Riley initiated coverage of Nokia Oyj (NYSE:NOK), giving the stock a Buy rating and setting the price target at $15. The firm pointed to the company's position in telecom infrastructure, cloud software, and hardware networking solutions. Riley noted that the company's networking businesses are seeing strong growth.
In Q2 2026, Optical Networks revenue increased 20% year-over-year, while IP Networks grew 16%. Net sales to AI and cloud customers also surged 105%. The research firm noted that hyperscalers continue to purchase Nokia Oyj's (NYSE:NOK) AI networking products to support large-scale computing clusters.
The company's AI and cloud opportunity is also reflected in its order book. Nokia Oyj (NYSE:NOK) reported EUR 2.8 billion in AI and cloud order intake during the second quarter of 2026. Riley pointed out that this provides revenue visibility into 2027.
The firm also noted that the carrier inventory correction cycle that had weighed on global capital expenditures has now concluded. Riley derived its $15 price target using a sum-of-the-parts valuation that separates the company's legacy assets from its data center business. The firm applied a premium hardware multiple to the data center segment, reflecting its view of the potential operating leverage in that business.
However, Nokia Oyj (NYSE:NOK) reported a EUR 50 million operating loss in the second quarter of 2026, compared with a EUR 147 million operating profit a year earlier. Its reported operating margin also declined to negative 1% from 3.3%. Nokia Oyj (NYSE:NOK) attributed the decline to an accelerated pace of restructuring.
Free cash flow was also negative EUR 732 million in the second quarter. The company said it has accelerated certain restructuring actions and now expects total related charges of EUR 800 million in 2026. These costs create a near-term financial burden even as the company is seeing strong demand from AI and cloud customers.
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