Sweden-based Ericsson has reported a 7% year-on-year increase in “organic sales” in the third quarter, supported by stronger demand for its Networks business, while warning that rising component costs and geopolitical uncertainty could weigh on margins in 2027.
The Swedish telecom equipment maker posted reported sales of 59.5 billion Swedish kronor (SEK), up from SEK 56.2 billion a year earlier.
Organic sales grew in three of its four market areas, reflecting demand for network modernisation, connectivity solutions and mission-critical communications infrastructure.
Ericsson’s adjusted gross income increased to SEK 28.4 billion from SEK 27 billion in the year-earlier period, driven primarily by mobile networks.
However, the adjusted gross margin slipped to 47.7% from 48.1%.
On a reported basis, gross income stood at SEK 28 billion, while the gross margin declined to 47.1% from 47.6%.
Ericsson said its networks business benefited from retroactive intellectual property rights (IPR) revenues, which supported margins during the quarter.
Cloud software and services margins remained stable, while the enterprise segment faced pressure following the divestment of Iconectiv.
Ericsson’s adjusted earnings before interest, taxes and amortisation (EBITA) stood at SEK 10.1 billion, compared with SEK 15.8 billion a year earlier. The adjusted EBITA margin fell to 17% from 28.1%.
However, a SEK 7.6 billion capital gain recorded in the previous year affected the comparison.
Excluding that gain, adjusted EBITA increased year-on-year, supported by lower operating expenses.
Reported EBITA declined to SEK 9.2 billion from SEK 15.5 billion, while the reported margin fell to 15.5% from 27.6%.
Net income dropped to SEK 5.8 billion from SEK 11.3 billion. Diluted earnings per share fell to SEK 1.77 from SEK 3.33, with the previous year’s figure including a divestment gain of SEK 1.72 per share.
Free cash flow before mergers and acquisitions came in at SEK 4.9 billion, down from SEK 6.6 billion a year earlier. Ericsson returned SEK 4.8 billion to shareholders through share repurchases.
While presenting the result, Ericsson’s Chief Executive Officer Per Narvinger said the telecom major delivered strong quarterly results through focused execution, its product portfolio and customer relationships.
“Customer discussions during the quarter highlighted growing demand for intelligent and autonomous networks that can improve performance, efficiency, reliability and resilience,” he said.
“Ericsson is already seeing efficiency gains from AI-enabled features deployed in customer networks,” Narvinger added further.
The company also announced a simplified operating structure aimed at strengthening customer focus, speeding up decision-making and improving accountability to generate further efficiencies over time.
Looking ahead, Narvinger said the radio access network (RAN) market remained flat, while geopolitical uncertainty continued to pose challenges.
Higher component costs are also expected to put pressure on Ericsson’s gross margins in 2027.
Ericsson plans to respond on the cost front through portfolio optimisation, pricing measures and operational efficiencies while continuing to invest in technology leadership and customer relationships.
The company said it remained positioned to navigate the challenging market environment and pursue profitable long-term growth, with contributions expected from all business segments.