Ericsson Q3 Profit Drops, Sales Rise; Simplifies Operating Structure; Stock Gains

(RTTNews) - Swedish telecom major LM Ericsson reported Thursday sharply lower profit in its third quarter, hurt mainly by the absence of prior year's significant divestment gain. Revenues, however, grew from last year, primarily with higher sales in Networks.

Looking ahead, Ericsson said it remains well positioned to deliver profitable long-term growth, with all segments contributing, despite challenges.

Separately, the company announced a simplification of its operating structure and executive team to boost research and development to focus more on cost efficiencies and customer needs.

Following the news, shares of Ericsson were gaining around 11 percent in Sweden, and around 12 percent in the pre-market activity on the Nasdaq.

Regarding the structural changes, Ericsson said a new Market Area Asia-Pacific, or APAC, will be established on January 1, 2027, combining the current Market Areas North East Asia, and South East Asia, Oceania, and India.

Market Area APAC will be headed by Patrick Johansson, currently Head of Market Area Europe, Middle East and Africa, or EMEA. The company will appoint a new Head of Market Area EMEA.

Ericsson has also announced changes to Business Area Enterprise Wireless Solutions, or BEWS. The current portfolio of BEWS will be moved to other parts of Ericsson.

Each of the units will, however, continue to operate with full focus on growing the business. The new structure will see neutral host solutions and Ericsson Private 5G move into Business Area Networks which will consolidate areas working with indoor technology. Wireless WAN solutions will remain a standalone business.

Chafic Nassif, currently Head of Market Area North East Asia, Andres Vicente, Head of Market Area South East Asia, Oceania and India, will hand over responsibilities on December 31.

Åsa Tamsons, Head of Business Area Enterprise Wireless Solutions, will also transition from her position on December 31.

In the third quarter, Ericsson's net income plunged 49% to 5.797 billion kronor from 11.300 billion kronor last year.

Earnings per share were 1.77 kronor, down 47 percent from 3.33 kronor last year. The prior year's earnings per share included a 1.72 kronor per share divestment gain.

Adjusted EBITA was 10.12 billion kronor, down 36 percent from last year's 15.82 billion kronor. Adjusted EBITA margin dropped to 17.0 percent from 28.1 percent a year ago.

Excluding the prior-year period capital gain, adjusted EBITA increased from last year.

However, adjusted gross income increased 5 percent year-over-year to 28.35 billion kronor, driven by Mobile Networks. Adjusted gross margin was 47.7 percent, down from 48.1 percent last year

In the quarter, the company's net sales rose 5.8 percent to 59.478 billion kronor from 56.239 billion kronor last year.

Organic sales increased by 7 percent from last year, primarily driven by higher sales in Networks. Organic sales grew in three out of four market areas, the company said.

The company noted that solid customer demand in strategic markets, combined with near-term commercial actions, supported organic growth.

In pre-market activity on Nasdaq, Ericsson shares were trading at $10.75, up 12.21 percent, after closing Wednesday's regular trading 1.34 percent lower.

In Stockholm, the shares were trading at 107.25 kronor, up 10.45 percent.

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