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%, up slightly from last year; EBITDA margin was 13.1%, with adjusted EBITDA at SEK 6.9 billion. IPR revenues were SEK 3.4 billion, down SEK 1.5 billion year over year, and the current IPR run rate is approximately SEK 13.5 billion including agreements signed in July 2026. 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. For Q3, management 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, Networks adjusted gross margin of 48%-50%, and elevated restructuring charges for 2026 with a large part already seen in the first half.

Börje Ekholm framed the quarter as evidence that Ericsson has become more resilient, with disciplined execution and continued strength in margins even in a challenging external environment. He emphasized Ericsson’s strategy around AI moving into the physical and industrial world, saying this should create new demand for mobile connectivity, especially uplink and low-latency use cases. He was upbeat about the company’s portfolio and positioning, but repeatedly stressed that Ericsson should remain disciplined and plan for a flattish market until demand clearly materializes.

Lars Sandström said reported sales fell 6% due to currency, while adjusted gross margin was 48.4% and adjusted EBITDA was SEK 6.9 billion. He noted operating expenses excluding restructuring charges fell to SEK 19 billion, about SEK 1 billion lower year over year, helped by cost reductions, currency, and the divestment of iconectiv. He also said cash flow before M&A was SEK 0.4 billion, inventories built by about SEK 5 billion mainly for Q3 deliveries, net cash was SEK 59.8 billion, and component cost pressure will build gradually in coming quarters, with mitigation coming from product substitutions, supply-chain actions, pricing, and redesigns.

Analysts focused heavily on AI-driven traffic growth, GPU use in radios, component cost inflation, pricing pass-through, rollout project margins, inventory build, and the Enterprise turnaround. Management said it is already seeing signs of uplink-driven demand and thinks the RAN market could be better than a flat base case over time, but insisted planning should stay cautious. On pricing, Ericsson confirmed there is no automatic pass-through in contracts; it is renegotiating some agreements, adjusting new tenders, and redesigning products, while saying the cost impact will become more visible in the second half and next year. On Enterprise, management said the business cannot remain loss-making and expects progress, though no timeline was given.