诺基亚并非买入标的；在合理的抛售之后其估值已属公允，缺乏安全边际。

And we've talked about Nokia, the old telecom equipment giant, especially last year when they completed the acquisition of Infinera to add some more vertical integration of optical components of photonics directly within their business.

They've made a couple other acquisitions in recent years, new CEO from Intel Data Center segment in 2025. I pulled up a batch of acquisitions Nokia has made since 2024. This first one here is of this company called Fenix Group, accelerating their US strategy in aerospace and defense communications.

Looking for a new end market here, the last couple of years, aerospace and defense has definitely ramped up in the US as well as in Europe. Nokia is a top supplier to Europe as well. They also acquired this company called Rapid, make this API product for networking companies, so being able to embed networking solutions via API, utilizing 4G and 5G. Can imagine this probably will get extended to 6G when that becomes a thing later this decade or by 2030, 2031.

And then of course, the one I just mentioned, the acquisition of Infinera, manufacturer of optical networking semiconductors, photonics. This is going to get added to Nokia Bell Labs, which came over a decade ago now when they purchased Alcatel-Lucent. This was completed last February, a year and a half ago.

And then most recently, Nokia said it is selling its fixed wireless access or FWA business to a micro cap company called Inseego. Nokia gets a stake in Inseego, an 11% equity stake. Inseego's at a micro cap. We're talking less than 100 million. Maybe there's lots of upside here, but, this is more Nokia just offloading parts of this business where they don't have a clear cut growth engine reallocating that capital somewhere else.

This is their Q2 2026 slide deck... This is their outlook for the full year. But specifically, I want to highlight this slide before we talk about the outlook and a couple valuation notes for Nokia.

They made this acquisition and talked a lot about 6G networks and AI RAN, Radio Access Network. Radio access networks RAN equipment is what hooks you up to a mobile internet connection via your phone, or if you have some sort of wireless internet at your home or business, that is the equipment that hooks you up to the World Wide Web with that wireless radio, substations and internet infrastructure, optical fiber optic that runs behind that fixed wireless part of the network, hooks you up to the main internet spine.

But this is not what is generating the bulk of Nokia's growth right now. Notice their telecom segment, this revenue chart is a little bit misleading. It kind of looks like just looking at the blue bars year over year in Q2, that their revenue doubled. But notice the scale here of the bar on the left. This is $4.4 billion. Last year at Q2 2026 on the right, $4.8 billion. So really just 9% year-over-year increase in revenue because they've chopped off the bottom of this chart. So telecom is actually growing slower than the company average. Only 4% year-over-year increase.

It's actually the company's new AI and cloud products, data center products, that are really ramping up and contributing to growth. So the reason for purchasing Infinera, Nokia can adapt a lot of its equipment and its know-how for inside the hyperscaler data center, for example, passive optical communications. So a passive optical line is a splitter, that requires no power to split a light signal up multiple ways. This is oftentimes used in internet infrastructure. It's very efficient. You don't have to have a powered light source to send the same signal to multiple users. You can actually just split the one signal, let's say at an internet base station and then split it multiple ways, and so the only other power source needed is on the receiving end, the user end. They're bringing some of that into the data center as well.

As we've talked about many times, optical is fantastic. It will gradually replace copper over time. But on a like-for-like basis, optical does consume more power. So bringing some of this old internet infrastructure technology into the data center can help with overall operating efficiency for the hyperscalers. Nokia helping with that.

The point being here is, at this point, most of the growth is coming from this, 105% year-over-year growth in AI and cloud. Only 4% for telecom.

So for us personally, we're looking for perhaps another investment, someplace to stick some money in internet infrastructure. Nokia, perhaps not yet. Not where it's at right now.

Let's jump down to the guidance for 2026. Notice the comparable operating profit that backs out acquisitions and divestitures expected to be two point three, two point four billion euro at the midpoint. And then of that free cash flow conversion expected to be a pretty broad range here, anywhere from 55 to 75% of operating profit. So we're looking at anywhere from 1 to 1.7 billion euro. Again, a pretty wide range expected for free cash flow as Nokia manages this resurgence in growth that they've been enjoying.

