Telefonaktiebolaget LM Ericsson (publ) (ERIC-B.ST) | Investment Case

1. Company Snapshot

1.a. Company Description

Telefonaktiebolaget LM Ericsson (publ), together with its subsidiaries, provides communication infrastructure, services, and software solutions to the telecom and other sectors.It operates through four segments: Networks, Digital Services, Managed Services, and Emerging Business and Other.The Networks segment offers radio access network solutions for various network spectrum bands, including integrated high-performing hardware and software.

This segment also provides integrated antenna and transport solutions; and a range of service portfolio covering network deployment and support.The Digital Services segment offers software-based solutions for business support systems, operational support systems, communication services, core networks, and cloud infrastructure.The Managed Services segment provides networks and IT managed, network design and optimization, and application development and maintenance services to telecom operators.

The Emerging Business and Other segment includes emerging businesses comprising Internet of Things; iconectiv; Cradlepoint that offers wireless edge WAN 4G and 5G enterprise solutions; and Red Bee Media, MediaKind, and other new businesses.It operates in North America, Europe and Latin America, the Middle East and Africa, South East Asia, Oceania, India, North East Asia, and internationally.Telefonaktiebolaget LM Ericsson (publ) was founded in 1876 and is headquartered in Stockholm, Sweden.

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1.b. Last Insights on ERIC

Telefonaktiebolaget LM Ericsson's recent performance was driven by strong Q4 earnings, beating estimates with EPS of 27 cents and sales of 69.3 billion Swedish Krona. A planned 15 billion Swedish krona share buyback program and proposed bigger dividends also boosted investor sentiment. The company's cost-cutting measures and sale of its Iconectiv business contributed to margin expansion and a strengthened balance sheet. Management highlighted disciplined cost actions and a strong finish to 2025.

1.c. Company Highlights

Last Price	98.42
Change Percentage	1.26%
Open	97.5
Previous Close	97.2
Market Cap ( Millions)	328062
Volume	5630473
Year High	101.35
Year Low	65.94
M A 50	91.93
M A 200	83.95

FCF Yield	9.09%
Dividend Yield	2.90%
ROE	29.57%
Debt / Equity	42.03%
Net Debt / EBIDTA	4.29%
Price To Book	3.0
Price Earnings Ratio	11.54
Price To FCF	11.0
Price To sales	1.39
EV / EBITDA	6.71

2. Ericsson's Strong Q4 2025 Results: A Solid Foundation for Future Growth

Ericsson's financial performance in Q4 2025 was impressive, with net sales totaling SEK 69.3 billion and organic sales growing 6% year-on-year. The adjusted EBITA margin was 18%, both for the quarter and the full year, close to the long-term target of 15% to 18%. The company's EPS came out at 2.56, significantly higher than the estimated 1.12. For the full year, net sales amounted to SEK 236.7 billion, and organic sales grew by 2%. Adjusted EBITA increased to SEK 42.9 billion, and the margin was 18.1%.

Publication Date: Feb -02

                                    📋 Highlights
                                    EBITA Margin Stability:
                                                Achieved 18% EBITA margin for both Q4 and full-year 2025, nearing the long-term target of 15-18%.
Dividend & Share Buyback:
                                                Proposed dividend of SEK 3/share and a record SEK 15 billion share buyback program.
Net Sales Growth:
                                                Q4 net sales reached SEK 69.3 billion (+6% organic YoY); full-year sales totaled SEK 236.7 billion (+2% organic YoY).
Net Cash Position:
                                                Maintained a net cash position of over SEK 61 billion, targeting SEK 45-61 billion range for 2026.
R&D & Strategic Focus:
                                                Prioritizing R&D in mission-critical and defense sectors, with limited CapEx, while aiming for operational efficiency in a flattish RAN market.

                                

Operational Highlights and Outlook

Ericsson's strategy focuses on leading in mobile networks and scaling its platform to new areas, such as mission-critical enterprise solutions. The company expects to see improving operating leverage as its top line accelerates. Börje Ekholm stated that Ericsson is well-positioned for the emerging era of hyper-connectivity and AI applications, which will require advanced wireless connectivity. For 2026, Ericsson expects a flattish RAN market but growth in new areas, and plans to focus on operational efficiency to strengthen the company for varying market conditions.

