Ericsson shares surge as strong network sales lift Q3 revenues

(Sharecast News) - Shares in Swedish telecoms equipment maker Ericsson surged nearly 10% on Thursday after the company reported stronger-than-expected third-quarter sales, driven by robust demand for network equipment in Asia and the Middle East.

Ericsson's A shares were up 9.7% at SEK 107.60 in Stockholm by 1140 BST after the company reported a 7% increase in organic sales, with reported revenues rising 6% to SEK 59.5bn.

Growth was led by its Networks division, where sales increased 9% to SEK 38.7bn, supported by the timing of project deliveries in Japan and India, alongside ongoing network modernisation and expansion in the Middle East. The company also reported modest growth in North America, although this was offset by weaker sales in Latin America.

Meanwhile, intellectual property licensing revenues rose to SEK 3.9bn from SEK 3.1bn, partly reflecting payments relating to previously unlicensed periods.

Adjusted earnings before interest, taxes and amortisation (EBITA) totalled SEK 10.1bn, down from SEK 15.8bn a year earlier, although the previous year's figure benefited from a SEK 7.6bn gain on a disposal. Excluding that gain, underlying earnings increased.

Net income fell to SEK 5.8bn from SEK 11.3bn, while the adjusted gross margin edged down to 47.7% from 48.1%.

However, Ericsson warned that rising component costs would weigh on profitability next year, with the company taking steps to offset the pressure through pricing measures, portfolio optimisation and efficiency improvements.

Chief executive Per Narvinger said: "Looking ahead, the RAN market is flat, geopolitical uncertainty remains elevated and component costs are a headwind to gross margin next year."

He added that the company remained well positioned to navigate the challenges and deliver profitable long-term growth.

Ericsson also announced plans to simplify its operating structure to strengthen customer focus, improve accountability and deliver further efficiencies.