Nokia's Rally Hangs in the Balance as July 23 Earnings Test Approaches

Nokia shares lost a third of their value from June highs ahead of Q2 earnings, as Ericsson's profit warning and back-loaded profit targets fuel market nervousness.

A stock that nearly quintupled from its 52-week low of €3.45 to a high of €14.97 in just ten months has lost nearly a third of that peak value over the past seven weeks. Nokia's shares closed at €10.27 on Tuesday, down 1.7% on the day and 31.4% below the June 3 high, as a perfect storm of sector headwinds, profit concentration, and valuation doubts converge ahead of the company's second-quarter earnings release on July 23.

The short-term damage has been severe. The stock has fallen 19.4% over the past month, and its relative strength index of 39.9 — just above oversold territory — suggests the selling pressure may not yet be exhausted. Yet the longer-term picture tells a different story: the shares remain up 84.4% year-to-date and have surged 148.7% over the past twelve months, while the 200-day moving average at €7.64 keeps the overall trend firmly bullish. The annualized 30-day volatility of 72.4% underscores how jittery the market has become around the stock.

That nervousness has been heightened by a profit warning from archrival Ericsson, whose shares collapsed 11.1% after the Swedish company reported a 6% drop in second-quarter revenue to $5.4 billion and warned that rising component costs — partly driven by AI demand — will persist into 2027. It was the last quarterly report under CEO Börje Ekholm, who hands the reins to Per Narvinger in October. The warning naturally raises questions about whether Nokia faces similar margin pressure from the same supply-chain dynamics.

AI deals and a back-loaded profit base

On the positive side, Nokia has been making strategic moves to capture the AI infrastructure boom. The company this week expanded its 5G partnership with Taiwan Mobile, supplying AirScale base stations and a suite of AI-powered software including MantaRay SON for self-organizing networks, predictive hardware analytics, and AI-driven energy management tools designed to reduce power consumption. Financial terms were not disclosed, but the deal strengthens Nokia's position as a long-term technology provider in Asia's fast-growing telecom market.

The company's AI and cloud revenues grew 49% in the first quarter and now account for roughly 8% of group sales, underpinned by approximately €1 billion in new orders. The optical networks division expanded 20%, and management raised the growth target for the Network Infrastructure segment to 12–14%.

Still, the numbers investors will dissect most closely on July 23 are those relating to profitability. According to consensus estimates, Nokia needs to generate 72.4% of its full-year 2026 operating profit — some €1.71 billion — in the second half of the year. That is a heavy lift given that first-quarter operating profit came in at just €281 million and the second-quarter consensus stands at only €372 million. The second-half target implies a dramatic ramp-up in either revenue, margins, or both. The consensus gross margin estimate for Q2 stands at 44.5%, a key input into whether that trajectory is realistic.

Analysts split on valuation after the triple-digit run

The divergent views among Street analysts reflect the uncertainty. Seeking Alpha, citing the stock's 140% rally and a price-to-earnings multiple of 29 based on 2026 estimates, has downgraded its rating to Hold and warns that the upcoming quarter will be a litmus test for growth in IP Networks. JPMorgan, by contrast, reiterated an Overweight rating in mid-June with a price target of $21, roughly double the current level in dollar terms. The breadth of that disagreement illustrates just how binary the July 23 event has become for Nokia's near-term trajectory.

With a market capitalization of €60.8 billion, the Finnish network equipment maker is now priced for perfection — and the second half of the year will have to deliver it. The Taiwan Mobile deal provides a narrative of AI-fueled growth, but Ericsson's cautionary tale on costs lingers as a warning shot. For investors who rode the stock from €3.45 to nearly €15, the next few days will determine whether the rally can resume or whether the correction has further to run.