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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 Q3 earnings, fueled by cost-saving measures and a $1 billion asset sale. The company's profitability returned, with a positive net profit margin, after several years of declines. A substantial one-off gain of SEK 18.6 billion buoyed the latest results. Additionally, Ericsson's cost reduction efforts and operating efficiencies lifted margins despite regional weakness. The company also hinted at higher shareholder returns and announced a major five-year partnership with Vodafone.

1.c. Company Highlights

2. Ericsson's Q3 2025: Strong EBITA Margin Expansion Despite FX Headwinds

Ericsson reported a net sales total of SEK 56.2 billion, with an adjusted gross income of SEK 27 billion and operating expenses of SEK 19.3 billion. The company's adjusted EBITA was SEK 8.2 billion, and cash flow before M&A was SEK 6.6 billion. Ericsson's EPS came in at 3.33, significantly beating estimates of 1.67. Gross margin reached 48.1%, and EBITA margin was 14.7%, a 3-year high, excluding the capital gain from the iconectiv sale. This strong performance was driven by the company's efforts to increase operational excellence and efficiency.

Publication Date: Oct -16

📋 Highlights
  • EBITA Margin Expansion:: Achieved 14.7% EBITA margin, a 3-year high, driven by operational efficiencies and cost reductions, excluding capital gains.
  • Organic Sales Decline:: Organic sales fell 2% YoY due to FX headwinds (-SEK 4.2B impact), despite growth in 3 out of 4 market areas.
  • Gross Margin Strength:: Gross margin reached 48.1%, with adjusted EBITA of SEK 8.2B, reflecting supply chain and service delivery improvements.
  • Headcount Reduction:: Workforce reduced by 6,000 over the past year, with ongoing cost measures to maintain operating leverage.
  • Cash Position & Shareholder Returns:: Ended Q3 with SEK 52B net cash, enabling potential increased shareholder returns via dividends or buybacks.

Operational Highlights

Ericsson's CEO, Borje Ekholm, mentioned that the company has been working on improving its supply chain and service delivery, which has helped to take out some of the mix dependency. Cloud Software and Services accelerated in Q3, driven by 5G Core deployments, and the company expects 5G Core to pick up again in Q4 and into 2026. This is expected to have positive implications for mix and gross margin.

Cash Flow and Shareholder Returns

Ericsson ended the quarter with an elevated cash position, driven by strong recurring cash flow and the iconectiv sale, allowing for scope for increased shareholder returns. The company's net cash position is around SEK 52 billion, and it aims to maintain a solid net cash position to ensure R&D and technology leadership. Ericsson is evaluating options for excess cash, including extra dividend and/or buybacks.

Valuation and Estimates

With a P/E Ratio of 17.44 and an EV/EBITDA of 13.34, Ericsson's valuation appears reasonable. Analysts estimate next year's revenue growth at 0.2%. The company's ROE is 19.57%, indicating strong profitability. Ericsson's Free Cash Flow Yield is 12.26%, suggesting a decent return for investors. The company's guidance for Q4 sales growth to be broadly similar to the 3-year average quarter-on-quarter seasonality, with a Networks adjusted gross margin in the range of 49% to 51%, is also positive.

Outlook and Risks

Ericsson expects a normal seasonal uptick in Q4 OpEx but will need to continue to manage costs to stay flat in a flat RAN market. The company has reduced its workforce by around 6,000 people over the past year and will need to continue to work on cost reduction. There is also uncertainty related to ongoing discussions on tariffs and their potential impact on the business.

3. NewsRoom

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Vonage Expands AWS Collaboration with the Launch of its Enterprise Solutions in AWS Marketplace

Dec -04

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Kraken Robotics Appoints Kim Butler to Board of Directors and Hires Bernard Mills as Executive Vice President, Defence

Dec -04

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Ericsson enters into strategic partnership with LotusFlare to accelerate adoption of network APIs

Dec -03

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Ericsson and LotusFlare Announce Equity Investment and Strategic Partnership

Dec -03

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OneLayer joins Ericsson's Enterprise Wireless Solutions Industry 4.0 Partner Program

Dec -02

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Assessing Ericsson (OM:ERIC B) Valuation: Diverging Signals from Narrative and DCF Models

Nov -28

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Is Ericsson’s Valuation Attractive After New 5G Partnerships and a 6.1% Stock Gain?

Nov -28

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Exclusive-Huawei, ZTE seal 5G deals in Vietnam after US tariffs, as ties with China warm​

Nov -28

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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

Strength

Weaknesses

Opportunities

Threats

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

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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EVS Broadcast Equipment

A-Score: 6.9/10

Value: 4.5

Growth: 6.4

Quality: 8.2

Yield: 6.2

Momentum: 8.5

Volatility: 7.3

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Cisco

A-Score: 6.1/10

Value: 2.2

Growth: 4.1

Quality: 7.7

Yield: 5.0

Momentum: 8.0

Volatility: 9.7

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Garmin

A-Score: 5.6/10

Value: 1.3

Growth: 6.4

Quality: 8.4

Yield: 3.8

Momentum: 9.0

Volatility: 4.7

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Ericsson

A-Score: 5.1/10

Value: 4.8

Growth: 3.3

Quality: 6.7

Yield: 6.2

Momentum: 5.0

Volatility: 4.3

1-Year Total Return ->

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HPE

A-Score: 5.0/10

Value: 4.8

Growth: 4.0

Quality: 3.6

Yield: 5.0

Momentum: 7.5

Volatility: 5.3

1-Year Total Return ->

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Nokia

A-Score: 4.1/10

Value: 3.4

Growth: 4.0

Quality: 5.6

Yield: 3.1

Momentum: 5.0

Volatility: 3.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

90.22$

Current Price

90.22$

Potential

-0.00%

Expected Cash-Flows