The supply-chain squeeze will limit Nokia’s growth through at least 2021, CEO Pekka Lundmark said during the company’s second-quarter 2021 earnings call. 

“The component market is tight,” he said. “You have to fight for your share every day, and that situation continues. We are on daily calls with many suppliers.”

Nokia has largely weathered these supply-chain constraints, but “interestingly, we could grow even faster if there were more components available,” Lundmark said.

Despite those challenges, Nokia recently revised its outlook for total 2021 revenue from a previous high of $25.9 billion to a new high of almost $27 billion. It would be higher, if not for the global supply crunch, according to Lundmark.

Nokia continues to show signs of a rebound as it implements a three-year turnaround plan Lundmark instituted soon after joining the company, but it anticipates some bumps along the way. 

Nokia Packs New SoC Into 54% of Q2 RAN Shipments

“We are seeing progress in all areas of the business and across all elements of the strategy,” he said. “It is important to bear in mind that our results benefited from some one-offs and we have a lot of work ahead of us. We are still only in the first phase of our strategy execution.”

Nokia banked $417 million in profit on $6.31 billion in revenue during the quarter, marking a 4% year-over-year growth in revenue and a 255% year-over-year jump in net income. 

A good chunk of that profit can be attributed to Nokia’s years-long effort to overcome silicon mistakes it made in the first wave of 5G products. The company last year began shipping 5G radio access network (RAN) equipment with a more price competitive and feature-rich system-on-a-chip (SoC) that accounted for 54% of all shipments during Q2. Nokia claims its on pace to hit its goal of 70% by the end of the year. 

Positive US Market Outlook

Lundmark also conveyed optimism about the company’s outlook in the U.S. market, pointing to recently signed five-year 5G deals with T-Mobile US and AT&T. He also continues to flag Verizon as a “very big and important customer” in many segments, but that doesn’t offset the multi-billion dollar losses it suffered when Verizon awarded Samsung and Ericsson the bulk of its 5G RAN contracts. 

After Verizon kicked Nokia to the curb, it inked a $6.64 billion deal with Samsung that runs through 2025 and will likely be extended. 

“There are no new headwinds, if you will, that would have surfaced after we first started to talk about this thing in October last year,” Lundmark said.

Mobile Networks Catches Up With Competitors

Nokia’s largest business unit, Mobile Networks, reported almost $2.83 billion in revenue during the quarter, a year-over-year decline of 1.8%. The group has signed 170 commercial 5G contracts to date, including 67 live 5G networks.

“We expect to have largely caught up with the competition by the end of the year,” Lundmark said, adding that it could lead in some areas, including its recently released massive MIMO 5G radios. 

Sales in Nokia’s Network Infrastructure unit increased 15% year over year to $2.1 billion. Within that unit, fixed networks sales jumped from a 28% growth rate in Q1 to a 49% growth rate in Q2, and sales growth in IP networks improved from 8% to 22% during the same period. Meanwhile, sales growth rates declined between Q1 and Q2 from 72% to 57% in submarine networks, and 13% to 7% in optical networks. 

Cloud and Network Services reported $835 million in revenue, a 2% year-over-year decline. The unit now boasts more than 150 customers for 5G core and more than 340 private wireless deals, a 36% increase from the beginning of the year. 

Nokia landed 63 new enterprise customers during the quarter, but enterprise-related sales declined 2% year over year.  

Communications service providers accounted for 80% of all sales during the quarter, followed by 7% from enterprises, and 8% from licensees. Nokia Technologies’ sales jumped almost 16% year over year to $477 million. 

Europe and North America each comprised 31% of total sales during the quarter, followed by 11% in the Asia-Pacific region, 8% in the Middle East, 7% in Greater China, and 6% each in Latin America and India.

Nokia's research and development spending increased 5% year over year to almost $1.26 billion during the quarter.