Valuation and Dividend

The company's valuation metrics appear reasonable, with a P/E Ratio of 11.34 and a Dividend Yield of 2.95%. The proposed increased dividend of SEK 3 per share and a share buyback program of up to SEK 15 billion represent the largest shareholder distribution in Ericsson's history. The company's net cash position of over SEK 61 billion provides a solid foundation for future investments and shareholder returns.

Segment Performance and Growth Opportunities

Cloud Software and Services saw a strong Q4 due to a large contract, and the full-year organic growth was around 6%. Ericsson sees opportunities in areas like mission-critical and defense applications, expecting a sizable market with increased European and US spending on defense. The company aims to position itself early in these areas and is investing in R&D to drive growth.

Guidance and Market Trends

Ericsson guides for a flattish market but sees potential for low- to mid-single-digit revenue growth in the longer term, driven by growth opportunities in new areas. Analysts estimate next year's revenue growth at 1.4%. The company's silicon strategy, with a disaggregated approach, allows software to run on various architectures, including NVIDIA chips, providing flexibility for customers.

3. NewsRoom

Microsoft, Ericsson lead global tech alliance for digital trust

Feb -13

Source:

C3.ai Broadens Partner Strategy: Can Telecom Accelerate Revenues?

Feb -12

Source: zacks.com

European Stocks Mixed in Wednesday Trading; Ryanair Faces Warning From Spanish Court

Feb -11

Source:

Vonage and C3 AI Partner on Network-Enabled, Agentic AI Field Services Solution for Mobile Workforces

Feb -11

Source:

Cloud OSS/BSS Market Research and Global Forecast Report 2026-2032: Cloud Adoption, Next-Generation Software Frameworks, and IoT Monetization Driving Growth

Feb -05

Source:

Macrocell Radio/Active Antenna Unit Research Report 2026: Market Analysis, Shipments, and Forecasts 2024 & 2025-2029 Featuring AT&T Wireless, Ericsson, Vodafone, OREX / OREX SAI

Feb -05

Source:

Vonage Wins Two Juniper Research Awards for Innovation in Network and Mobile Identity Solutions

Feb -05

Source:

Ericsson (OM:ERIC B) Valuation Check After Higher 2025 Earnings And Proposed Dividend Increase

Feb -05

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.84%)

6. Segments

Networks

Expected Growth: 6.5%

Ericsson’s networks segment growth is driven by 5G deployments, increasing network densification, and growing demand for IoT and Industry 4.0 applications, as well as its strong market position in Europe and North America.

Cloud Software and Services

Expected Growth: 10.4%

Ericsson’s cloud software and services for telecom operators are expected to grow driven by increasing adoption of 5G networks, rising demand for digital transformation and automation, and growing need for telco cloud infrastructure.

Enterprise

Expected Growth: 10.2%

Telefonaktiebolaget LM Ericsson's enterprise solutions are driven by increasing demand for 5G network infrastructure, IoT, and cloud computing, as well as growing need for digital transformation and cybersecurity in various industries.

Other

Expected Growth: 4.5%

Ericsson's miscellaneous segment is driven by growing demand for IoT, smart cities and 5G-enabled industries, as well as increasing investments in digital transformation and security solutions.

7. Detailed Products

5G RAN

Ericsson's 5G Radio Access Network (RAN) provides a scalable and flexible solution for 5G networks, enabling high-speed data transmission and low latency.

Core Network

Ericsson's Core Network provides a scalable and flexible solution for 4G and 5G networks, enabling high-speed data transmission and low latency.

IP Routing and Switching

Ericsson's IP Routing and Switching provides a scalable and flexible solution for IP networks, enabling high-speed data transmission and low latency.

Network Management

Ericsson's Network Management provides a comprehensive solution for managing and optimizing network performance, enabling operators to improve network efficiency and reduce costs.

OSS and BSS

Ericsson's OSS (Operations Support Systems) and BSS (Business Support Systems) provide a comprehensive solution for managing and optimizing network operations and business processes.

