Nokia's Two-Speed Story: AI Orders Surge While Restructuring Costs Bite

Nokia's AI networking orders double to €2.8B, but restructuring costs and weak 5G demand drag shares; S&P hints at upgrade.

The disconnect between Nokia's order book and its share price has rarely been wider. The Finnish telecom equipment maker is booking record demand for AI networking gear, yet its stock has shed nearly a third of its value in a month, closing at €7.93 — roughly 47 percent below the 52-week high of €14.97 touched on June 3.

That gap between operational momentum and market sentiment is now drawing attention from an unexpected corner: the credit markets. S&P Global revised its outlook on Nokia's debt from "stable" to "positive" on July 30, keeping the long-term rating at BBB- while signaling a possible one-notch upgrade within the next 24 months. The agency cited improved operational execution and the company's expanding footprint in AI and cloud infrastructure — provided Nokia keeps costs under control.

The Cost of Getting Leaner

The market's skittishness traces back to the second-quarter report released on July 23, when Nokia raised its 2026 restructuring cost estimate to roughly €800 million. Management framed the increase as a necessary step to become more agile and redirect resources toward growth areas.

Part of that reshaping involves portfolio pruning. Nokia has agreed to sell its Fixed Wireless Access CPE business to Inseego, and a similar deal for the Enterprise Campus Edge unit looks increasingly likely. Both operations were carved into a dedicated portfolio segment on January 1 as part of a new corporate structure built around two main operating divisions. The proceeds are earmarked for AI-native RAN platforms and optical networking.

The market's reaction suggests investors are weighing the near-term pain of restructuring against the longer-term promise. The stock now trades almost exactly at its 200-day moving average but sits nearly 30 percent below the 50-day average of €11.21 — a technical picture that pits a durable uptrend against a sharp short-term correction.

Order Books Tell a Different Story

CEO Justin Hotard painted a more encouraging picture on the earnings call. AI and cloud networking orders reached €2.8 billion in the second quarter, more than doubling year over year, driven by long-term contracts in Optical Networks and IP Networks. That momentum is helping offset persistent weakness in the traditional telecom equipment business, where carriers have slowed their 5G buildouts.

The quarter itself delivered solid numbers. Comparable earnings per share came in at €0.07, beating the consensus estimate of €0.05. Comparable net sales rose 8 percent to €4.82 billion, or 9 percent on a currency-adjusted basis. Management reaffirmed its full-year 2026 guidance for operating profit between €2.1 billion and €2.6 billion, with Hotard expressing confidence that margins would land at the upper end of the range.

A Legal Win in Germany

The same day S&P updated its outlook, Nokia also cleared a legal hurdle. Germany's Federal Court of Justice dismissed an appeal by Mala, which had accused Nokia of patent infringement involving LAN switches. The ruling confirmed the revocation of a network patent and put an end to parallel infringement proceedings in Düsseldorf.

Shareholder Returns and the Road Ahead

The board approved a dividend of €0.04 per share on July 23, with the record date set for July 28 and payment due August 6. The distribution falls under the authorization granted at the April shareholder meeting, which allows total payouts of up to €0.14 per share for fiscal 2025 in four installments.

Analyst opinions remain split. Deutsche Bank trimmed its price target from €13.50 to €11.50 but kept a "Buy" rating. Barclays holds firm on "Sell," while UBS maintains a neutral "Hold." Craig-Hallum and Bank of America both stick with "Buy," undeterred by the recent slide.

Technical indicators suggest the selling pressure may be nearing exhaustion. The 14-day RSI stands at 33.3, approaching oversold territory, though the annualized volatility of the past 30 days — above 68 percent — underscores just how jittery trading has become since the June peak. Even after the pullback, the stock remains up roughly 42 percent year to date.

The next major test comes on October 22, when Nokia reports third-quarter results. Whether the AI order momentum can continue to offset restructuring costs — and whether the August 6 dividend payment and progress on the Inseego sale can steady nerves — will determine if the market's patience matches management's confidence.