Nokia’s €732 Million Cash Drain Drowns Out a Record AI Quarter
Published on 07/29/2026 at 21:20 | Redaktion boerse-global.de
The numbers coming out of Nokia’s second-quarter report tell two completely different stories. On one page, the Finnish network equipment maker posted an 18% jump in comparable operating profit to €434 million, handily beating analyst estimates of €382 million. Revenue climbed to €4.82 billion, also ahead of expectations. On the other page, free cash flow cratered to minus €732 million, working capital consumed €1.15 billion, and net liquidity shrank 27% in a single quarter to €2.776 billion.
The market has made its choice about which story to believe. Nokia shares slid to €7.58 on Wednesday, extending a 33.33% rout over the past 30 trading days and leaving the stock 49.25% below its 52-week high of €14.97 hit in early June.
The Chip Warning That Changed Everything
The sell-off traces back to a single statement from CEO Justin Hotard on July 23. He warned that the memory chip shortage would persist until 2027 — a timeline that effectively caps the near-term upside for Nokia’s booming AI and cloud order book, no matter how impressive the headline growth looks.
That order book is genuinely eye-catching. AI and cloud revenue doubled year-over-year to €446 million in the second quarter, powered by optical networking gear and a partnership with Nvidia for data center connectivity. New orders in the segment reached €2.8 billion, representing 6.3 times the quarterly revenue. Management raised its 2026 profit target to €2.1-2.6 billion from €2.0-2.5 billion.
Should investors sell immediately? Or is it worth buying Nokia?
But here’s the rub: only about half of that order backlog is expected to convert into revenue within the next twelve months. If the conversion timeline slips further toward 2027 because of chip constraints, the cash burn from building inventory to meet future demand will only intensify.
The Balance Sheet Tells a Different Story
The operating numbers look even worse when you strip out the adjustments. Nokia’s comparable operating profit of €434 million turned into an actual operating loss of €50 million, dragged down by €390 million in accelerated restructuring costs tied to exiting legacy businesses. The operating margin collapsed from 9.0% to negative 1.0%.
The cash drain is the most immediate concern. Working capital outflows of €1.15 billion reflect higher inventories and receivables as Nokia stockpiles components to navigate the chip shortage. The company is buying a chip manufacturing facility in Chandler, Arizona from NXP Semiconductors — pending regulatory approval — and plans to lease capacity there from early 2027 before retrofitting it for optical components used in AI data centers. That’s a long-term fix, not a solution for the current quarter.
Meanwhile, Nokia’s core fixed networks business continues to struggle, with revenue down 13% as telecom operators slash infrastructure spending and delay investments.
Technical Damage and the 200-Day Line
The chart has turned decisively bearish. Nokia shares now trade 3.72% below their 200-day moving average of €7.89, a level that chart-watching investors treat as the dividing line between a healthy pullback and a structural downtrend. The 14-day relative strength index has fallen to 27.2-27.3, deep in oversold territory. Historically, such readings often precede short-term bounces once selling pressure exhausts itself.
But the stock has already failed one attempt to reclaim the 200-day line, and the long-term 200-day trend is now under serious threat. The 50-day moving average sits well above the current price, confirming the near-term downtrend.
Analyst Divergence Reflects the Uncertainty
The market can’t agree on what Nokia is worth. Deutsche Bank cut its price target but kept a buy rating. Barclays maintains its sell recommendation. The disagreement captures the central tension: Is Nokia a misunderstood AI infrastructure play with a temporary cash flow problem, or a company whose restructuring costs and chip constraints will continue to eat into the AI growth story?
Nokia at a turning point? This analysis reveals what investors need to know now.
The 12-month return still shows a gain of 110.18%, and the stock is up 35.92% year-to-date. Long-term holders who rode the rally from the 52-week low of €3.45 are sitting on a 120.30% gain. But the momentum has clearly shifted, and the market is now pricing in the restructuring drag more heavily than the AI opportunity.
What to Watch Next
The next concrete test comes on October 22, when Nokia reports third-quarter results. Investors will be watching three things: whether working capital outflows moderate as inventory builds stabilize, whether the order-to-revenue conversion accelerates, and whether margins show any sign of stabilizing despite the chip headwinds.
If the Arizona facility comes online faster than expected or the chip shortage eases sooner than 2027, the oversold RSI could provide the technical fuel for a recovery toward the €7.89 resistance level. If the cash burn continues and order conversion slows, the 200-day line will become a ceiling rather than a floor — and the 52-week low could come back into view.
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