Nokia's network infrastructure business grows across the board in Q4

Nokia’s Network Infrastructure (NI) revenue was up 20% year-on-year in Q4, posting stronger growth than the company’s Mobile Networks or Cloud and Network Services segments. All four of the company’s NI units were up year-on-year: IP Networks grew 11%, Optical Networks was up 21%, Fixed Networks posted 8% growth and Submarine Networks grew 32%.

Overall Q4 revenue for the NI group was €2.7 B ($2.9 B), or 36% of Nokia’s overall revenue. NI also contributed 36% of Nokia’s revenue for the full year, with sales of €9.0 B ($9.8 B), up 18% from 2021.

IP Networks and Fixed Networks are the two biggest parts of Nokia’s NI business, together representing two thirds of the segment’s sales. IP Networks posted its best year-on-year growth of 2022 in Q4 and surpassed its Q4 2021 performance as well. Fixed Networks saw slower growth in Q4 than earlier in the year and in Q4 2021.

Nokia president and CEO Pekka Lundmark said on the company’s earnings call that Nokia’s IP Networks unit has the capacity to expand share in a market that is growing about 3% annually. He said the company’s recently launched FP5 IP routing products create opportunities for growth in service provider edge routing, adding that Nokia also wants to expand into core routing.

The Fixed Networks segment is “primarily being driven by ongoing fiber deployments,” Lundmark said, noting that other technologies will also contribute to growth. “Our Fixed Network business also covers copper solutions,” he said. “There is demand in some parts of the world for copper as well and very importantly, fixed wireless access.”

Analyst Simon Leopold, managing director at Raymond James, highlighted Nokia this week as a potential beneficiary of AT&T’s aggressive fiber buildout. “We continue to believe that the primary beneficiaries of AT&T’s spending focus in CY23 include … its fiber project suppliers Nokia and CommScope, but in a back-end loaded year,” wrote Leopold in a research note. “We believe AT&T is absorbing inventory now that it sees an improving supply chain.”

Enterprise customers 

Sales to enterprise customers represent about 8% of Nokia’s overall revenue, Lundmark reported. Growing this segment is a key initiative for the company.

“One of our key strategic objectives is to diversify our customer base so that we would not only be relying on service providers,” said Lundmark. “We were around €2 billion last year, 21% growth from 2021 to 2022, and a really, really good 49% growth in Q4.”

Lundmark highlighted growth in Nokia’s portfolio of partners for both campus networks and wide area enterprise networks during the call.

Macro trends

Lundmark also responded to an analyst question about the “geopolitical situation,” an evolving dynamic which of course includes restrictions on the technologies that companies in many countries can buy from China. Lundmark said that for the NI business, the geopolitical situation “has not been as pronounced as we have seen in Mobile Networks, but gradually, these factors seem to be creeping in into the Optical Business as well.”

The CEO also commented on the global supply chain, noting that securing components is less challenging now, but Nokia still has to wait for resources. “Availability has normalized. What has not normalized is lead times,” Lundmark summarized.