The Zacks Wireless Equipment industry is poised to capitalize on the healthy demand trends driven by the rapid deployment of 5G and the transition to cloud and fiber networks. However, large-scale investments for seamless 5G evolution, margin erosion due to price wars, higher customer inventory levels and inflated raw material costs owing to a challenging macroeconomic environment, geopolitical conflicts and uncertain business conditions might erode profitability.  

Nevertheless, Motorola Solutions, Inc. (MSI Quick QuoteMSI - Free Report) , Ubiquiti Inc. (UI Quick QuoteUI - Free Report) and Clearfield, Inc. (CLFD Quick QuoteCLFD - Free Report) are likely to profit from solid growth dynamics, supported by the widespread proliferation of IoT, fiber densification and shift to cloud services.

Industry Description

The Zacks Wireless Equipment industry primarily comprises companies offering various networking solutions, wireless telecom products and related services for wireless voice and data communications through scalable modular platforms. Their product portfolio encompasses integrated circuit devices (chips) and system software for wireless voice and data communications, analog and digital two-way radio, satellite telecommunications, wireless networking and signal processing and end-to-end enterprise mobility solutions. The firms also provide a broad range of routing, switching and security products, video surveillance and machine-to-machine communication components that secure VPN appliances, enable intrusion detection and thwart data theft. Some firms even provide electronic warfare, avionics, robotics, advanced communications and maritime systems to the defense industry.

What's Shaping the Future of the Wireless Equipment Industry?

5G, Fiber & Cloud Networking at Core: A faster pace of 5G deployment is expected to augment the industry's scalability, security and universal mobility and propel the wide proliferation of IoT. Expansion of fiber optic networks to support 4G LTE and 5G wireless standards, as well as wireline connections, is likely to act as a tailwind. The industry participants are enabling their customers to move away from an economy-of-scale network operating model to demand-driven operations and seamlessly migrate to 5G by offering easy programmability and flexible automation through steady infrastructure investments. The exponential growth of cloud networking solutions is further resulting in increased storage and computing on a virtual plane. 

Network Convergence: With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, the industry is increasingly developing solutions to support wireline and wireless network convergence. These investments are likely to help minimize service delivery costs to adequately support broadband competition and expand rural coverage and wireless densification in the long run. The industry players have enabled enterprises to rapidly scale communications functionalities to a vast range of applications and devices with easy-to-use software application programming interfaces. The firms support high user volumes without affecting deliverability and cost-effectively eliminate performance degradation.

Depleting Profit Margins: Although higher infrastructure investments will eventually help minimize service delivery costs to support broadband competition and wireless densification, short-term profitability has largely been compromised. Margins are likely to be affected by the high cost of first-generation 5G products, profitability challenges in China, the prolonged Russia-Ukraine war and Middle East tensions. Uncertainty regarding chip shortage (albeit to a lesser extent) and supply-chain disruptions owing to tariff wars (leading to a dearth of essential fiber materials), shipping delays and scarcity of other raw materials due to geopolitical unrest are expected to affect the expansion and rollout of new broadband networks. Extended lead times for basic components might also hurt the delivery schedule and raise production costs. High customer inventory levels, owing to a challenging macroeconomic environment and intense market volatility due to higher tariffs, pose another headwind for the companies.

Integrated Services: The majority of the industry participants offer mission-critical communication infrastructure, devices, accessories, software and services that enable their customers to run businesses with increased efficiency and safety for their mobile workforce. These systems drive demand for additional device sales, software upgrades, infrastructure overhaul and expansion, as well as additional services to maintain, monitor and manage these complex networks and solutions. The comprehensive suite of services ensures continuity and reduces risks for constant critical communication operations. 

Zacks Industry Rank Indicates Bullish Trends

The Zacks Wireless Equipment industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #65, which places it in the top 27% of more than 250 Zacks industries. 

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. 

Before we present a few wireless equipment stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Outperforms S&P 500, Lags Sector

The Zacks Wireless Equipment industry has outperformed the S&P 500 composite but lagged the broader Zacks Computer and Technology sector over the past year.

The industry has surged 26.4% over this period compared with the S&P 500 and sector’s growth of 21.1% and 28.5%, respectively.

One-Year Price Performance

Industry's Current Valuation

On the basis of trailing 12-month Enterprise Value-to EBITDA (EV/EBITDA), which is the most appropriate multiple for valuing telecom stocks, the industry is currently trading at 31.46X compared with the S&P 500’s 18.87X. It is also trading above the sector’s trailing 12-month EV/EBITDA of 19.76X.

Over the past five years, the industry has traded as high as 35.87X, as low as 6.55X and at the median of 15.67X, as the chart below shows.

Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio

3 Wireless Equipment Stocks to Buy

Motorola: Based in Chicago, IL, Motorola is a leading communications equipment manufacturer with a strong market position in bar code scanning, wireless infrastructure gear and government communications. As a leading provider of mission-critical communication products and services worldwide, the company has ensured a steady revenue stream from this niche market. It intends to boost its position in the public safety domain by entering into strategic alliances with other players in the ecosystem. Motorola is witnessing a robust demand for video security products and services and remains well poised to maintain this growth momentum with a diversified portfolio. The Zacks Consensus Estimate for its current fiscal-year earnings has been revised 3.8% upward since January 2025. This Zacks Rank #2 (Buy) stock has a long-term earnings growth expectation of 9.1%.

Price and Consensus: MSI

Ubiquiti: Headquartered in New York, Ubiquiti offers a comprehensive portfolio of networking products and solutions for service providers and enterprises. The company maintains a proprietary network communication platform committed to reducing operational costs by using a self-sustaining mechanism for rapid product support and dissemination of information. Ubiquiti aims to benefit from significant growth opportunities in both emerging and developed economies. These include a relentless pursuit by emerging countries to stay connected with the world through the adoption of wireless networking infrastructure, as developed economies aim to bridge the demand-supply gap for higher bandwidth. The stock has gained 52.8% over the past year. The Zacks Consensus Estimate for its current fiscal and next fiscal-year earnings has been revised 57.5% and 53.2% upward, respectively, since January 2025. Ubiquiti sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: UI

Clearfield: Headquartered in Minneapolis, MN, Clearfield is a leading provider of fiber optic products, deploying more than a million fiber ports each year. The company is benefiting from solid demand in its Clearfield operating segment. Its connected home offerings, such as home deployment kits, which incorporate all necessary equipment for a fiber-to-the-home installation, are witnessing strong momentum. The kit is gaining popularity among service providers because it significantly speeds up the deployment process by reducing the number of truck rolls and boosting technician efficiency. Clearfield is also benefiting from a sharp uptick in regional service provider verticals, backed by an improvement in demand and reduced inventory levels. Regional service providers’ move toward aggressive network build-up can boost Clearfield’s prospects in the upcoming quarters. This Zacks Rank #2 stock has a VGM Score of A. The firm delivered a trailing four-quarter earnings surprise of 92.5%, on average.

Price and Consensus: CLFD