Swedish telecom equipment maker Ericsson beat analysts’ expectations for third-quarter profit and sales on Thursday, sending its shares sharply higher in Stockholm, although the company warned that rising component costs will squeeze its gross margin next year, Reuters reported.
Adjusted earnings before interest, taxes and amortisation (EBITA) came in at SEK 10.1 billion for the July–September period, according to the company’s interim report. Analysts had pencilled in roughly SEK 7.9 billion to SEK 8.1 billion, according to estimates cited by Sweden Herald and Newsquawk. The figure was down from SEK 15.8 billion a year earlier, but that comparison was flattered by a SEK 7.6 billion capital gain booked in the prior-year quarter; stripping that out, adjusted EBITA rose. The adjusted EBITA margin stood at 17.0%.
Net sales climbed 6% to SEK 59.5 billion from SEK 56.2 billion, comfortably above the roughly SEK 55.3 billion analysts had expected. On an organic basis, sales grew 7%, with growth recorded in three of the group’s four market areas. Net income fell 49% to SEK 5.8 billion, again reflecting the absence of last year’s one-off divestment gain.
Investors cheered the beat. Quartz reported that the stock rose as much as 11% in Stockholm trading on Thursday, extending a year-to-date gain of about 18%.
Networks drives the quarter
The Networks business, Ericsson’s largest unit, led the sales growth, and its margin improved, helped by retroactive intellectual property rights revenues. Networks’ adjusted gross margin reached 50.3%, above the 48–50% range the company had guided. Margins in Cloud Software and Services were stable, while the Enterprise segment’s margin declined, mainly because of the divestment of iconectiv.
Chief executive Per Narvinger credited focused execution and the strength of the company’s product portfolio, adding in the report that Ericsson is “already seeing the efficiency gains from AI-enabled features.”
Free cash flow before mergers and acquisitions was SEK 4.9 billion, down 26% from a year earlier, while net cash rose 17% to SEK 60.7 billion. The company returned SEK 4.8 billion to shareholders through share buybacks during the quarter.
Cautious outlook
Despite the strong quarter, management struck a measured tone on the market backdrop. Narvinger said “the RAN market is flat, geopolitical uncertainty remains elevated,” and flagged that higher component costs will weigh on gross margin next year. Ericsson said it plans to offset part of that pressure through portfolio, pricing and efficiency measures.
For the fourth quarter, Ericsson guided its Networks adjusted gross margin to 49–51%, which Sweden Herald noted was above market expectations.
Alongside the results, the company announced a simplification of its group structure and changes to its executive team, aimed at sharpening customer focus and efficiency. Sweden Herald reported that the overhaul includes merging its business areas covering Asia and Oceania.
Ericsson’s results come as investors watch closely for signs of a recovery in telecom operators’ spending on radio access network equipment, which has been subdued for several years. With the RAN market expected to stay flat, analysts will be watching whether cost discipline and AI-related efficiency gains can hold margins steady as component prices rise into 2027.
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