Nokia Cuts Free-Cash-Flow Conversion to 35%–55% and Raises Restructuring Charges to 1.1 Billion Euros
Key Facts
In its third-quarter results report issued on October 22, Nokia lowered its forecast for converting comparable operating profit into free cash flow in 2026 to a range of 35%–55%, from 55%–75% previously. The company said the reduction reflects working capital investments to secure supplies and support growth opportunities in 2027, alongside accelerated restructuring. Nokia plans to invest an additional 400 million euros in working capital during the current year. It also raised its estimate for restructuring charges and related costs from cost-cutting programs to 1.1 billion euros. It estimated restructuring-related cash outflows at between 800 and 900 million euros in 2026.
The lower cash conversion reflects more funds allocated to inventory and supplies ahead of growth opportunities the company expects next year, while restructuring adds an expected cash burden during 2026. In its second-quarter report, Nokia had forecast converting 55%–75% of comparable operating profit into free cash flow. At the time, it estimated restructuring charges related to cost-cutting programs at about 800 million euros, and related cash outflows at between 700 and 800 million euros. The update therefore includes a lower cash-conversion range and higher estimates for charges and outflows. The company meanwhile kept its comparable operating profit forecast for the year at 2.1–2.6 billion euros.
The revisions came as Nokia reported growth in its business during the third quarter, with comparable sales of 5.154 billion euros, up 10% year on year, and sales on a constant-currency and portfolio basis rising 9%. Comparable operating profit rose 35% to 605 million euros, and its margin increased 220 basis points to 11.7%. By contrast, reported operating profit fell 22% to 196 million euros. The reported profit margin declined 160 basis points to 3.8%. The company attributed the decline in the reported margin to accelerated restructuring and integration costs.
AI and cloud businesses featured among the drivers of demand in the third quarter, with Nokia's sales to customers in these areas rising 123% year on year. Order intake increased 118%, bringing new orders to 1.5 billion euros. According to its report, the company plans to direct its working capital investment toward securing supplies and supporting the growth opportunity in 2027. It also forecast 12%–14% growth in network infrastructure sales during 2026. This includes an assumption that combined growth in optical and IP networks will exceed the previous range of 18%–20%.
In its fourth-quarter outlook, Nokia assumed sales would rise 20%–24% compared with the previous quarter, and said comparable operating profit typically increases sharply in that quarter. The company sees this performance supporting comparable operating profit above the midpoint of its full-year range of 2.1–2.6 billion euros. Chief Executive Justin Hotard said in the second-quarter report that the company was on track to deliver a result slightly above the midpoint of the range. Nokia plans to publish its fourth-quarter and full-year 2026 results on January 28, 2027. The company's U.S.-listed shares closed at $8.56 on October 30, 2026.