• Ericsson on Tuesday declared adjusted third-quarter earnings, excluding impairments, of 7.327 billion Swedish crowns ($0.7 billion), surpassing the 5.75 billion crown mean forecast of analysts cited by Reuters.
  • North America emerged as a bright spot in the sales picture, with year-on-year growth of more than 50%.
  • The company bolstered its footing in the U.S. last year, when it beat out Finnish rival Nokia and won a sizable contract with carrier AT&T.

Ericsson, a Swedish telecommunications company, saw a notable surge in its share prices after the release of its third-quarter core earnings report. The company outperformed analyst projections, primarily due to an upswing in demand from the North American market.

At 8:28 a.m. London time, the company's stock had risen nearly 9%, although it later adjusted to a 7.6% gain by 9:52 a.m.

On Tuesday, Ericsson reported adjusted third-quarter earnings, excluding impairments, of 7.327 billion Swedish crowns ($0.7 billion), up from 3.9 billion Swedish crowns during the same quarter last year, and surpassing the analysts' average estimate of 5.75 billion crowns as reported by Reuters.

While net sales declined by 4% year-on-year to 61.8 billion Swedish crowns in the third quarter, they still exceeded the anticipated figure of approximately 61.6 billion crowns, according to Reuters estimates. Notably, North America showed remarkable growth, with sales increasing by over 50% compared to the previous year.

Ericsson CEO Börje Ekholm discussed the current market conditions during an interview on CNBC’s “Squawk Box Europe,” stating, “This market has faced numerous challenges for an extended period. However, we are beginning to observe signs of stabilization, which is quite encouraging.”

Last year, the company strengthened its position in the U.S. by securing a significant contract to develop a telecom network utilizing ORAN technology, surpassing Finnish competitor Nokia. This project aims to manage 70% of AT&T’s traffic in the U.S. by the end of 2026.

“North America was the pioneer in rolling out 5G, and consequently, it was also the first to experience a slowdown. However, the market is now rebounding, which brings a sense of optimism,” Ekholm noted.

He recognized the positive impact of the AT&T contract, emphasizing that the primary driver of 5G demand is the growth in consumer mobile internet usage. “Data consumption continues to rise at a significant rate, necessitating new investments,” he added.

The growth in North America helped mitigate substantial sales declines in the third quarter in both Northeast and Southeast Asia, where telecom companies have shifted their focus to emerging markets like India.

“India presents a unique situation,” Ekholm remarked, highlighting the rapid rollout of 5G access in the country during 2023, which has inflated sales figures. He expressed confidence in the growth potential in that region, despite acknowledging that the company is “somewhat disadvantaged” due to its limited presence in China.

On Tuesday, Ericsson reported an increase in its adjusted gross margin to 46.3% in the third quarter, up from 39.2% in the same quarter last year, attributing this improvement to a new “market mix, commercial discipline, and cost actions.” The robust gross margin and positive outlook led UBS analysts to predict a 5-10% increase in the company’s consensus earnings before interest and tax (EBIT) for 2024, with a similar expectation for 2025.

The results released on Tuesday indicate a recovery for Ericsson, which has faced declining demand for its 5G equipment. This situation led the company to announce plans in March to reduce its workforce by 1,200 employees in Sweden. Earlier, Ericsson had already cut 8,500 jobs worldwide, representing approximately 8% of its total workforce, as part of its cost-reduction strategy.