Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 23, 2026 · Beat 3 of last 5 quarters
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Nokia's Q2 results underscore the accelerating AI infrastructure buildout, with AI & Cloud sales more than doubling and order intake surging to EUR 2.8 billion. The company's investments in optical capacity, including new indium phosphide fabs, signal sustained demand for data center interconnect and scale-across fabrics. The shift to AI RAN with NVIDIA could reshape radio network economics, potentially driving a new wave of infrastructure spending.
Nokia reported Q2 net sales of EUR 2.2 billion, up 9% year-over-year, with Network Infrastructure growing 12% (Optical +20%, IP +16%) and Mobile Infrastructure growing 7%. AI & Cloud sales more than doubled to EUR 446 million, with order intake of EUR 2.8 billion. Gross margin expanded 70 bps to 46%, and operating margin rose 70 bps to 9%. Free cash flow was negative EUR 732 million due to seasonal incentive payments and working capital buildup. The company announced the sale of its fixed wireless access business to Inseego and classified it, along with enterprise campus edge, as discontinued operations.
Management maintained full-year comparable operating profit guidance, tracking somewhat above the midpoint of the range, with only a technical adjustment for discontinued operations. They expect Q3 net sales to rise 3-7% sequentially, with operating profit broadly flat due to software phasing in Mobile Infrastructure, followed by a meaningful Q4 improvement. AI & Cloud demand remains strong, with order momentum expected to be lumpy but growing over time. The company is investing heavily in optical capacity, including new indium phosphide fabs in San Jose and Arizona, and expects AI RAN pilots by end of 2026 with commercial availability in 2027. Considering some of the increased restructuring costs and as we make some investments in working capital to prepare for growth, we now expect to track towards the low end of our free cash flow conversion assumption of 55% to 75%.
“Thanks, David, and hello, everyone. Our second quarter showed continued progress against the strategy we set at our Capital Markets Day. Our team is focused on maximizing our opportunity in the AI super cycle, and that focus is translating into early results.”
on Strategic progress
“While we're very pleased with the order growth, it's important to put that number into a bit of context. Q2 benefited from several significant long-term orders as our customers look to secure supply in a constrained environment.”
on Order intake context
“We're entering the second half with good momentum and remain on track to deliver somewhat above the midpoint of our operating profit guidance.”
on Guidance
Can you give us milestones for the 4 new DSPs planned by end of 2027 and reassurance they can be achieved?
Justin Hotard explained that the four DSPs result from maintaining both Nokia and Infinera DSP teams, providing better market coverage across scale-across fabric, DCI, metro, and long-haul. They will enter customer trials in 2027 and become commercially available toward the end of 2027.
Can you rank order and characterize supply chain risks, especially memory and indium phosphide wafers?
Justin Hotard identified memory as the most significant constraint due to broad demand and pricing. He noted focus on securing supply, simplifying designs, and elongating lead times with customers. The new Arizona fab is expected online around 2029, with San Jose ramping in 2027.
In supply-constrained markets, double ordering is common. How do you see this risk for Nokia?
Justin Hotard argued that sophisticated hyperscaler customers have little incentive to double order given transparent supply visibility and long-term commitments. He noted that traditional telco orders typically convert within 12 months, but AI/cloud orders are elongating due to supply constraints.