I use geolocation, but I do it with the "HTTP Server module" setting instead of the "Php" setting, because I also need geolocation for other things on my server besides Matomo. And I get this same warning. Mine is a correct and supported configuration and it should not trigger a boxed warning implying that something is wrong. The only "issue" with my configuration would be a hypothetical one if I were to use other features "that require setting IP addresses" - which I am not doing. Most people aren't; the configurations in which the server module wouldn't work are not common.

Note that there are not similar warnings generated for stuff like leaving the SMTP server unspecified, even though that's an "issue" on a similar level: a thing that can cause problems in certain fairly unusual circumstances but is usually no issue at all. We never see this:

! Warning
Mail transmission
There are some issues with your system. Matomo will run, but you might experience some minor problems. See below for more information.
Email works, but you are not using one of the recommended providers. If you have to send email authenticated by an SSL certificate or do something else for which the PHP mail() function is insufficient, install Sendmail or Postfix and configure the location of your server on the General settings page.

Matomo should not report geolocation turned off, or geolocation correctly configured to use an HTTP server module, as "issues" absent a clear indication that the user is actually trying to do something that doesn't work. At the very least, the warning message should be made much clearer, because it's not at all obvious what kinds of activities "require setting IP addresses" and users may not have a clear understanding of whether that's something they care about.