- NOK
- NOK
Investing.com — Moody’s Ratings upgraded Nokia (NYSE:NOK) to investment-grade territory on Tuesday, lifting its long-term issuer and senior unsecured ratings to Baa3 from Ba1 while maintaining a positive outlook. The credit rating agency cited accelerating demand for cloud and artificial intelligence infrastructure, which is actively reshaping the Finnish telecommunications equipment maker’s earnings profile away from volatile mobile carrier spending.
The upgrade reflects Moody’s expectation that Nokia’s expanding Network Infrastructure unit, bolstered by its acquisition of Infinera, will drive operating margin expansion and broaden its customer base beyond traditional carriers. While telecom operators still accounted for 72% of net sales through the first nine months of 2026, accelerating optical and IP network demand from hyperscalers provides an increasingly resilient growth engine as mobile radio access network (RAN) investments remain broadly flat.
Near-term profitability faces transitional friction as Nokia absorbs elevated restructuring expenses, which surged to roughly €1.1 billion for 2026 compared to an initial €250 million estimate. The higher outlays stem largely from winding down operations across mainland China and enacting structural cost reductions in Europe, which will pressure free cash flow after dividends to a negative €370 million this year.
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Financial momentum is projected to rebound sharply from 2027 onward as restructuring charges abate and fixed-cost absorption improves across higher optical and IP network delivery volumes. Moody’s forecasts adjusted operating margins to widen from around 5% in 2026 to 9% in 2027 and 11.5% in 2028, lifting adjusted EBITDA to €3.6 billion and returning annual free cash flow to between €700 million and €750 million.
Underpinning the upgrade is Nokia’s conservative capital structure, highlighted by an existing net cash position and substantial liquidity buffers. With €4.7 billion in adjusted cash alongside €2.37 billion in undrawn credit and European Investment Bank loan facilities, Nokia is positioned to deleverage gross debt-to-EBITDA from 1.9x at year-end 2026 toward 1.3x by 2028.
The positive outlook signals that further credit upgrades remain within reach over the next 12 to 18 months if management executes its margin expansion targets. Analysts will be watching whether Nokia can steadily lift operating margins toward the low teens while sustaining strong net cash generation against an otherwise sluggish broader carrier backdrop.
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