Key Takeaways
- Nokia shares fell 9% today. Third-quarter revenue of €5.15 billion beat estimates, and comparable EPS of €0.09 matched them.
- Nokia is putting an extra €400 million into working capital this year so it has supply for 2027, when it expects Optical and IP Networks to grow 25% to 30%.
- Nokia also lowered its 2026 free cash flow conversion assumption to 35%-55% of comparable operating profit, down from 55%-75% in July.
- Even after today’s drop, Nokia trades well above its five-year average forward P/E, so the 2027 growth has to show up.
Nokia (NOK) sank 9% today after a third quarter that beat on revenue. CEO Justin Hotard also said that “growth is accelerating.”
The problem is what Nokia is spending to keep that growth coming.
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AI & Cloud more than doubled
Nokia’s third quarter was a strong one on the top line, with revenue up 10% to €5.15 billion against the around €5.1 billion analysts expected. Comparable EPS of €0.09 matched estimates, and the AI & Cloud business did the heavy lifting: sales to those customers jumped 123% at constant currency, IP Networks grew 43%, and Nokia booked €1.5 billion of new AI & Cloud orders. One caveat is that part of Mobile Infrastructure’s 5% growth was revenue pulled forward from the fourth quarter.
Looking ahead, Hotard expects Optical and IP Networks combined to grow 25% to 30% in 2027, and Wall Street sees a turn coming too. Sales slipped from $22.3 billion in 2023 to $19.9 billion in 2025, but analysts expect around $21 billion this year and around $22 billion in 2027…
Paying up for 2027
Nokia held its full-year outlook of €2.1 billion to €2.6 billion in comparable operating profit. But it now plans to spend an extra €400 million on working capital this year to lock in supply for 2027. It also raised restructuring charges to €1.1 billion, from €800 million in July.
So Nokia lowered its free cash flow conversion assumption to 35%-55% of comparable operating profit, from 55%-75%. That works out to roughly half a billion euros less cash this year. Nokia has had positive free cash flow in each of the last five years, from $0.67 billion in 2023 to $2.02 billion in 2024…
Free cash flow was already negative €99 million in the third quarter, and net cash fell to €2.58 billion.
Still not cheap
The price matters more. At Wednesday’s close, Nokia traded at 21x forward earnings. Its five-year average is 14x…
After today’s drop, Nokia trades closer to 19x forward earnings, which is still a healthy premium to its five-year average of 14x. It didn’t help that optical peers Lumentum and Coherent also fell this morning, so Nokia wasn’t sliding alone.
My take: I think spending cash to meet demand Nokia can already see in its orders is the right call, and today’s drop mostly lets some air out of a rich valuation. At this multiple, though, investors are paying up front for the 25% to 30% growth Hotard promised for 2027.
The first real check comes with Nokia’s fourth-quarter report on Jan. 28, 2027, when the company expects sales to jump 20% to 24% from the third quarter.
So what is Nokia stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
