Nokia reported robust third-quarter (Q3) financial results that continued to build on its most recent quarters and further fulfills CEO Pekka Lundmark’s ambitious turnaround plan.

However, the vendor did note several challenges that could impact its ability to continue on this track, though it remains confident it’s in a better position today to navigate those challenges.

Here are five significant points Nokia’s management discussed during its most recent earnings call.

Nokia Q3: North America Slowing, India to Surge

The vendor posted financial results that were in line with or slightly ahead of expectations, building off recent quarterly successes. Overall revenues increased 16% year over year, boosted by strong 5G deployments in North America.

CFO Marco Wiren noted during the earnings call that North America 5G deployments powered double-digit growth for Nokia’s Mobile Networks division. However, a mix of stronger fiber sales were offset by a drop in fixed-wireless access (FWA) opportunities to mute that division’s overall growth. Wiren explained that the FWA challenges were tied to a small overall customer base having an outsized impact on overall sales.

Despite the strong North America push, Nokia management remains cautious on its long-term trajectory due to a front-loaded push by carriers in building out their mid-band spectrum assets to support 5G.

“It is quite likely that the capex of the North American customers will at least somewhat normalize after a very strong year,” Lundmark said.

Lundmark did add that Nokia could replace that channel with recently signed deals by India operators. This includes a deal to supply 5G gear to Bharti Airtel and a new deal with Reliance Jio.

“So that does mean that there will be a mix change in Mobile Networks toward emerging markets, which … will put some pressure on gross margin,” Lundmark said. “But at the same time the scale effects will be meaningful, meaning that we will get through the scale better leveraged on our fixed cost, which should then support the operating margin.”

Private Wireless Momentum

Lundmark also touted Nokia’s continue “momentum” in the private wireless space, which has seen considerable attention tied to 5G deployments over the past six months. He said Nokia signed 30 customers to private wireless contracts during Q3.

“We are building the engagements we need with our partner network to really scale this business for the future,” he said. “All of these points are very important for our longer-term strategy as it's critical that we build momentum in enterprise to deliver on our longer-term growth ambitions. From what I have seen so far, I'm confident this will remain our fastest-growing customer segment over time.”

Nokia Q3 Supply Chain Improving

Lundmark said the vendor was beginning to see improvements in supply chain constraints that had been limiting Nokia’s growth over the past several quarters. This has also allowed the vendor to fulfill past orders during its most recent quarter that helped pad overall results.

“On supply chain, the situation is improving but remains tight,” Lundmark said. “In many areas of the business it's now becoming less of a constraint. In some areas, we were even able to catch up on some of our backlog from prior quarters.”

Those other areas that remain constrained include Nokia’s optical networking business, which echoes what others in that space have reported.

“The picture is improving, but we still believe it will not be before the first half of 2023 before there are no longer material constraints on any part of the business,” Lundmark added.

Cloud Business Remains Challenged

Nokia’s cloud ambitions remain in flux as the vendor looks to implement a sustainable business model to support software services. Lundmark tied some of this to slower-than-expected launches of 5G standalone (SA) networks that take more advantage of software and cloud platforms.

The executive admitted that “top-line development” for Nokia’s Cloud and Network Services division “is a bit weak.” But he tied that to the 5G SA market not being able to supplant diminishing 3G network spending.

“We have so many discussions with operators who realize that in order to then get the full benefits out of 5G, including all the new monetization cases and to do really compelling slicing for enterprise customers … you will need standalone,” Lundmark said. “5G operators understand this. But it is just in many cases an enormous amount of complexity that they need to go through in order to be able to truly rely on standalone 5G. It's not a simple thing for them, but I'm confident that they will get there, and that's definitely their plan.”

Economic Uncertainty

While the earnings call was overall very positive, broader macroeconomic and geopolitical challenges continue to cast a cloud over longer-term projections. Lundmark said these challenges have only increased in recent months.

“There is clearly a risk that this could start to impact the capex spending of some of our customers,” Lundmark said. “However, as we look ahead to 2023, considering the significant ramp-ups that are expected in regions like India, which are just beginning their 5G journeys, the ongoing fiber rollout, which is also now supported by a number of government funding programs, and the opportunities we see in enterprise, we currently expect our addressable market will grow on a constant currency basis.”