Ericsson cites ‘solid’ demand as operating profit beats forecasts

Stockholm, Sweden - Swedish telecommunications company Ericsson reported a 49% drop in net profit for the third quarter due to soaring semiconductor prices and AI-linked demand, according to a statement released on Thursday. However, operating profit on ordinary operations exceeded analyst expectations, indicating solid demand from key customers in strategic markets.

The company's net income for the quarter fell to SEK5.8 billion (US$581 million) from SEK11.3 billion a year earlier, primarily due to a one-time gain of SEK7.6 billion from selling US telecoms and IT firm Iconectiv the previous year. Adjusted EBITA, or operating profit, decreased by 36% from the previous year to SEK10.1 billion, but still surpassed Bloomberg's average analyst forecast of SEK7.93 billion.

Ericsson's sales increased by 6% to SEK59.5 billion year-on-year, while organic sales grew by 7%, buoyed by expansion in Networks division in Northeast Asia, Southeast Asia, Oceania, India, Europe, the Middle East, and Africa. However, gross profit margins declined slightly to 47.1% from 47.6%. CEO Per Narvinger said Ericsson was well-positioned to meet growing customer needs for intelligent and autonomous networks to enhance performance, efficiency, robustness, and resilience, while taking steps to optimize the portfolio, adjust pricing, and improve operational efficiency in response to geopolitical risks and rising component costs.