Telefonaktiebolaget LM Ericsson (publ)

Ericsson reported Q2 net sales of SEK 52.7 billion, down 1% organically year over year; excluding the one-off IPR settlement in Q2 2025, organic sales grew 1%. Adjusted gross income was SEK 25.5 billion and adjusted gross margin was 48.4%; gross margin was 48%, EBITDA margin was 13.1%, and adjusted EBITDA was SEK 6.9 billion. Cash flow before M&A was SEK 0.4 billion, and net cash decreased by SEK 8.3 billion sequentially to SEK 59.8 billion. By segment, Networks sales were SEK 33 billion, Cloud Software and Services sales were SEK 14.7 billion, and Enterprise sales were down 19% reported but up 3% organically. For Q3, Ericsson expects Networks sales growth above the three-year average quarter-on-quarter seasonality, Cloud Software and Services sales growth broadly in line with the three-year average seasonality, and Networks adjusted gross margin of 48%-50%.

Börje Ekholm framed the quarter as proof that Ericsson’s operational turnaround has made the company more resilient, with solid execution and strong margins despite a challenging external backdrop. He emphasized that AI moving into the physical world should create a new growth phase for mobile connectivity, uplink, and low-latency networks, and said Ericsson is well positioned to benefit. At the same time, he was explicit that the company is planning cautiously, assuming a flattish market in the near term while investing for future upside.

Lars Sandström highlighted SEK 52.7 billion of Q2 sales, adjusted gross margin of 48.4%, adjusted EBITDA of SEK 6.9 billion, and cash flow before M&A of SEK 0.4 billion. He said operating expenses excluding restructuring were SEK 19 billion, about SEK 1 billion lower year over year, helped by cost reductions, currency, and the divestment of iconectiv. He also noted net cash of SEK 59.8 billion, a 12% rolling four-quarter cash flow-to-net-sales ratio at the upper end of the 9%-12% target, and said 2026 restructuring charges are expected to remain elevated. On outlook, he said component-cost pressure will build gradually in coming quarters, while mitigation actions and pricing changes are being implemented.

Analysts focused heavily on AI-driven traffic growth, uplink demand, GPU versus purpose-built silicon in radios, and the impact of memory/component inflation on margins. Management said the revisions to traffic estimates reflect emerging uplink demand and that Ericsson’s RAN stack is hardware-agnostic, though purpose-built silicon currently has clear advantages in cost, energy efficiency, and field performance. On pricing, management confirmed there is no automatic pass-through in contracts; increases require renegotiation or new tender pricing, and they said some renegotiations have already been completed. Questions also centered on rollout-project margin pressure, Enterprise’s persistent losses, and whether Ericsson should pivot more toward data-center spending; management said rollout projects are usually tougher in the first few quarters, Enterprise must become value accretive over time, and Ericsson is intentionally targeting the distributed AI and physical-world connectivity layer rather than the data-center layer.