Nokia entered 2023 with momentum that brightly outshone its Nordic rival Ericsson, but company management provided mixed messages on how the rest of the year is going to play out for the telecommunications infrastructure and software vendor.

Nokia posted a 10% year-over-year increase in net sales for the first quarter and a more substantial 32% increase in net profits. Sales growth was just behind what rival Ericsson managed to post, but Nokia’s net income far surpassed the 46% year-over-year drop reported by its rival.

Nokia President and CEO Pekka Lundmark touted strong growth in 5G equipment sales across some markets, specifically pointing to India and “good traction in Europe.” Lundmark added that Nokia had around 30% market share across Europe at the end of the quarter, but was gaining half of all new contracts tied to operators ripping out equipment from China-based vendors like Huawei and ZTE.

Those two geographies were enough to offset “softening in North America sales” to help Nokia post a 13% increase in revenues from its Mobile Networks business. Lundmark added that North America sales remained front-loaded toward early 2022, with most operators in the area now focused on trimming capex as they absorb their initial 5G builds.

Nokia is also regaining traction in North America, with Lundmark stating the vendor has “not lost any market share in Mobile Networks in North America” and that “actually, we have regained.” That gain was tied to contracts with tier-two and tier-three operators, many of which are using federal funds to rip-and-replace equipment from Chinese vendors, and work Nokia has with T-Mobile US.

“We are clearly one of their key suppliers and we have a long-term 5G agreement with them,” Lundmark said.

The comment also countered ongoing concerns over Nokia’s technology competitiveness following its very public dismissal from Verizon’s initial virtualized radio access network (vRAN) work in 2020.

Nokia also continued to see strong sales into the enterprise market, with revenues surging 62% year-over-year. Lundmark cited strong sales into the webscale market “where sales more than doubled in the quarter,” and double-digit growth in its private wireless business. The executive added that Nokia added 73 new enterprise customers during the quarter, counting 595 total enterprise customers at the end of Q1.

Dell’Oro Group predicts worldwide telecom capex increased at a low-single digit rate year-over-year in 2022, down from the high-single digit growth in 2021. The firm expects global telecom capex to drop at a 2% to 3% compound annual growth rate (CAGR) over the next three years “as positive growth in India will not be enough to offset sharp capex cuts in North America.”

Stefan Pongratz, VP and analyst at Dell’Oro Group, noted in a recent report that the disconnect is “partly because the equipment makes up roughly one-third of the capex.”

“With the equipment market expected to grow 1% in 2023, and telco capex projected to decline, it can be inferred that the Dell’Oro analyst team is modeling some minor decoupling over the short-term,” Pongratz explained.

Ericsson CEO Börje Ekholm last week told investors that the first quarter was “challenging” for the vendor due to “slower deployment pace in some early 5G markets,” which was further impacted by catching up on past supply chain bottlenecks. This impact is expected to continue through the next couple of quarters.

“This has, of course, been compounded with the fact that customers in those markets are lowering their inventories,” Ekholm explained. “So that’s the reason the impact on our sales is bigger than the slowdown in the underlying deployment phase. We will continue to see inventory adjustments during Q2, but we expect less impact after that, but there could be some smaller effect during Q3.”

Despite the robust start to the year, Nokia’s management provided mixed signals on the remaining three quarters.

Lundmark did admit the vendor was “starting to see signs of the economic environment impacting customer spend.” But, he added that customers still had a need to maintain their investments in 5G and fiber, with questions remaining over the timing of any spending impact.

“It's clear that there is some economic uncertainty impacting customer spending plans,” Lundmark said. “In that regard, it is worth noting that if we look globally, excluding China, only about 20% of sites … are currently active for mid-band 5G, which should help illustrate how much investment still needs to be made. And even if we look at some markets like North America, which had invested earlier, mid-band site penetration is still only around 50%.”

India remains a driver of that ongoing investment need, which along with the broader uncertainty allowed Lundmark to paint an optimistic picture for the full year.

“We will maintain our cost discipline to ensure we can successfully navigate this uncertainty, and we remain on track to deliver another year of growth in 2023 with our outlook unchanged,” he added.