Nokia's AI Order Book Is Filling Fast, but the Cash Register Is Still Empty
Published on 10/25/2026 at 16:41 | Editorial boerse-global.de
Nokia's dividend cheque is in the post. Whether the business behind it deserves a higher rating is a separate question — and one the Finnish equipment maker has not yet answered.
The board signed off on a payout of EUR 0.03 per share on Thursday, a decision that settles the income side of the ledger without saying much about the growth story. Shares rose 2.8% on Friday, a move media reports attributed to more constructive analyst commentary following the sell-off that greeted the company's latest results. Approval alone, however, is unlikely to carry the stock much further.
Two Questions, One Stock
The dividend and the buy calls address different things. One fixes a cash amount per share; the other concerns how the stock should be valued after its slide. Neither substitutes for evidence that Nokia can keep improving operationally — and that is where investors weighing an entry after the pullback, or another spell on the sidelines, should focus.
Management left its full-year outlook untouched at the most recent earnings release. For shareholders, the durability of existing expectations therefore matters more than any fresh guidance.
Should investors sell immediately? Or is it worth buying Nokia?
Orders Are Not Revenue
The pivotal issue is whether strong demand from AI and cloud customers turns into profitable sales. In the third quarter of 2026, revenue from that client group jumped 123% year on year, while order intake climbed 118% to EUR 1.5 billion.
Bookings and turnover are not the same thing. Growth in orders is a starting point, not a guarantee. What counts is whether Nokia converts that pipeline into business that also lifts the bottom line.
At group level, comparable operating profit rose to EUR 605 million in the third quarter of 2026, up from EUR 448 million a year earlier. Comparable net sales reached EUR 5.15 billion, 10% above the prior-year level. That combination — demand, revenue and earnings moving together — is a stronger argument than the AI and cloud order figures viewed in isolation.
The Cash Test
The financial cross-check is where the picture darkens. Free cash flow in the third quarter of 2026 came in at minus EUR 99 million. Higher profits and surging AI revenue did not translate into positive free cash flow.
Restructuring costs and additional working capital needs are weighing on the funding of growth. For shareholders, the size of the addressable market is only half the story; how much money actually stays in the business after expenses is the other half.
Where the Growth Is Coming From
AI and cloud now carry real weight, but they do not yet replace the existing revenue base. Telecommunications still accounts for 71% of group sales, so Nokia should not be viewed purely as a play on AI data-centre buildouts. The trajectory of the traditional business remains central to the overall result.
Optical networks and IP networks offer the next leg. Nokia expects growth of 25–30% in those segments for 2027, extending the growth story beyond the latest quarter — though an expectation is not a delivered result.
Field Tests Put Flesh on the Bones
Concrete applications are lending the growth case some substance. According to Nokia, the AI-RAN platform developed with NVIDIA is already being trialled in live networks, with artificial intelligence supporting the operation of radio access equipment.
Elisa tested voice, mobile data and video analytics simultaneously in Helsinki. That carries more weight for investors than a product announcement, because the technology has to handle different applications under real network conditions. Distributed deployments and evaluation of commercial applications and services are expected in 2027, and BT is preparing a live network test in Birmingham the same year. Widespread commercial use is not yet proven.
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Deutsche Telekom and Nokia are also working on AI-assisted channel estimation. Initial lab measurements typically showed 10–15% higher uplink throughput, with larger improvements under more complex radio conditions. Such results point to potential customer benefit but are not yet evidence of corresponding revenue.
The Valuation Hurdle
A valuation of 19.4 times expected 2027 earnings cannot be justified by rising demand for AI networks alone. What matters is whether that demand produces sustainably higher profits and free cash flow.
Friday's analyst move illustrates the tension. Rosenblatt reportedly cut its price target to $14 from $15 while keeping its buy rating, citing lower valuation multiples among comparable companies — even as it called the post-earnings sell-off overdone. Two statements sit side by side: the immediate market reaction looked excessive, but the valuation environment warranted a lower target.
That leaves a concrete risk. Even with the business growing, a more cautious valuation could cap the stock's headroom. The dividend decision does nothing to change that.
Nokia has paired genuine technological progress with an unfinished financial examination. The rating demands sustained earnings growth and better cash flow. Successful network tests support the outlook; profitable business and reliable cash generation still have to supply the proof.
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