Nokia Stock Resumes Decline on Cautious Outlook and Legacy Weakness Despite Q2 Profit Beating Estimates

Quick overview

Nokia stock fell sharply despite stronger-than-expected earnings and accelerating AI and cloud demand, as memory supply constraints, weak traditional telecom markets, and execution risks continued to cloud the company’s transformation story.

Nokia Stock Slides Below €9 as AI Growth Fails to Offset Legacy Telecom Weakness

Nokia stock tumbled around 5% on earnings day, falling below the €9 level despite the Finnish telecommunications equipment maker reporting stronger-than-expected second-quarter results. While artificial intelligence and cloud customers are emerging as increasingly important growth drivers, persistent weakness in traditional telecom markets and warnings over prolonged memory shortages have raised fresh concerns about the pace and sustainability of Nokia’s transformation.

Nokia Stock Falls Below €9 After Recovery Attempt Fades

Nokia shares came under renewed pressure after an attempted recovery lost momentum. The stock briefly approached the €10 level during the opening session, but the advance quickly reversed as sellers returned.

Shares subsequently fell below the €9 psychological threshold, reaching around €8.66 and highlighting continued investor uncertainty surrounding Nokia’s strategy.

The decline was notable because the company delivered a better-than-expected quarterly operating performance. However, investors appeared more focused on the risks surrounding future growth, including supply constraints, weaker legacy businesses, and the substantial investments required to expand Nokia’s position in AI infrastructure.

AI and Cloud Demand Becomes Nokia’s Biggest Growth Story

Nokia reported an 18% increase in comparable operating profit to €434 million for the second quarter of 2026, beating the average analyst estimate of €382 million, according to LSEG data.

Comparable net sales reached €4.82 billion, also exceeding market expectations.

The strongest growth came from AI and cloud customers. Nokia said sales from these customers doubled during the quarter to €446 million, while the company booked €2.8 billion in new orders.

The results reinforce the growing importance of AI infrastructure to Nokia’s future. The company has been increasingly targeting major technology companies investing heavily in data centres, particularly through its optical networking and high-capacity connectivity businesses.

Nokia highlighted strong performance in its Network Infrastructure division, with Optical and IP Networks benefiting from demand linked to AI and cloud infrastructure.

However, the rapid expansion of AI-related demand is also creating new challenges.

Memory Shortages Could Remain a Problem Through 2027

Nokia CEO Justin Hotard warned that supply constraints remain a significant issue for the telecommunications equipment industry.

The sharp increase in demand for memory components from AI companies has contributed to tighter supplies and higher prices, creating additional pressure for equipment manufacturers.

Hotard said demand remains strong, but supply continues to represent the industry’s main constraint, with customers increasingly placing longer-term orders.

The warning adds a layer of uncertainty to Nokia’s otherwise encouraging AI growth story. If memory shortages persist into 2027, as management has cautioned, the company could face higher input costs and potential limitations on its ability to fulfil growing customer demand.

That could make it more difficult for Nokia to convert strong order growth into consistent earnings expansion.

Nokia Expands AI Infrastructure and Data Centre Strategy

Since becoming CEO, Hotard has placed greater emphasis on Nokia’s data centre opportunity. His previous experience leading Intel’s Data Center and AI Group has also shaped the company’s push into infrastructure supporting next-generation computing.

Nokia has strengthened its relationship with Nvidia through a significant investment agreement and is increasing its focus on optical connectivity, which is becoming increasingly important as data centres handle larger volumes of AI-generated workloads.

The company has also launched what it describes as the industry’s first commercial AI RAN platform. Nokia expects the technology to become commercially available by 2027, with pilot deployments targeted for the end of 2026.

At the same time, Nokia is expanding manufacturing capacity in optical technologies, including investments in Indium Phosphide semiconductor manufacturing in San Jose and a new site in Arizona.

These initiatives could position Nokia to benefit from long-term AI infrastructure spending. However, the financial benefits may take time to materialize, leaving investors exposed to execution and capital-spending risks in the meantime.

Legacy Telecom Weakness Remains a Major Concern

Nokia’s shift toward AI, cloud infrastructure, enterprise connectivity, and advanced networking comes as traditional telecom markets remain under pressure.

The company’s Fixed Networks division recently recorded a 13% revenue decline as telecom operators reduced infrastructure spending and delayed investments.

This weakness remains one of the biggest obstacles facing Nokia. Although faster-growing businesses are expanding, they have not yet consistently offset declines across more mature segments.

The result is a transformation story that remains promising but uneven.

Investors may therefore continue to demand clearer evidence that Nokia’s new growth areas can become large enough to compensate for declining legacy operations.

Technical Outlook: Nokia Stock Tests Key Support

From a technical perspective, Nokia shares remain vulnerable after failing to maintain their recent recovery.

The stock’s decline has brought the 20-day simple moving average into focus, with the indicator currently around the €10 level.

A decisive break below this area could increase selling pressure and open the possibility of further declines.

The inability to hold the €11 recovery zone suggests buyers remain cautious, while sellers continue taking advantage of weak momentum.’

Nokia Chart Weekly – Sellers Return after the Failed Rebound

Nokia shares have been trading up since August last year, when the price was trading below €3.50, and in early June it reached €15. Moving averages have been acting as support during pullbacks, helping keep the trend bullish. We saw a dip below €7 in late March, but the sentiment improved, with last week’s earnings helping investors, and Nokia shares extended the upside to €15 with the help of the 20 daily SMA.

Defence and 5G Partnerships Provide Limited Support

Nokia has also pursued opportunities in defence and advanced 5G infrastructure.

Its NestAI defence partnership has attracted attention following early progress in military communications and next-generation networking applications. Nokia has also expanded its relationship with Taiwan Mobile through an agreement focused on upgrading 5G infrastructure.

The project uses Nokia’s AirScale hardware alongside AI-powered software intended to improve network efficiency, automate operations, and reduce energy consumption.

These partnerships could strengthen Nokia’s long-term competitive position. However, investors appear increasingly focused on whether such agreements will generate meaningful and sustainable earnings rather than simply expanding the company’s strategic footprint.

Cost Savings and Restructuring Offer Some Cushion

Nokia’s restructuring program remains another potential source of support.

Management expects the program to deliver €1.2 billion in gross cost savings by the end of 2026, with additional efficiency initiatives planned, particularly in Europe.

The company also continues to divest non-core assets, including its fixed wireless access business, while concentrating resources on areas where it believes it has stronger competitive advantages.

Nokia expects to deliver operating profit above the midpoint of its full-year guidance, although it anticipates third-quarter operating profit to remain broadly similar to the second quarter sequentially.

Nokia Stock Faces a Difficult Transformation Test

Nokia’s latest results demonstrate that AI and cloud demand can provide a powerful new growth engine. Stronger operating profit, rising AI-related sales, and robust orders suggest the company’s strategic shift is beginning to gain traction.

However, the sharp decline in Nokia stock shows that investors remain cautious.

Weakness in traditional telecom markets, memory shortages, acquisition integration risks, restructuring costs, and heavy investment requirements could all limit the pace at which the transformation translates into sustainable shareholder returns.

For now, Nokia’s AI opportunity appears significant, but the stock’s reaction suggests investors want more than strong orders and strategic partnerships. They are likely to demand consistent earnings growth and evidence that the company’s newer businesses can overcome the decline of its legacy operations.

Until that balance becomes clearer, Nokia stock could remain vulnerable to renewed selling pressure despite its improving exposure to the long-term AI infrastructure boom.

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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