Analyst(s): Futurum Research
Publication Date: July 24, 2026

Nokia’s Q2 FY 2026 earnings show a company gaining traction with AI and cloud customers across optical networking and IP routing. The quarter also clarified how AI-RAN, internal AI adoption, and U.S. optical manufacturing investments are shaping Nokia’s next phase of execution.

What Is Covered in This Article:

• Nokia’s Q2 FY 2026 financial results
• AI and cloud order conversion
• Optical and IP supply constraints
• AI-RAN software shift and timing
• Guidance and Final Thoughts

The News: Nokia (NYSE: NOK) reported Q2 FY 2026 comparable net sales of €4.82 billion, up 8% year-over-year (YoY), compared with consensus of €4.83 billion. On a constant currency (cc) basis, comparable net sales increased 9% YoY. Network Infrastructure revenue was €2.04 billion, up 12% YoY cc, led by Optical Networks at €868 million, up 20% YoY cc, and IP Networks at €679 million, up 16% YoY cc. Mobile Infrastructure revenue was €2.68 billion, up 7% cc, while AI and Cloud customer revenue was €446 million, up 105% YoY cc. Comparable operating profit was €434 million, up 18% YoY, with comparable operating margin of 9%, up 70 basis points YoY. Comparable profit for the period was €414 million, up 64% YoY, and comparable diluted earnings per share was €0.07, up 75% YoY.

“Q2 demonstrates our strategy is delivering results. Since we set out our plan late last year, Team Nokia has focused on maximizing our opportunity in the AI supercycle. I am encouraged by the execution and progress we have made in a short period of time. We enter the second half with momentum and remain on track to deliver somewhat above the midpoint of our comparable operating profit guidance,” said Justin Hotard, president and CEO of Nokia.

Nokia Q2 FY 2026: Optical Strength Positions Nokia for the AI Buildout

Analyst Take: Nokia’s Q2 FY 2026 results point to a company building a more defined role in AI infrastructure, particularly in optical transport, data center interconnect, and IP routing. The €2.8 billion AI and Cloud order intake is evidence that customer planning cycles are extending because supply remains tight. Nokia’s challenge is now execution, not demand creation. The quarter also showed that Mobile Infrastructure can remain stable while the company shifts investment toward AI-related connectivity and software-led network upgrades. For enterprise technology vendors and operators, Nokia’s results reinforce that AI infrastructure demand is starting to affect both data center and telecom network planning.

AI and Cloud Orders Extend Visibility

Nokia’s AI and Cloud order intake reached €2.8 billion in Q2 FY 2026, with around half expected to convert to revenue over the next twelve months. The remainder extends beyond the normal order horizon, which is a change from Nokia’s traditional telecom customer pattern where orders typically convert within twelve months. The order mix was weighted toward optical, but IP also contributed through data center switching design wins that started to convert into orders during the quarter. Customer concentration remains a factor, especially in IP, but that is common during the early stages of large design-win ramps. The more important signal is that Nokia is gaining entry into customer programs where validation, performance, and supply assurance drive follow-on demand. Extended order visibility gives Nokia a better planning base, but it also raises the execution bar for supply, delivery, and product qualification. Nokia’s free cash flow was negative €732 million in Q2 FY 2026, and net cash fell to €2.8 billion from €3.8 billion the prior quarter, driven by roughly €1.15 billion in working capital outflow. This is a quarterly timing dynamic rather than a structural shift, but it is worth watching given how much of Nokia’s near-term investment case rests on converting order intake into cash, not just revenue.

Optical and IP Become the AI Infrastructure Core

Network Infrastructure is now the clearest proof point for Nokia’s AI infrastructure strategy. Optical Networks grew 20% YoY cc in Q2 FY 2026, while IP Networks grew 16% YoY cc, driven by demand for data center interconnect, scale-across fabrics, and switching. Nokia’s distinction between data center interconnect and scale-across demand is important because these workloads require different combinations of optical capacity, routing, and back-end connectivity. The company also secured its first multi-rail in-line amplifier (ILA) design win during the quarter, adding evidence that the optical roadmap is resonating with AI and cloud customers.

Supply remains the constraint, especially around memory and leading-edge optical components, which makes Nokia’s expanding manufacturing footprint strategically relevant. The San Jose Fab 2 is on track to begin production in Q4 2026, Pennsylvania’s advanced test and packaging capacity is set to increase tenfold starting in Q3 2026, and the agreement to acquire NXP’s Chandler, Arizona site adds a longer-term leg of capacity, with an initial lease starting in 2027 and full acquisition targeted to close in Q1 2029. Together, these investments give Nokia a multi-year runway of indium phosphide capacity that extends well past the near-term AI and cloud ramp.

AI-RAN Shifts Nokia’s Mobile Infrastructure Model

Nokia’s AI-RAN platform gives the Mobile Infrastructure business a longer-term path to software-led differentiation. The company expects pilots by the end of FY 2026, commercial availability in FY 2027, and more volume in FY 2028. Nokia is targeting more than 100% spectral efficiency gains by FY 2028, which would materially improve the economics of dense radio networks if operators validate the performance in live deployments. The NVIDIA partnership centers on GPU-based baseband options within Nokia’s AirScale platform, future standalone platforms, and cloud RAN server deployments. Nokia also described AI-RAN as a way to shift value from hardware refreshes toward ongoing software performance upgrades, including a path to 6G without additional hardware investment. AI-RAN is still early, but it gives Nokia a way to reset the economics of radio networks at a time when operator returns remain under pressure.

Nokia also pointed to a set of named co-innovation engagements that give the order momentum more texture. Google Cloud is building AI agents on Gemini to support autonomous network operations, Vodafone Albania is using AI-powered network slicing to dynamically manage network resources, and Indosat Ooredoo Hutchison is expanding its 5G network while advancing AI-RAN readiness. Nokia also disclosed a first trial with a US hyperscaler for an out-of-band data center management solution that brings passive optical technology inside the data center. These engagements move the AI and cloud narrative from order intake and revenue growth to specific, named proof points of where the technology is actually being deployed.

Guidance and Final Thoughts

Nokia maintained its FY 2026 operational outlook, with the comparable operating profit range technically revised to €2.1 billion to €2.6 billion (prior: €2.0 billion to €2.5 billion) due to the reclassification of Fixed Wireless Access CPE and Enterprise Campus Edge as discontinued operations. The company expects Q3 FY 2026 net sales to increase 3% to 7% sequentially, while comparable operating profit should be broadly flat versus Q2 FY 2026 because of software revenue phasing. Q4 FY 2026 is expected to improve meaningfully, supported by normal telecom seasonality and YoY growth in AI and cloud sales. Network Infrastructure net sales are expected to grow 12% to 14% cc and portfolio basis in FY 2026, with combined IP and Optical Networks expected to grow 18% to 20%. Nokia also raised FY 2026 restructuring-related charges to €800 million as it accelerates restructuring, China integration, and additional Europe-focused actions.

Nokia is becoming more closely aligned with AI infrastructure spending than with the traditional telecom investment cycle. The strength in optical networking and IP routing indicates that cloud providers are increasingly treating network infrastructure as a critical component of AI deployment rather than a supporting technology. The next phase will depend on whether Nokia can translate its growing order book into sustained revenue growth while navigating component constraints, scaling manufacturing capacity, and proving that AI-RAN evolves into a meaningful commercial opportunity rather than a longer-dated technology roadmap.

See the full press release on Nokia’s Q2 FY 2026 financial results on the company website.

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