The Finnish telecommunications giant Nokia recently released a Q3 earnings report, revealing its figures have sharply plunged.

To address the matter, the company is launching a widespread cost-cutting plan that will result in massive layoffs, cutting up to 14,000 jobs (which would be over 16% of its entire workforce).

Nokia Profits Plunged by 69%

Commenting on the Q3 2023 earnings report, Nokia said it must react as quickly as possible and reduce its cost base. The firm believes that doing so would increase operation efficiency. It also blamed the “challenging market environment” for the poor performance and the new job cuts.

The company’s report for Q3 net sales shows a 20% decline on a YoY basis, totaling 4.98 billion EUR. Meanwhile, profit plunged by 69% YoY over this period, leading to only 133 million EUR.

As a result, the company is now targeting to lower its cost base on a gross basis in 2023 by somewhere between 800 million euros ($842.5 million) and 1.2 billion euros ($1.26 billion) by the end of 2026.

As of now, the company employs a total of 86,000 workers. However, after it conducts the job cuts, that figure is expected to drop to between 77,000 and 72,000 employees.

Despite the job cuts, Nokia claims it has invested heavily to strengthen its technology leadership, which granted the company a foundation to weather the market weakness.

The State of the Market Forced More Job Cuts

The telecom industry is in a massive rut as 5G continues to underperform. Nokia is only one of many companies that are taking a hit.

Nokia’s report shows that the declines were the most noticeable in North America, although the company suffered a performance drop on a global level. Its sales volumes in India and similar key markets were described as “moderated,” while 5G deployments are “normalized.”

The company’s CEO, Pekka Lundmark, stated that the decline in mobile network revenue resulted from

Some moderation in the pace of 5G deployment in India which meant the growth there was no longer enough to offset the slowdown in North America.

But, despite it being a foreign firm, Nokia was not the only telecommunications company to see a drop in the US. Major carriers such as AT&T and Verizon also had to put cost-cutting measures into place after struggling in the current market.

5G still hasn’t turned into the golden goose many of these telecom companies were hoping for.

What Is Next for Nokia?

According to the company’s report, Nokia still expects to achieve full-year net sales of up to 24.6 billion EUR, an older forecast that the company apparently decided to stick with. Lundmark also commented that he is confident in the business’ fundamental drivers.

He said,

Data traffic growth continues; the 5G rollout is only around 25% complete, excluding China, and networks will continue investment. Cloud computing and AI revolutions will not happen without significant investment in networks with vastly improved capabilities.

Ericsson’s Report Shows Similar Struggles

Ericsson released its Q3 results this Wednesday, only a day before Nokia. The Swedish firm has noted a similar decline in revenue while also pointing out similar issues in North American countries as Nokia did.

Furthermore, the company’s CEO, Borje Ekholm, stated that the underlying uncertainty strongly impacts the firm’s mobile networks business. He expects it to persist for the rest of 2023 and even in 2024, expressing doubt regarding the telecommunications equipment market recovery.

Like Nokia, Ericsson warned that sales in H2 2023 are likely to come noticeably lower than usual. The company also cited the challenging environment and macroeconomic uncertainty as the leading cause of poorer performance.