Ericsson Earnings Beat on Strong Mobile Network Demand

Ericsson AB earnings beat analysts’ expectations in the third quarter due to solid demand for mobile network equipment in its core markets, while flagging that component costs will pressure margins next year.

Adjusted earnings before interest, taxes and amortization were 10.1 billion Swedish kronor ($1 billion) in the period, the Stockholm-based telecommunications-equipment company said in a statement on Thursday. That compares to an average analyst estimate of 7.93 billion kronor, according to data compiled by Bloomberg.

“We delivered strong third-quarter results, supported by focused execution, the strength of our portfolio, and the trust customers place in Ericsson,” new Chief Executive Officer Per Narvinger said in the statement. “Looking ahead, the RAN market is flat, geopolitical uncertainty remains elevated and component costs are a headwind to gross margin.”

Narvinger took over this month at Ericsson, which has struggled for years with a sluggish market for its 5G network equipment. A company veteran, he will seek to revive the business after his predecessor Börje Ekholm cut expenses and headcount.

Ericsson mitigated higher component costs through short term measures in its product development, Chief Financial Officer Lars Sandström said in an interview. The company will pass on higher prices to its customers when their current contracts end, he added.

Finnish rival Nokia Oyj has reorganized its business to prioritize networking equipment for artificial intelligence data centers and is also building Nvidia Corp. chips into radio access networks. Ericsson remains a pure-play supplier, building purpose-made equipment for telecom operators as they prepare for the next generation of mobile technology.

Ericsson plans to merge its two Asian units into a single APAC market area and rearrange its enterprise wireless business to streamline development, it said in a separate statement Thursday.

The moves will help Ericsson focus on the Asian market and better compete with Elon Musk’s Starlink, which is increasingly challenging telecom operators, Narvinger said on Bloomberg TV.

Ericsson won a five-year, $14 billion contract to modernize AT&T Inc.’s network in 2023, which has helped offset sales declines elsewhere. It also bagged a separate deal to supply AT&T with radio equipment to support the deployment of spectrum the US-based telecom bought from Echostar Corp., AT&T said in August.

The company’s shares rose 2.2% to 97.10 kronor on Wednesday and have gained 7.2% this year.