S&P Global Ratings has shifted its outlook on Nokia Corp. to positive from stable, while reaffirming the firm's long-term issuer credit rating at 'BBB-' and its short-term rating at 'A-3'. The upgrade in outlook reflects the agency's view that Nokia could qualify for a one-notch rating upgrade within 24 months if the company controls costs and captures sustained demand from AI and cloud customers for network infrastructure.
In the second quarter of 2026, Nokia's Network Infrastructure division expanded by 12% year-over-year on a constant currency basis. That gain was led by a 20% rise in Optical Network revenue and a 16% increase in IP Networks sales. Based on those trends, S&P expects the Network Infrastructure segment to expand by roughly 10%-15% across 2026-2027, citing strong requirements from hyperscale cloud operators for high-speed data transport and a lengthening of order durations as a result of supply constraints.
The agency noted that Nokia's February 2025 acquisition of Infinera has bolstered the company's optical networking capabilities and given it a more direct foothold in North America and the hyperscaler customer base.
S&P also expects Nokia's Mobile Infrastructure revenue - which made up about 57% of group revenue in 2025 - to remain broadly stable through 2026-2027. The firm highlighted Nokia's AI-RAN initiative, a commercial platform that launched in July 2026. AI-RAN pairs the company's AI-native anyRAN software with NVIDIA hardware and is designed to improve spectral efficiency while advancing a shift toward a software-defined, subscription-oriented delivery model. The agency emphasized that the platform's adoption pace and its contribution to long-term resilience are still unproven.
On margins and cash flow, S&P projects Nokia's adjusted EBITDA margin will decline to about 11.0% in 2026 from 12.1% in 2025. The downgrade in margin is attributed to elevated restructuring charges and higher operating expenses as the company supports growth initiatives. Reported free operating cash flow after leases is forecast to fall to roughly 1.1 billion in 2026 from 1.25 billion in 2025, driven in part by an increase in capital expenditures to about 900 million.
Looking further ahead, the ratings agency expects revenue and EBITDA expansion to push reported free operating cash flow to approximately 1.3 billion in 2027 and 1.6 billion in 2028.
S&P set out conditions for a potential ratings upgrade within an 18-24 month window: Nokia would need to sustain free operating cash flow after lease payments above 1.3 billion, keep adjusted debt to EBITDA at or below 1.5x, and maintain funds from operations to debt north of 60%. Conversely, the outlook could revert to stable if demand from AI and cloud customers for communications equipment weakens materially or if adjusted EBITDA margin falls below 10% on a sustained basis.
Context for markets
The developments highlighted by S&P touch sectors reliant on advanced networking capacity, including telecommunications equipment providers and hyperscale cloud operators. Changes in Nokia's margin and cash flow profile could influence investor sentiment in telecom-equipment equities and may affect financing terms tied to credit ratings.