Ericsson's newly appointed chief executive Per Narvinger flagged rising component expenses as a risk to profit margins in the coming year. Additionally, three members of the company's Executive Team will leave their roles effective 31 December.

The Swedish telecom supplier's adjusted earnings before interest, taxes and amortisation (EBITA) reached SEK 10.1bn ($1bn) during the third quarter, significantly surpassing the average analyst estimate of SEK 7.93bn according to Bloomberg data.

Ericsson's stock climbed as much as 11% on the Stockholm exchange Thursday, marking its strongest single-day performance since 23 January and bringing year-to-date gains to 18%, Bloomberg reported.

Sales and profit

Total reported sales reached SEK 59.5bn, up from SEK 56.2bn in the prior-year quarter. Stripping out the impact of acquisitions, divestitures and foreign exchange movements, organic sales expanded 7%. The Networks segment led the expansion, with growth materialising across three of the company's four geographic markets.

Adjusted EBITA declined from SEK 15.8bn a year prior, though that earlier figure included a SEK 7.6bn gain on asset sales. Excluding that one-time benefit, adjusted EBITA improved, Ericsson stated. The adjusted EBITA margin stood at 17.0%, compared with 28.1% previously.

Net profit fell to SEK 5.8bn from SEK 11.3bn. Free cash flow before mergers and acquisitions totalled SEK 4.9bn, while the company deployed SEK 4.8bn on share repurchases.

'The RAN market is flat'

Narvinger, who assumed the chief executive role this month, characterised the quarter's performance as "strong third-quarter results". His predecessor Börje Ekholm had pursued a cost-reduction and workforce-trimming strategy, per Bloomberg.

Looking ahead, the RAN market is flat, geopolitical uncertainty remains elevated and component costs are a headwind to gross margin next year.

Per Narvinger, Ericsson CEO

To counterbalance mounting component expenses, Ericsson deployed short-term adjustments in product development efforts, according to chief financial officer Lars Sandström in comments to Bloomberg. The company intends to transfer these cost pressures to customers as existing agreements expire, he explained. Narvinger indicated to Bloomberg TV that some of the quarter's purchasing activity reflected customers accelerating orders ahead of anticipated price adjustments.

One Asia-Pacific market area

The company unveiled plans for a streamlined organisational framework. Beginning 1 January 2027, the Market Areas North East Asia and South East Asia, Oceania and India will consolidate into a unified Market Area Asia-Pacific (APAC). Patrick Johansson, currently leading Market Area Europe, Middle East and Africa (EMEA), will take the helm of the combined unit. Ericsson will commence recruitment for a replacement EMEA leader.

The Enterprise Wireless Solutions business area will be dismantled. Neutral Host solutions and Ericsson Private 5G will transfer to Business Area Networks. Wireless WAN will continue as an independent operation under Yossi Cohen, who heads Market Area Americas.

Three Executive Team members—Åsa Tamsons (Enterprise Wireless Solutions), Chafic Nassif (North East Asia), and Andres Vicente (South East Asia, Oceania and India)—will step down from their positions on 31 December. The restructured Executive Team will be "leaner and more balanced in terms of responsibilities", Narvinger stated.

In remarks to Bloomberg TV, Narvinger indicated the restructuring will enable Ericsson to sharpen its focus on Asia and strengthen its competitive position against Elon Musk's Starlink, which he characterised as an increasingly formidable threat to traditional telecom operators. Finnish competitor Nokia has meanwhile reorganised to emphasise networking gear for AI data centres and is integrating Nvidia chips into radio access networks, Bloomberg noted. Ericsson continues to function as a dedicated supplier of equipment to telecom operators.

Source: The Next Web