Key takeaways
- The top five telecom vendors collectively experienced a 9.5% year-over-year (YoY) revenue increase in Q2-2024, primarily led by strong performance from APAC vendors like Huawei.
- While Huawei’s revenue grew significantly (33.7% YoY in Q2-2024), Cisco, Ericsson, and Nokia faced revenue decline. This trend can be attributed to reduced network investment as 5G deployment reaches completion in major markets, slower-than-expected adoption of 5G networks and increased competition.
- Artificial Intelligence (AI) becomes a strategic growth catalyst for telecom vendors to drive innovations, as telcos face headwinds due to slowing network investments.
- Cisco reported a 10.3% YoY decline in Q2-2024, impacted by decline in product revenue, which offset the growth in its enterprise business.
- Splunk’s acquisition boosted its software portfolio and increased its annual recurring revenue (ARR).
- Ericsson’s overall revenues declined by 7.1% YoY in Q2-2024, due to a decline in carrier network business, with enterprise business growth being almost flat.
- Ericsson’s Intellectual Property Rights (IPR) licensing revenue rose by 21.9% due to new licensing agreements.
- Nokia’s overall revenues declined by 17.9% YoY in Q2-2024 due to weak network infrastructure, mobile networks, and cloud services.
- The carrier network business, which represents ~80.4% of Nokia’s total revenue, declined by 21.3%.
- Huawei’s revenue increased by 33.7% YoY in Q2-2024, driven by strong growth in its Intelligent Automotive Solutions (IAS) business unit.
- ZTE’s revenue grew by 1.1% YoY in Q2-2024, driven by its strategic focus on bolstering digital and intelligent infrastructure capabilities.
- Leading telecom vendors focused on strategic themes like 5G, AI, and green tech, to expand their footprint alongwith enhancing the network capabilities for telcos.
- In Q2-2024, the major engagements of leading vendors with telcos centered around deployment of technologies like 5G, fibre optics, and cloud solutions, driving network modernization, enhancing user experiences, and unlocking new business opportunities.
Trending telecom equipment vendor insights
1. AI becomes a strategic growth catalyst for telecom vendors to drive innovation
- Artificial intelligence (AI) is rapidly transforming the telecommunications landscape, driving innovation and fostering strategic partnerships among industry leaders such as Nokia, ZTE, Cisco, Ericsson, and Huawei. These companies are strategically integrating AI into their cloud services, network management, and product development initiatives to accelerate digital transformation.
- For instance, Cisco is investing heavily in AI-powered security and partnerships including USD 1 billion investment fund for AI startups, while Huawei’s Nebula Telecom Large Model is advancing intelligent networks. Nokia’s MX Grid is empowering organizations with AI-driven operational efficiency.
2. Telecom equipment vendors are facing headwinds due to slowing network infrastructure investments
- Telcos are deferring capital expenditures as they struggle to monetize 5G investments beyond basic connectivity services like Fixed Wireless Access (FWA). While FWA is gaining traction, other promising areas such as private networks have yet to deliver expected returns.
- North America and APAC, particularly India, have witnessed a decline in spending owing to 5G deployments reaching maturity, thereby impacting the revenue for vendors like Nokia, Cisco, and Ericsson. However, anticipated investments of about USD 2 billion by Indian telcos, Reliance Jio and Bharti Airtel, to enhance their 5G networks offer a glimmer of hope for revenue recovery in the region.
3. Selective acquisitions facilitate innovation and market dominance, while focusing on core competencies and emerging technologies
- Leading telecom vendors continue to bolster innovation and market dominance, by pursuing selective acquisitions, with focus to drive innovation, expand technological capabilities, and establish global market leadership.
- Ericsson is consolidating its leadership in the RAN and core markets while expanding its footprint in North America, in addition to bolstering its enterprise presence through acquisitions such as Cradlepoint and Vonage. Nokia, on the other hand, is optimizing its portfolio by divesting its submarine network business and acquiring Infinera to strengthen its position in the optical network market, whereas Cisco’s acquired Splunk and Isovalent acquisitions aiming to enhance its security and cloud capabilities.
4. Regulatory landscape and geopolitical factors continue to impact the revenue and market dynamics
- The global telecommunications industry is undergoing a paradigm shift driven by escalating security apprehensions.
- Germany’s recent decision to phase out Chinese vendors Huawei and ZTE from its 5G network highlights the evolving regulatory environment. The country has imposed strict timelines for the removal of these vendors’ equipment from both core networks (by 2026) and access and transmission networks (by 2029).
- The United States has adopted a similarly stringent approach, mandating the cessation of fixed and mobile broadband services offered by Chinese telecom entities telcos (US units of China Telecom, China Unicom, China Mobile, Pacific Networks, and ComNet) in the country.
- India’s Department of Telecommunications (DoT) has initiated an evaluation to assess the financial implications of substituting legacy telecom equipment sourced from untrusted vendors, principally Huawei and ZTE, with secure alternatives.
- This might potentially impact the revenue generation potential of Huawei, ZTE, and other Chinese vendors as well, facing previous ban on equipment approval.
5. Telecom vendors undertake restructuring initiatives to improve profitability alongwith tactical focus shift to high growth areas
- Faced with declining market demand, Cisco, Ericsson, and Nokia are implementing aggressive cost-cutting measures, including large-scale layoffs.
- Cisco plans to reduce its total global workforce by 7% in the second round of layoffs announced in Aug-2024 (owing to challenges faced in hardware sales) to focus towards higher-growth sectors like cybersecurity and AI. Earlier this year, Nokia also announced of job reductions of upto 14,000, whereas Ericsson aimed to streamline its operations with global layoffs, affecting 1,200 positions in Sweden.
For detailed reading
Research methodology and assumptions
- The report “Global telecom vendor updates: Summer 2024” provides brief insights into the financial and operational performance of leading telecom vendors (Cisco, Ericsson, Nokia, Huawei and ZTE) for the period April-June 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 Q2-2024 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 Q2-2024, 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 April-June 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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