Nokia CEO Says Supply Squeeze Is ‘A Structural Cost Increase, Not Just A Shortage': NOK Stock Drops To 6-Month Low Despite Q3 Beat

• Hotard said that Nokia is asking customers for 12 to 18 months of forward visibility.
• CFO Marco Wirén said Nokia sees the same “broad-based constraints” on supply and pricing that Ericsson flagged for 2027 margins.
• Wirén said part of the quarter’s strength was a “pull forward” from the fourth quarter.

Nokia (NOK) beat third-quarter profit expectations on Thursday, but its stock fell to a six-month low as investors focused on negative cash flow, a larger restructuring bill and a warning from its chief executive that the cost of building networks is rising for good.

NOK stock fell over 10% in morning trade and was among the top trending tickers on Stocktwits at the time of writing, even as retail sentiment on the platform around the shares continued to trend in ‘bullish’ territory. 

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Nokia CEO Says Supply Chain Squeeze Will Push Prices Higher

On the earnings call, Chief Executive Justin Hotard said the strain AI has put on component supply goes beyond a temporary shortage. He told analysts the squeeze reaches chips, memory and circuit boards, and that Nokia is already asking customers to plan further ahead.

“It is not just a shortage, it is also a structural cost increase that we are seeing in the supply chain.”

– Justin Hotard, CEO, Nokia

Hotard said customers are being asked for 12 to 18 months of visibility, a shift from the hand-to-mouth ordering cycle with roughly six-month lead times he found when he took the job 18 months ago. He expects the traditional telecom market to stay flat, with one exception.

“Overall, we expect the market to be flat. However, given the cost inflation, we expect pricing to go up.”

– Justin Hotard, CEO, Nokia

Chief Financial Officer Marco Wirén also confirmed that Nokia also sees the 2027 margin pressure that Ericsson flagged in its earnings. “There’s broad-based constraints when it comes to supply and price increases. We see that as well, and that’s why we are working on different fields to try to mitigate those impacts for us as well,” he said.

Nokia Cuts Cash Conversion Outlook, Raises Restructuring Charges

Nokia's free cash flow in Q3 was negative by about €99 million ($111 million). The firm ended the quarter with about $2.9 billion in net cash. 

Wirén said the company will put an additional $448 million into working capital to support growth. That cuts its expected 2026 free cash flow conversion, the share of operating profit that turns into cash, to 35% to 55%. Nokia had guided to 55% to 75% in July.

Restructuring is also costing more. Nokia now expects charges of about $1.2 billion this year, with cash outflows of $896 million to $1.01 billion. Wirén also said some of the quarter’s strength was borrowed from the next one. 

“The strength of the performance we saw in quarter 3 reflected some pull forward from quarter 4 as we work to improve linearity.”

– Marco Wirén, CFO, Nokia

Nokia reiterated its comparable operating profit guidance between $2.35 billion to $2.91 billion. It expects to finish above the midpoint of that range. Comparable operating profit for the quarter was about $678 million, a margin of 11.7%, up 220 basis points. The company expects fourth-quarter (Q4) sales to rise 20% to 24% from the third, though patent licensing deals should slow.

Nokia AI And Cloud Sales Jump 123%, But Supply Limits Growth

Nokia’s sales in AI & Cloud rose 123% and now make up 12% of group sales. Orders in that unit rose 118% to about $1.68 billion. IP Networks, Nokia’s routing business, grew 43% as design wins with cloud providers turned into revenue. Hotard said demand is not the problem.

For the first time, Nokia put a number on 2027, expecting Optical Networks and IP Networks to grow 25% to 30% combined. That is above its 18% to 20% assumption for this year.

Hotard also pointed to progress with Nvidia (NVDA) on AI-RAN. T-Mobile (TMUS) completed its first live voice call on the technology in its production network over the weekend. Nokia said it's working with 19 customers on AI-RAN.

(Conversion rate: €1 = $1.12)

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