I pulled up Cloudflare, Akamai, and Fastly again, and also added in Nokia. And you'll immediately notice here, I'm not going to focus on the revenue growth over the last 12 months. Instead, I want to point out the free cash flow margin, which is also the back of the pack.

A large part of this is because the CDN companies, yes, they are actual infrastructure businesses. There is hardware here that Cloudflare, Akamai, and Fastly are managing, but they make most of their money via usage and software, so a very different type of business model versus Nokia, which primarily earns revenue and profit from selling equipment.

This is a notable line item here because Nokia stock had a nice surge the first half of 2026, and has come back down, as of this recording, around $10 per share. What does that actually mean? Well, it means it's a market cap of $55-56 billion.

They're in pretty good shape here. I checked off a number of things on our thesis checklist that I liked. Obviously, being involved with AI data centers and internet infrastructure is a good thing. You don't know how long that sales cycle is going to last. We'll talk about that in just a moment with the reverse DCF. This company does have a lot of breadth, a lot of vertical integration now. But a lot of the questions come from the pace of the revenue growth and the profitability.

Balance sheet is in good shape. That's great. They do have net cash and investments on balance. But this below-average free cash flow and operating margin is something to flag because, yes, Nokia does generate something like sixteen, maybe quickly approaching twenty billion euro in annual sales. But at the current market cap, what are you actually getting for that? Yes, you get a lot of revenue, but not much profit right now.

So jumping to a reverse DCF. On a trailing twelve-month basis, earnings per share and free cash flow per share are about the same, so I'm going to leave the weights alone. And to get to a fair value today, I dropped the terminal rate down to four percent, and what's expected over the next five years is a forty-one percent per share profit CAGR. Accelerating revenue is not going to cut it. Nokia needs a massive uplift in its profit margins. Low to mid-single digit is not going to get us there. We need to see something to the tune of ten percent minimum profit margin to make this scenario true.

Five-year cycle. Historically, these cycles come in bursts for Nokia. When the initial 5G rollout started to happen in the late 2010s through 2020, 2021, you got this nice little burst of growth. So we could leave this at five years. We could drop this down to three and just model for the big increase in data center revenue. And then expect that after that, any 6G network build-out is going to be maybe more moderate or not very persistent. Maybe an initial wave of growth and then that's it.

If we drop our initial wave of growth down to three years, what is the per share profit CAGR? About 80% higher, it looks like. 70% per share profit CAGR, 71% over the next three years to make this thing fair valued at this point.

So yes, Nokia stock did sell off pretty hard in July and so far in August after the big run-up earlier this year. But that seems to me to be because the expectations for the company had run far ahead of reality, and the sell-off was warranted. And now maybe we're looking at something closer to fair value, but certainly not a good value stock.

Just to illustrate this one more way, talked about the little bursts of growth the company has notched over the years. Here's the free cash flow bursts. Here's in end of 2017, 2018, 2019 during initial 5G rollouts. Then you have this dry spell for about three, four years. They started to monetize again as we came out of the bear market in 2023 and 2024. But there is a lot to prove here for Nokia.

And at least as far as how we see it here at CSI, they have put the pieces in place, or at least have begun to put the pieces in place to continue their vertical integration. Purchased Infinera. They're also in process of purchasing a fab from NXP down in Arizona. So they are building themselves into an optical communications manufacturer, not just internet and wireless network equipment assembler and seller with a bit of software layered into that as well.

But a lot of that appears to be priced in already, thanks to the big surge in the stock price already the last couple of years. So if you're looking for a value stock, maybe there is some value there in Nokia if they can outperform, over-deliver on what is currently baked into the stock price.

But for us, this is unfortunately another one we are going to pass on, but we're gonna keep it on our watch list. If this thing were to drop, let's say another ten billion in market cap down to forty-five billion, somewhere in the eight, even $9 per share range, we'll take a look again, see if anything has changed in the expectations.