Ericsson and Nokia both blamed North America for sinking their respective near-term earnings, a move that one analyst firm said might not rebound until 6G technology becomes available.

Ericsson, which was already coming off of a rough start to the year, reported a 9% year-over-year drop in sales in the second quarter of 2023. The bulk of that came from a 13% decrease in Segment Network sales, which overshadowed a 20% increase in Enterprise sales.

On the enterprise side, Ericsson noted “operators and enterprises are showing great interest” in its market-specific offerings. This includes its private network and Cradlepoint businesses that the vendor has been steadily upgrading.

Ericsson’s Network sales were bifurcated by strong growth in India, “where we now have a leading market share;” and North America, “where build-out pace moderated and customer inventory levels were reduced.”

The vendor expects network investments to pick back up beginning later this year, with “the exact timing of these increased network investments is, of course, in the hands of our customers.”

That optimism was somewhat shared by Nokia, which entered 2023 with some cautious momentum. The vendor this week cut its full-year earnings and operating margin expectations, with the hit coming from its Network Infrastructure and Mobile Networks businesses.

“The weaker demand outlook in the second half is due to both the macroeconomic environment and customers’ inventory digestion,” the vendor noted in its earnings adjustment. “Customer spending plans are increasingly impacted by high inflation and rising interest rates along with some projects now slipping to 2024 – notably in North America. There is also inventory normalization happening at customers after the supply chain challenges of the past two years.”

Nokia has been adjusting its operating model in hopes of finding the right financial mix.

The vendor last month struck a deal with Red Hat to offload primary support and ongoing development of Nokia’s container and cloud infrastructure operations onto Red Hat’s OpenShift and OpenStack platforms. Red Hat will also be taking on more than 350 Nokia employees from that vendor’s cloud infrastructure teams.

Fran Heeran, SVP and GM of core networks, cloud and network services for Nokia, said the vendor is making the move as it adjusts to market demands. This includes operators increasingly moving from what had been vertically integrated telecom stacks to a more horizontal approach.

“We’re seeing a change in that market now where customers increasingly want to build a horizontal solution to a standard architecture, standard cloud infrastructure for all applications coming from all suppliers into their network,” Heeran said. “That’s not a market that Nokia was pursuing. We were very clear for a long time that we were very focused on the cloud infrastructure supporting our own applications with some third-party elements as well. So with the market evolving that way it was very important that we had a technology offering as part of our full-stack solution in core networks that allowed customers to take that horizontal approach.”

Nokia is scheduled to release its full Q2 earnings on July 20.

The market’s overall stagnation aligns with analyst reports that have highlighted a flat year for 5G equipment sales.

Dell’Oro Group this week predicted the global radio access network (RAN) will decline at a 1% compound annual growth rate (CAGR) over the next five years, noting “the [RAN] market is done expanding for now.” This slowdown is being driven by more advanced countries countering growth in developing nations.

“Even if it is early days in the broader 5G journey, the challenge now is the comparisons are becoming more challenging in the more mature 5G markets and the upside with the slower-to-adopt 5G regions is not enough to extend the growth streak,” Stefan Pongratz, VP at Dell’Oro Group, noted in a statement. “Meanwhile, growth from new revenue streams including fixed-wireless access and enterprise LTE/5G is not ramping fast enough to change the trajectory. With 5G-Advanced not expected to trigger a new capex cycle, the question now is no longer whether RAN will grow. The question now is, rather, how much will the RAN market decline before 6G comes along?”