Ericsson posts stronger-than-expected third quarter

Ericsson posted stronger-than-expected third-quarter results on Tuesday, driven by a major contract with AT&T and solid growth in North America, despite facing a challenging global telecom market.

The Swedish telecom equipment giant reported a net profit of SEK 3.9bn (£287.35m), a significant turnaround from last year’s SEK 30.5bn loss, which was largely due to a write-down related to its acquisition of Vonage.

Revenue for the quarter totalled SEK 61.8bn - a 1% decline year-on-year, reflecting a general slowdown in telecom spending globally.

However, North America proved a bright spot, with a 55% surge in sales, boosted by Ericsson’s $14bn OpenRAN contract with AT&T, secured last December.

That offset weaker demand in other regions, such as India, where 5G investment had slowed after a rapid rollout in 2022.

Adjusted gross margin improved significantly to 46.3%, up from 39.2% in the same period last year, thanks to a favourable market mix and cost-cutting measures, including job reductions.

Operating income before interest and taxes (EBITA) reached SEK 7.8bn, far exceeding analysts’ expectations of SEK 5.6bn.

“Q3 marks a period of laser-focus on execution of our strategic plan,” said president and chief executive officer Börje Ekholm.

“We see increasing customer momentum around programmable networks that deliver differentiated performance, and expect further traction, supported by the joint venture we have announced with 12 of the world’s largest telecom operators.

“The JV will aggregate network APIs, accelerating commercialization and generating new opportunities for network monetization.”

Ekholm said the company saw signs that the overall market was stabilising with North America, as an early adopter market, returning to growth.

“While the market development is ultimately in the hands of our customers, we are working to deliver operational excellence regardless of market conditions.

“Our third-quarter results demonstrate our progress, with strong gross margin expansion and free cash flow, benefiting from our commercial discipline and operational efficiency actions.”

Ericsson expected its Networks sales to stabilise year-on-year during the fourth quarter, Börje Ekholm said, driven by continued good growth in North America.

“However, we anticipate further near-term sales pressure in Enterprise as we focus on profitable segments.

“We launched a new private 5G enterprise product portfolio in the third quarter to support performance improvement, which remains a key priority.”

At 1608 CEST (1508 BST), shares in Telefonaktiebolaget LM Ericsson were up 11.54% in Stockholm at SEK 87.36.

Reporting by Josh White for Sharecast.com.