Translation: Original published in Finnish on 7/24/2026 at 7:00 am EEST.

While orders from Nokia's AI customers grew strongly in Q2, the company still needs to demonstrate how this accelerating growth will impact its bottom line in the coming years. Although our forecasts already anticipate strong earnings development, the stock’s valuation (2028e P/E 20x) will remain high for several years to come. At current valuations, investors must therefore bear risks related to both realizing earnings growth expectations and sustaining high valuation levels. We reiterate our Sell recommendation for Nokia but revise our target price to EUR 6.5 (was EUR 6.0).

AI orders exceptionally strong in Q2

Nokia's comparable Q2 EBIT (434 MEUR) exceeded expectations (consensus 376 MEUR), but one-off items from accelerated restructuring pushed reported EBIT (-50 MEUR) into the red (consensus 262 MEUR). The most interesting figure in the report was the growth in orders from AI and cloud customers to 2.8 BEUR (Q1'26: 1.0 BEUR), which strengthens the outlook for near-term growth in Network Infrastructure. However, in Q2, the growth of Optical and IP Networks (total 17%) fell short of our expectations and the consensus (21%). The operational earnings beat for the quarter also came from Mobile Infrastructure, which has received less attention recently, where accelerated growth (partially due to timing factors) and higher-than-expected patent revenues supported the development. 

Only a technical clarification to the outlook

Nokia has issued a technical update to its outlook, setting guidance for comparable operating profit this year at 2.1–2.6 BEUR (previously 2.0–2.5 BEUR). From an operational perspective, Nokia’s full-year 2026 outlook remains unchanged, but the divestitures of Portfolio Businesses have slightly raised the guidance. Earnings are still expected to come in slightly above the midpoint of the guidance range (2.35 BEUR), and our forecast is now 2.4 BEUR. However, medium-term earnings expectations are more critical for Nokia's share. In light of the order flow, AI demand continues to be strong, although the Q2 report did not yet confirm that the growth in Optical and IP Networks would translate into stronger-than-expected earnings growth for Network Infrastructure. Thus, Nokia still has to prove that growing AI orders will also strongly reflect in the company's earnings growth in the coming years. The guidance provided for Q3 (comparable operating profit roughly at the Q2 level) was also on the soft side relative to our expectations, so this year’s earnings will once again be concentrated toward the very end of the year. Our earnings estimates for the coming years increased by 3-5% due to the divestments of Portfolio Businesses, but otherwise, our estimates are largely unchanged.

Strong earnings growth still priced with a front-loaded bias

According to our estimates, Nokia's earnings-based valuation is very high, with adjusted P/E ratios of 25x-23x and corresponding EV/EBIT ratios of 19x-16x for 2026-2027. With our 2028 estimate slightly exceeding the company's target level, the multiples (adj. P/E 20x and 14x) remain elevated. Compared to our free cash flow forecast (2028e EV/FCF 22x), the valuation would still be very tight at that time. Nokia’s current valuation can be justified by its peers' high multiples, although Nokia’s group-level growth and profitability fall well short of those of its highly valued peers (e.g., Ciena). Furthermore, the growth and profitability of Network Infrastructure alone remain well below the level of its optical peers. The AI boom has pushed the valuations of Nokia's peers to levels that we do not believe are sustainable in the long term. Although many stocks have recently seen a clear correction from their peaks, sector valuation levels remain generally very high. From a risk-reward perspective, we do not find betting on the sustainability of the sector's high valuation levels and the realization of earnings expectations for Nokia's share attractive at the moment. In the short term, Nokia's share will likely continue to move in line with the sentiment of other AI companies in the market.