Managed Services

Ericsson's Managed Services provide a comprehensive solution for managing and optimizing network operations, enabling operators to improve network efficiency and reduce costs.

Digital Services

Ericsson's Digital Services provide a comprehensive solution for digital transformation, enabling operators to improve customer experience and reduce costs.

IoT

Ericsson's IoT solutions provide a comprehensive solution for IoT applications, enabling operators to improve efficiency and reduce costs.

8. Telefonaktiebolaget LM Ericsson (publ)'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Ericsson is moderate, as there are alternative solutions available for its products and services. However, the company's strong brand reputation and customer loyalty mitigate this threat to some extent.

Bargaining Power Of Customers

The bargaining power of customers is relatively low, as Ericsson's products and services are often customized to meet specific customer needs, making it difficult for customers to switch to alternative suppliers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is moderate, as Ericsson relies on a diverse range of suppliers for its components and materials. However, the company's large scale of operations and strong relationships with suppliers help to mitigate this threat.

Threat Of New Entrants

The threat of new entrants is relatively low, as the telecommunications equipment industry has high barriers to entry, including significant capital requirements and the need for specialized expertise.

Intensity Of Rivalry

The intensity of rivalry in the telecommunications equipment industry is high, with several established players competing for market share. Ericsson faces intense competition from companies such as Huawei, Nokia, and ZTE.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	33.23%
Debt Cost	5.70%
Equity Weight	66.77%
Equity Cost	5.74%
WACC	5.73%
Leverage	49.77%

11. Quality Control: Telefonaktiebolaget LM Ericsson (publ) passed 3 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

EVS Broadcast Equipment

A-Score: 7.0/10

Value: 4.0

Growth: 6.3

Quality: 8.1

Yield: 6.9

Momentum: 9.0

Volatility: 7.7

1-Year Total Return ->

Cisco

A-Score: 6.2/10

Value: 2.3

Growth: 4.0

Quality: 7.6

Yield: 5.0

Momentum: 9.0

Volatility: 9.3

1-Year Total Return ->

Ericsson

A-Score: 5.2/10

Value: 5.7

Growth: 3.3

Quality: 7.5

Yield: 6.2

Momentum: 4.0

Volatility: 4.7

1-Year Total Return ->

Nokia

A-Score: 4.9/10

Value: 4.0

Growth: 4.0

Quality: 5.7

Yield: 3.8

Momentum: 8.5

Volatility: 3.3

1-Year Total Return ->

Garmin

A-Score: 4.7/10

Value: 1.8

Growth: 6.4

Quality: 8.4

Yield: 3.8

Momentum: 3.0

Volatility: 4.7

1-Year Total Return ->

HPE

A-Score: 4.6/10

Value: 4.4

Growth: 3.7

Quality: 3.2

Yield: 5.0

Momentum: 6.0

Volatility: 5.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-6.27%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

5.73%

Telefonaktiebolaget LM Ericsson (publ) - SE0000108656

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on ERIC

1.c. Company Highlights

Lower Growth

Higher Yield

Less Volatile

Earnings Beats

Revenues Miss

Earnings Miss

Revenues Beats

Strong Momentum

Lower Quality

Average Growth

Medium Volatility

Average Quality

2. Ericsson's Strong Q4 2025 Results: A Solid Foundation for Future Growth

Operational Highlights and Outlook

Valuation and Dividend

Segment Performance and Growth Opportunities

Guidance and Market Trends

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.84%)

6. Segments

Networks

Expected Growth: 6.5%

Cloud Software and Services

Expected Growth: 10.4%

Enterprise

Expected Growth: 10.2%

Other

Expected Growth: 4.5%

7. Detailed Products

5G RAN

Core Network

IP Routing and Switching

Network Management

OSS and BSS

Managed Services

Digital Services

IoT

8. Telefonaktiebolaget LM Ericsson (publ)'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Telefonaktiebolaget LM Ericsson (publ) passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

98.42$

Current Price

98.42$

Potential

-0.00%

12.e Scoring ^Insights

12.f DCF ^BETA