TLDR
- Ericsson (ERICb) stock rose 8% Thursday after Q3 sales beat forecasts.
- Sales hit 59.5 billion crowns, versus 55.4 billion expected.
- Adjusted EBITA fell 36% to 10.1 billion crowns, but analysts had forecast 7.87 billion.
- CEO Per Narvinger said component costs will pressure gross margins next year.
- Ericsson guided Q4 adjusted gross margin to 49% to 51%.
Ericsson (ERICb) stock rose 8.44% on Thursday after the company reported third-quarter sales well above forecasts. The move came even though profit fell from a year ago.
Telefonaktiebolaget LM Ericsson (publ), ERIC
Holders had a good morning. The stock was up more than 8% on the day.
Net sales rose 6% to 59.5 billion crowns. Analysts polled by LSEG were looking for 55.4 billion.
Organic sales grew 7%. North America sales rose slightly, helped by project phasing.
Networks, the largest business, saw sales rise 9% to 38.7 billion crowns. Investing.com reported that the unit’s sales grew 17% quarter over quarter.
Cloud Software and Services sales rose 3% to 15.8 billion crowns. Enterprise sales fell 10% to 4.6 billion crowns, partly because of the iconectiv sale.
Profit Falls Less Than Expected
Adjusted EBITA dropped 36% to 10.1 billion crowns. A year earlier, it was 15.8 billion.
Analysts had forecast only 7.87 billion crowns. Reuters described the drop as smaller than expected.
The adjusted EBITA margin narrowed to 17.0% from 28.1%. The forecast was 14.2%.
Ericsson said efficiency measures helped offset higher costs. It plans to keep cutting costs and simplify its operating structure.
Component Costs Cloud the Outlook
Component costs rose in the quarter. Ericsson flagged the same issue in July, pointing to higher memory chip prices tied to surging AI demand.
New CEO Per Narvinger addressed it in the earnings statement. “Looking ahead, the RAN market is flat, geopolitical uncertainty remains elevated and component costs are a headwind to gross margin,” he said.
He said those costs will pressure gross margins next year. Geopolitical uncertainty also remains high.
Ericsson expects the global radio access network equipment market to stay stable in 2026. Nothing in the outlook points to a rebound.
For the fourth quarter, Ericsson expects Networks sales growth broadly in line with average seasonal patterns. It guided to an adjusted gross margin of 49% to 51%.
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