Nokia Stock Fell 5% Despite an Earnings Beat — Here Are the 4 Reasons Why

Nokia reported a solid Q2 2026 earnings beat on July 23, 2026 — comparable operating profit jumped 18% to €434 million, revenue grew 9% on a constant-currency basis, and AI & cloud revenue more than doubled to €446 million . Yet the very next day, the stock fell more than 5% to hit its lowest close since April .

For investors who saw only the headline numbers, the selloff looked confusing. But a closer read of the full report reveals four distinct factors that drove the market's negative reaction.

1. The Ugly Reality Behind the Adjusted Profit

The most important reason for the decline was the chasm between Nokia's "comparable" and "reported" (GAAP) results. While comparable operating profit looked strong, the reported numbers told a very different story.

On a reported basis, Nokia recorded an operating loss of €50 million and net profit of just €2 million, down sharply from €90 million a year earlier . Heavy restructuring and other charges — including an estimated €800 million for the full year 2026, with €350 million related to integrating Chinese operations — consumed the reported profitability . A €390 million restructuring charge in Q2 alone pushed the reported operating margin to -1.0% .

Investors focused on these real-world losses rather than the adjusted figures.

2. Memory Supply Constraints That Cap the AI Story

Nokia's AI growth narrative is real, but it has a ceiling. CEO Justin Hotard told Bloomberg on July 23 that memory remains the industry's biggest supply constraint, and management expects shortages to continue through 2027 .

"Demand remains strong, while supply continues to be the main industry constraint," Hotard said, noting that customers are placing longer-term orders as a result . While that drives order visibility, it also means Nokia can't fully convert AI demand into revenue as long as key components remain scarce.

On the earnings call, Hotard added that memory and leading-edge silicon constraints have led the company to "elongate lead times" and seek better visibility from customers .

3. A Guidance Raise That Was Purely Technical

Nokia raised its full-year 2026 comparable operating profit forecast to €2.1–€2.6 billion. But a closer look shows the increase was effectively meaningless.

The revision was a €0.1 billion technical adjustment from reclassifying two businesses — Fixed Wireless Access CPE and Enterprise Campus Edge — as discontinued operations . The underlying outlook for continuing operations was essentially unchanged .

Analysts and traders treated the raise as a non-event — or worse, a distraction .

4. Legacy Telecom Weakness Dragging Down the Story

While AI & Cloud revenue doubled to €446 million (9.3% of total sales), Nokia's core business of selling network equipment to traditional mobile operators continued to face declining demand .

Nokia's ADRs fell alongside those of rival Ericsson, signaling broad pressure on European telecom equipment names . The market saw a company with one fast-growing AI business and a much larger, shrinking legacy business — and weighed the latter more heavily.

Cash Flow Concerns Added to the Pressure

CFO Wiren noted on the earnings call that the company now expects to track toward the low end of its free cash flow conversion assumption of 55%–75%, partly due to higher restructuring costs . Free cash flow in Q2 was negative €732 million .

The bottom line: Nokia's selloff wasn't a rejection of its AI strategy. It was a clear-eyed market response to a reported loss, supply constraints that limit AI upside, a guidance raise that was technically hollow, growing pressure in traditional telecom, and deteriorating cash flow — factors that overwhelmed the positive comparable-profit beat .