Nokia 2Q26 First Take: AI and cloud orders accelerate significantly, maintain Neutral

Overview

This report is Goldman Sachs' first take on Nokia's 2Q26 results. The report believes revenue was broadly in line with consensus, but comparable EBIT was materially better than expected. The main highlights came from accelerating AI and cloud customer orders, strong growth in Optical Networks and IP Networks, and smooth progress in expanding critical optical communications capacity. Goldman Sachs also notes that 3Q26 comparable operating profit is expected to be flat quarter over quarter, below the market expectation of €515mn due to the timing of software revenue recognition, and therefore maintains a Neutral rating.

Core views

The core view is that Nokia's fundamentals are showing positive signals, especially with AI and cloud orders rising from €1bn in 1Q26 to €2.8bn in 2Q26, indicating stronger demand momentum; strong growth in Optical Networks and IP Networks within Network Infrastructure supports medium-term revenue visibility; and InP capacity expansion helps alleviate the bottleneck to Optical Networks growth. However, due to weak 3Q EBIT guidance, no material increase in full-year operating EBIT guidance, and limited upside to the target price versus the current share price, Goldman Sachs maintains a neutral stance.

Analysis framework

The report uses an earnings quick-take framework, comparing 2Q26 actual revenue, gross profit, expenses, and comparable EBIT with Infront consensus, and breaking down sources of growth by business segment. It then combines orders, revenue conversion cycle, capacity expansion, 3Q revenue and profit guidance, full-year 2026 EBIT guidance, and relative share-price performance to assess the short-term share-price reaction and the 12-month investment rating.

Methodology notes

• Earnings comparisonConsensus variance analysis

  Difference between actual results and consensus

  The report compares 2Q26 revenue, gross margin, expenses, comparable EBIT, and divisional performance with Infront consensus to identify the drivers of outperformance or underperformance versus expectations.

• Valuation methodsEV/EBITDA valuation

  13x CY27E EV/EBITDA

  Goldman Sachs' 12-month target price is based on 13x CY27E EV/EBITDA and incorporates restructuring factors.

• Factor frameworkGS Factor Profile

  Growth, Financial Returns, Multiple, Integrated

  Goldman Sachs' factor framework compares the stock's attributes versus the market and industry peers across growth, financial returns, valuation multiples, and integrated percentile rankings.

• M&A frameworkM&A Rank

  Acquisition probability tiering

  Goldman Sachs discloses that it uses an M&A framework across its global coverage to assess potential acquisition probability, but this report does not indicate that the factor is a core driver of Nokia's target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• NOKIA.HE

  Common equity under coverage

  Strengths

  Accelerating AI and cloud orders, strong growth in Optical Networks and IP Networks, 2Q26 comparable EBIT above expectations, and capacity expansion helping ease the InP bottleneck.

  Weaknesses

  3Q26 comparable operating profit is expected to be flat quarter over quarter, full-year operating EBIT guidance was not materially raised, and the target price implies slight downside versus the current share price.

  Comparison

  Underperformed EU Tech by 22% over the past month, but slightly outperformed over the past three months, with an absolute gain of 65% year to date.

  Risks

  Optical Networks and IP Networks growth coming in below expectations, Radio Networks profitability disappointing, or cost control and capacity-expansion investment creating EBIT pressure.

• NOK ADR

  Nokia ADR

  Strengths

  Shares the same AI and cloud order, network-business growth, and capacity-expansion thesis as the common stock.

  Weaknesses

  The 12-month target price offers only slight upside versus the current price, with an unremarkable risk-reward profile.

  Comparison

  ADR target price of $10.40 versus a current price of $10.28, implying 1.2% upside.

  Risks

  Also exposed to business growth, profitability, cost control, investment cadence, and foreign-exchange fluctuations.

Key data

• 2Q26 comparable revenue€4.815bnBroadly in line with consensus of €4.822bn.
• 2Q26 comparable EBIT€434mnAbove consensus of €376mn, beating expectations by 16%.
• 2Q26 comparable EBIT margin9.0%Above consensus of 7.8%.
• AI and cloud customer orders€2.8bnAbove €1bn in 1Q26; the company expects about 50% to convert into revenue over the next 12 months.
• Network Infrastructure year-over-year growthabout 12% ccOptical Networks grew 20% cc year over year, IP Networks grew 16% cc year over year, and Fixed Networks declined 2% cc year over year.
• Mobile Infrastructure revenue€2.680bn4% above consensus, with Radio Networks growing 7% cc year over year.
• 2026 comparable EBIT operating guidance€2.0bn-€2.5bnThe company said the operating basis is unchanged and still has the potential to come in above the midpoint.
• 2026 comparable EBIT reported guidance€2.1bn-€2.6bnThe increase reflects gains from discontinued operations.
• FY26 capital expenditure guidance€800mn-€900mnBelow the previous €900mn-€1,000mn due to changes in real estate plans.
• 12-month target priceNOKIA.HE €8.90 / NOK ADR $10.40Implying 2.9% downside for NOKIA.HE and 1.2% upside for the ADR.

Impact & implications

The report tends to believe the stock may react positively in the short term, because orders, growth in the network business, and capacity expansion have all improved market confidence in Optical Networks growth, while the stock has underperformed EU Tech by 22% over the past month. But the medium-term investment conclusion is still constrained by earnings cadence, target-price upside, and full-year operating guidance, making this more suitable as a monitoring point for AI cloud order conversion and the InP capacity ramp rather than a clear signal to add to positions.

Risks

• Optical Networks and IP Networks growth coming in faster or slower than expected could change the revenue and profit outlook.
• Improvement or deterioration in Radio Networks profitability could affect overall EBIT.
• If cost control and capacity-expansion-related investment are better or worse than expected, they could amplify EBIT upside or downside under strong or weak revenue scenarios.
• The timing of 3Q26 software revenue recognition leading to flat quarter-over-quarter operating profit may pressure short-term earnings expectations.
• If AI and cloud orders fail to convert into revenue as the company expects, it would weaken the investment significance of the current order momentum.

What to watch

• The specific drivers of momentum in Optical Networks and IP Networks.
• Whether new large orders or customer wins emerge among AI and cloud customers.
• The progress of revenue conversion from the €2.8bn of orders over the next 12 months.
• Execution of the San Jose factory's 4Q26 capacity ramp.
• Progress in converting related InP capacity at the NXP Arizona Chandler manufacturing campus.
• The software revenue-recognition cadence behind the guidance for flat quarter-over-quarter 3Q26 EBIT.
• Whether Network Infrastructure growth can continue in subsequent quarters.