Nokia CEO Pekka Lundmark

Nokia reported strong second-quarter financial results boosted by its mobile networks and infrastructure business that continued to ride strong 5G deployment demand. Those results also came in ahead of expectations and built on what was an uninspiring start to the year.

The Finnish vendor reported an 11% increase in Q2 sales compared to the same period last year, and a more robust 31% increase in net profits. Net sales increased across all of its divisions, save for its intellectual property focused “Technologies” division, which was hit by ongoing patent litigation, and only its “Cloud and Network Services” division did not post a profit, which it attributed to higher operating expenses.

Nokia added that its halo “Mobile Networks” and “Network Infrastructure” divisions could have performed better but were hamstrung by ongoing supply chain constraints during the quarter.

CEO Pekka Lundmark said the vendor continued to see supply chain improvements as the quarter progressed and thinks they will continue to “ease through the second half of 2022 and the first half of 2023.”

Similar to rival Ericsson, Nokia also stockpiled inventory during the quarter in an attempt to battle supply constraints. CTO Marco Wiren explained the vendor increased inventories by around $240 million during the quarter, “and we believe that until the supply chain has returned to more normal and we can trust on the lead times that we get from our suppliers, we prefer to have at least the level we have today and have a little bit buffer.”

Nokia management also said it was confident it had gained equal 5G technology footing in the expansive North American telecom market following early hurdles.

“At least when it comes to North America, I can confirm that what we are hearing from customers now is that ... we are now fully competitive when it comes to technology,” Lundmark said, adding later that recent U.S. network testing results showed Nokia’s equipment was up to par.

This was in response to Verizon sidestepping Nokia as a key 5G radio access network (RAN) vendor due to equipment concerns. That precipitated Lundmark driving a three-year turnaround strategy that so far has resulted in job cuts and management changes.

“As I said on a general level, of course, our goal is to maximize our market share,” Lundmark answered to a specific Verizon question during the earnings call. “And if we have lost market share somewhere, our goal is to win it back. But if those things would happen, that’s something that I do not want to speculate on.”

However, Lundmark also noted that outside of China, 5G technologies make up only 15% of live networks, which opens up a lot of future opportunities.

“And obviously, India is one of the most important one here. Latin America, the same thing. It’s only starting now,” Lundmark said. “So that’s why we do believe that we are still early in the 5G cycle.”

This 5G bullishness was in contrast to a more modest outlook that accompanied Nokia’s flat Q1 numbers.

Rival Ericsson last week reported muted Q2 results that came in lower than expected. The vendor did post a robust year-over-year sales surge, which was enough to counter a dip in margins that resulted in a 19% increase in Ericsson’s net income for the quarter. That sales growth came in Ericsson’s strongholds of North America and Europe, which are more advanced in their respective 5G rollouts.