Ericsson cites ‘solid’ demand as operating profit beats forecasts

Ericsson has faced soaring semiconductor prices amid a surge in AI-linked demand. (EPA Images pic) STOCKHOLM: Swedish telecoms giant Ericsson posted Thursday a 49% drop in net profit for the third quarter from a year earlier, when the group benefited from a one-time gain from the sale of a US business.

However, profit on ordinary operations beat analyst expectations thanks to "solid customer demand in strategic markets", the company said.

Nonetheless, the group has faced soaring semiconductor prices as a result of the surge in AI-linked demand, and it warned that geopolitical risks and rising component costs were "a headwind to gross margin next year".

It said it was responding with "portfolio optimisation, pricing and efficiency measures".

Net income in the third quarter fell to SEK5.8 billion (US$581 million) from SEK11.3 billion a year earlier.

That reflected the exceptional gain of SEK7.6 billion from the divestment of US telecoms and IT company Iconectiv last year.

Adjusted EBITA, or operating profit, was down by 36% from a year earlier to SEK10.1 billion, but that was significantly higher than Bloomberg's consensus of analyst forecasts for SEK7.93 billion.

Sales rose by 6% from a year earlier to SEK59.5 billion.

Organic sales, which strip out the impact of currency fluctuations, grew by 7%, driven by increases in its Networks division in Northeast Asia, Southeast Asia, Oceania and India, as well as Europe, the Middle East and Africa, though lower sales were registered in Latin America.

Gross profit margins declined slightly, to 47.1% from 47.6%.

"We delivered strong third-quarter results, supported by focused execution, the strength of our portfolio, and the trust customers place in Ericsson," chief executive Per Narvinger, who took over in June, said in a statement.

He said Ericsson was "well positioned" to deliver on customers' need "for more intelligent and autonomous networks to improve performance, efficiency, robustness and resilience".