Nokia Corp - ADR

Strong quarter momentum; margins improved (good): - Net sales +9% YoY in Q2 2026 (constant currency / comparable basis per call). - Gross margin +70 bps to 46%; operating margin +70 bps to 9% (operating profit $434m). - Network Infrastructure grew +12%, led by Optical (+20%) and IP Networks (+16%). - Positive/mixed drivers: optical margin benefited from strong AI/cloud demand + integration of Infinera; operating profit was headwound ~150 bps from higher stock-based compensation due to share price/program effects; quarter also benefited from software revenue phasing.

AI & Cloud acceleration with lumpy but expanding order book (surprising/opportunity): - AI & Cloud net sales +105% YoY to EUR 446m, and order intake EUR 2.8bn (quarter). - Management emphasized “lumpiness”: Q2 orders benefited from several significant long-term orders in a constrained supply environment. - Context investors should note: ~half of Q2 order volume expected to convert to revenue within the next 12 months; Nokia does not expect the same quarterly intake level every quarter. - Telco/telecom appears to be emerging as a secondary growth contributor tied to increased traffic (AR supercycle), but telecom expectations are “mostly unchanged.”

Outlook remains steady; Q3 profit roughly similar to Q2, improvement in Q4 (forecast): - No operational change to comparable operating profit guidance; still tracking somewhat above the midpoint of the operating profit range. - Q3 assumptions: net sales +3% to +7% sequentially. - Operating profit expected broadly similar to Q2 due to mobile infrastructure software revenue phasing (then meaningful improvement in Q4). - Cash conversion guidance adjusted slightly: now tracking towards low end of FCF conversion 55%–75% due to restructuring cost + working capital investments.