Nokia's Credit Outlook Brightens Just as Its Share Price Hits a Technical Crossroads
Published on 08/02/2026 at 14:05 | Redaktion boerse-global.de
The disconnect between Nokia's operational trajectory and its stock market performance has rarely been starker. While the Finnish telecom equipment maker's shares have shed roughly 30 percent over the past month, S&P Global Ratings chose the end of July to lift its credit outlook from "stable" to "positive" — a signal that the agency sees improving fundamentals even as investors head for the exits.
A Credit Upgrade Built on AI Momentum
S&P confirmed Nokia's long-term issuer rating at 'BBB-' and its short-term rating at 'A-3' on July 30, while revising the outlook upward. The agency indicated that a full one-notch upgrade could materialize within 24 months, provided Nokia keeps its cost structure disciplined and capitalizes on surging demand for network infrastructure.
The optimism hinges largely on the Network Infrastructure division, which posted currency-adjusted growth of 12 percent in the second quarter of 2026. Optical networks led the charge with a 20 percent jump, while IP networks advanced 16 percent. S&P projects segment growth of 10 to 15 percent for both 2026 and 2027, fueled by hyperscalers requiring high-speed data transmission and extended order lead times stemming from supply constraints.
The bar for an actual upgrade, however, remains demanding. Nokia would need to sustainably lift free operating cash flow after leases to above €1.3 billion while keeping adjusted leverage at no more than 1.5 times EBITDA. S&P also anticipates the adjusted EBITDA margin will compress to roughly 11.0 percent in 2026, down from 12.1 percent in 2025, as restructuring charges and higher operating expenses for growth initiatives weigh on profitability.
Should investors sell immediately? Or is it worth buying Nokia?
The Cash Conversion Conundrum
The upgraded outlook arrives against a backdrop of persistent weakness in cash generation that has clouded sentiment since the second quarter. Operationally, Nokia delivered solid results — adjusted operating profit came in 13.6 percent above expectations — yet the company still recorded an operating loss of €50 million.
Free cash flow swung to minus €0.7 billion in the quarter, while net liquidity contracted from €3.8 billion to €2.8 billion. The numbers underscore a fundamental tension: revenue growth and order momentum are strong, but converting those wins into actual cash remains the sticking point.
The order book from AI and cloud customers stands at €2.8 billion — six times the quarterly revenue from that segment. Management expects roughly half of that, about €1.4 billion, to convert into revenue over the next twelve months, representing nearly 29 percent of total quarterly sales. Those figures paint a promising picture, yet whether they translate into genuine cash generation is the open question shadowing the rating optimism.
Quarterly Results Beat, Guidance Raised
The second-quarter numbers, released on July 23, confirmed the shift toward higher-margin infrastructure projects. Comparable operating profit reached €434 million, comfortably surpassing the €372 million analysts had penciled in. Despite the headline operating loss driven by accelerated restructuring costs, Nokia responded by raising its full-year 2026 guidance. The company now expects comparable operating profit between €2.1 billion and €2.6 billion, up from the previous range of €2.0 billion to €2.5 billion.
Revenue from AI and cloud customers surged 105 percent year-over-year in the quarter, reinforcing the narrative that Nokia is successfully diversifying into the fastest-growing corner of the networking market.
A Chart at a Critical Juncture
The share price story, however, tells a different tale. The stock closed Friday at €7.93, sitting almost exactly on its 200-day moving average of the same figure — a level often viewed as long-term support. That puts the shares 47 percent below the 52-week high of €14.97 reached on June 3. The monthly decline of roughly 30 percent has pushed the relative strength index to 33.3, signaling oversold conditions, while annualized volatility sits at an elevated 68.44 percent. Despite the recent slide, the stock remains up 121 percent over the past year.
The competitive picture is mixed. Ericsson shares gained 5.0 percent over the past week, while Ciena slipped 3.6 percent. Nokia's US-listed shares barely moved.
Nokia at a turning point? This analysis reveals what investors need to know now.
Analysts Divided on Fair Value
Wall Street and European analysts covering Nokia can't agree on where the stock should trade. The average price target among 23 analysts stands at €10.32, implying roughly 25 percent upside from current levels. But the range of individual estimates is strikingly wide — from €4.65 to €18.00 — reflecting deep uncertainty about the company's trajectory.
Deutsche Bank trimmed its price target following the quarterly results but maintained a positive stance. Other voices caution that the current share price already embeds considerable good news, arguing Nokia no longer trades like an undervalued stock.
What's Next
A dividend payment of €0.04 per share is scheduled for Thursday, August 6, with the ex-dividend date having passed on July 28. For the third quarter, Nokia expects net sales to rise 3 to 7 percent sequentially, though operating profit is likely to stagnate due to the timing of software revenue recognition. Management points to the final quarter of the year for a more pronounced earnings jump.
Helsinki trading was suspended on Saturday and resumes Monday, August 3. Until the next quarterly report arrives in October, the stock's direction will hinge on smaller data points: progress converting AI orders into revenue, the pace of restructuring, and the broader sentiment toward AI-adjacent hardware. The rating agency's vote of confidence suggests the fundamentals are moving in the right direction — but the market is clearly waiting for proof that the order book translates into cash before rewarding the stock again.
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