While growing 5G demand will get more attention for helping Nokia beat second quarter earnings estimates, the company’s network infrastructure business, including its fixed networks, IP, optical and submarine networks businesses, proved to be a source of strong growth as well during 2022’s second quarter.
Nokia President and CEO Pekka Lundmark said in a video statement regarding the earnings, “Network Infrastructure had another great quarter with 12% growth in net sales. This was driven both by strong market demand and our increased market share. All four of its businesses grew with Fixed Networks and Submarine Networks as the main engines – both delivering double-digit growth.”
This performance came as the company weathered a variety of uncertainties across all of its business segments, including its recent exit from the Russian market, the ongoing semiconductor shortage, other supply chain challenges, inflation and currency fluctuations in some markets against Euros and U.S. dollars.
“We are obviously seeing the same headlines our investors are seeing,” Lundmark said. “None of us has a crystal ball to predict what exactly is going to happen in the world economy in the next twelve months. Our focus is on preparing for all possible scenarios.”
He continued, “The most important thing for us as a company is to make sure we do not become complacent. We will maintain our focus on further increasing our technology leadership and having a constant focus on cost efficiency. If we maintain that focus, I am confident we can continue to deliver on our strategic goals.”
Net sales for the network infrastructure group actually were up 21% year over year–12% on a constant currency basis, the company reported. IP Networks net sales increased about 4% on a constant currency basis on double-digit growth out of North America that made up for a decline in Europe, where the Russia departure had an effect, and in Asia.
Meanwhile, the Optical Networks segment, where ordering activity has continued to be strong despite macro economic challenges, saw net sales grow by 4% on a constant currency basis. The supply chain challenges that continue to affect this segment should start to see some improvement in the second half of 2022 based on current visibility, the company said
The big breadwinner in the infrastructure group was the Fixed Networks business, which was up 22% on a constant currency basis during the quarter with broad-based strength across most regions, with particular strength in North America, as operators continued to focus their investments on connectivity, Nokia stated. Growth was driven by fiber related products (both home and operator premises) along with fixed wireless access.
Webscale operator deployments continued to drive growth in Submarine Networks as net sales grew 27% on a constant currency basis, Nokia said. Supply chain challenges and ongoing cost inflation worked against Nokia’s ability to grow its gross margins in its infrastructure segments, though gross margins were up slightly.