Nokia, a leading provider of network infrastructure solutions, has seen its stock price surge in recent months, driven by a combination of factors including its partnership with Nvidia and the excitement surrounding its AI-RAN technology. However, the company's China exit has raised concerns about its future prospects, and the question remains whether the spring rally was built on substance or hype.
Revenue Beats and Operating Turnaround
In its Q2 2026 earnings report, Nokia announced revenue of $5.49 billion (€4.8 billion), beating estimates by 13.8%. This marks the third consecutive quarter of revenue beats, following a disappointing Q2 2025 earnings report that forced a guidance cut. The company's AI & Cloud customer revenue more than doubled to $508.96 million (€446 million), and Q2 order intake reached €2.8 billion. These results demonstrate a genuine operating turnaround, which has been driven by the company's focus on AI and cloud customers.
The China Exit: Risks and Opportunities
Nokia's decision to exit China has raised concerns about the potential impact on its business. The company plans to close almost all of its mainland China sites by the end of the year, which could result in the loss of thousands of jobs and 6G research capacity. However, some analysts have framed the retreat as a bigger bet on AI and optical networks, suggesting that the company is shifting its focus to more lucrative areas of the market.
AI-RAN Pilots and Commercial Scale
Nokia's AI-RAN technology has been a key driver of its recent success, and the company has announced plans to launch AI-RAN pilots with 10 public customers. These pilots are expected to reach commercial scale by 2027, with volume expected to follow in 2028. The success of these pilots will be critical to the company's future prospects, as they will determine whether Nokia's AI-RAN technology can deliver the recurring revenue that justifies its re-rating.
Patent Licensing and Cash Flow
Nokia's patent licensing business has been a steady source of cash flow for the company, with Technology Standards revenue reaching €407 million in Q2 2026. This business is less dependent on equipment cycles and provides a stable source of income for the company. The company's agreement to acquire NXP's Chandler, Arizona, campus for indium phosphide production is also expected to throw off cash in the future.
What to Watch Next
The success of Nokia's AI-RAN pilots and the company's ability to deliver recurring revenue will be critical to its future prospects. The company's operating turnaround and focus on AI and cloud customers have been genuine, but the China exit has raised concerns about its future prospects. The company's patent licensing business and agreement to acquire NXP's Chandler, Arizona, campus will also be important to watch in the coming months. If Nokia can deliver on its promises and continue to drive growth, its stock price may be due for a re-rating. However, if the company's China exit has a more significant impact than expected, its stock price may continue to decline.
Conclusion
Nokia's surge has been driven by a combination of factors, including its partnership with Nvidia and the excitement surrounding its AI-RAN technology. However, the company's China exit has raised concerns about its future prospects, and the question remains whether the spring rally was built on substance or hype. The success of Nokia's AI-RAN pilots and the company's ability to deliver recurring revenue will be critical to its future prospects, and investors will be watching closely to see if the company can deliver on its promises.
