Key takeaways
- Consumer business propels Huawei revenue growth as other telecom vendors see decline in business, resulting in low single digit collective revenue growth YoY for the leading five telecom vendors in Q3-2024.
- Huawei’s revenue experienced significant growth of 15.6% YoY in Q3-2024, while other leading vendors, such as Cisco, Ericsson, Nokia, and ZTE, faced revenue declines. This trend can be attributed to reduced network investments following the completion of 5G deployments in major markets, slower-than-anticipated adoption of 5G networks, and heightened competition.
- Leading telecommunications vendors are investing in AI-driven innovations to enhance network efficiency, performance, and security. These efforts include collaborations and acquisitions aimed at developing advanced AI-powered Radio Access Network (RAN) solutions and AI security technologies.
- The North American market has reportedly shown initial signs of stabilization, with vendors anticipating growth in demand over the coming years.
- Cisco reported a 5.6% YoY decline in revenue for Q3-2024, primarily due to a decrease in product revenue, which offset the growth in its enterprise business.
- Excluding Splunk, total revenue declined by ~14% YoY in Q3-2024.
- Ericsson reported a modest improvement in its Q3-2024 results, although sales declined by 4.2% YoY to approximately USD 5.9 billion (SEK 61.8 billion).
- The YoY decline was relatively lower compared to declines of 14.8% and 7.1% in Q1-2024 and Q2-2024, respectively, due to a sales uptick in North America.
- Nokia’s overall revenues decreased by 8.1% YoY in Q3-2024, primarily due to a decline in Mobile Networks, particularly in India, and a divestment in Cloud and Network Services.
- The carrier network business, which accounts for ~79.6% of Nokia’s total revenue, declined by 12.8%.
- Huawei’s revenue increased by 15.6% YoY in Q3-2024, driven by robust performance in its consumer business, including smartphones and PCs, as well as its growing smart car components unit.
- ZTE’s revenue declined by 3.9% YoY to USD 3.8 billion (CNY 27.6 billion) in Q3- 2024, due to the global economic slowdown and reduced operator investments.
Trending telecom equipment vendor insights
1. North American market shows signs of recovery, albeit at a slower rate for telecom vendors
- The North American market, particularly the United States, has emerged as a promising area for leading telecom vendors such as Ericsson and Nokia. Increased investment by major customers in network infrastructure for fixed services has contributed to initial signs of revenue recovery in the region.
- Ericsson reported a significant YoY revenue growth of 51.3% in Q3-2024 and a 13.5% YoY increase for the first nine months of FY-2024. Although Nokia experienced a YoY revenue decline of 3.2% in Q3-2024, this represents a notable improvement compared to the 44.8% decline in the same quarter of the previous year (Q3-2023). Cisco also registered its lowest YoY decline in Q3-2024 compared to the previous three quarters of the current year (FY-2024).
2. AI remains a pivotal driver of strategic growth and innovation for telecom vendors
- Leading telecom vendors are pursuing strategic initiatives to enhance their AI capabilities. For instance, Nokia, Ericsson, Nvidia, and T-Mobile have collaborated to launch the AI-RAN Innovation Center, focused on advancing AI-powered RAN solutions. Similarly, ZTE and Huawei have announced new AI-powered innovations aimed at enhancing network efficiency and performance.
- Additionally, Cisco has acquired security startups DeepFactor and Robust Intelligence to further strengthen its AI security capabilities.
3. Organizational realignment strategies of leading telecom vendors focus on future growth opportunities
- Nokia has announced a strategic restructuring of its Corporate Affairs function into two parts: Geopolitics and Government Relations, and Communications, to address challenges and opportunities in the global telecom landscape.
- Ericsson’s integrated strategy, combining Cradlepoint, Ericom, and Ericsson Private 5G, aims to deliver comprehensive enterprise wireless solutions. This three-pronged approach, encompassing Ericsson Private 5G, Ericsson Private 5G Compact, and Ericsson Enterprise 5G Coverage, addresses the growing demand for secure, high-performance connectivity in diverse enterprise environments.
- Cisco has also merged its Networking, Security, and Collaboration teams into a single unit, aiming to accelerate innovation, enhance customer experience, and fully integrate Splunk into its product portfolio.
4. Telecom vendors face headwinds, leading to job reductions
- Leading equipment vendors continue to experience challenges in FY-2024, marked by a series of job cuts from companies such as Cisco, Nokia, and Ericsson.
- Nokia has been proactive in its cost-reduction efforts. As part of the plan announced in Dec-2023, the company has already laid off nearly 2,000 employees in Greater China in Oct-2024 and is poised to further reduce its workforce in Europe.
- The impact of these measures is evident in the company’s improved financial performance, with a positive operating profit growth of 3.8% in Q3-2024, compared to declines of 6.1% and 7.9% in Q1-2024 and Q2-2024, respectively.
- Cisco and Ericsson have also implemented job reduction programs to address declining revenues and optimize costs. Meanwhile, Huawei and ZTE, despite not announcing formal layoff plans, are navigating a complex geopolitical landscape that could potentially impact their workforce.
5. Chinese vendors face potential future revenue challenges amidst security concerns
- The global trend of “rip and replace,” initiated by the US, Germany, and India, is poised to significantly impact the revenue potential of Chinese vendors like Huawei and ZTE.
- In the US, the FCC recently granted extensions to multiple service providers to complete the removal of Chinese equipment, citing supply chain disruptions as the primary reason. Additionally, US lawmakers are intensifying efforts to restrict Huawei’s access to critical US technology, particularly semiconductor manufacturing equipment.
- India is also actively pursuing a similar strategy. Vodafone Idea has assured the government of its commitment to phasing out Chinese technology from its core network and has selected Samsung as its 5G equipment provider for priority circles, opting for Nokia and Ericsson to drive 4G network expansion.
- Germany has imposed strict deadlines for removing Chinese equipment from its networks, with core networks to be cleared by 2026 and access and transmission networks by 2029.
For detailed reading
Research methodology and assumptions
- The report “Global telecom vendor updates: Autumn 2024” provides brief insights into the financial and operational performance of leading telecom vendors (Cisco, Ericsson, Nokia, Huawei and ZTE) for the period July-Sep 2024.
- This report harnesses insights gleaned from official sources, financial reports, and regulatory filings of leading telecom equipment vendors, providing a robust foundation for analysis.
- The financial performance for Q3-2024 serves as a powerful leading indicator, offering invaluable insights into future market trends and potential disruptions.
- The report provides actionable insights for benchmarking carrier and enterprise business operations against these key vendors.
- A summary of key strategic developments for Q3-2024, encompassing product launches, partnerships, and contract wins, provides a holistic understanding of vendor strategies and their potential impact on the market.
- All local currency figures have been converted to USD using an average exchange rate calculated for July – Sep 2024 to facilitate fair comparison.
- The data presented in this report is based on the most current information available at the time of compilation. As such, it may not reflect subsequent developments. This report is intended for informational purposes only and should not be relied upon as a substitute for independent research.
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