Ericsson American Depositary Shares
ERIC · Nasdaq
Next quarter
Reports Oct 15, 2026, before the open.
Consensus is $0.14 EPS for Sep 2026 across 3 estimates, ranging $0.12 to $0.18.
ERIC Jun 2026
- 0.00%
- -0.69%
- $0.13
- $0.13
- —
- —
Highlights
- Earnings: Reported EPS was 0.13, matching the 0.13 consensus estimate; diluted EPS under IFRS was SEK 1.22 versus SEK 1.37 a year earlier and SEK 0.27 in Q1.
- Margin resilience: Adjusted gross margin was 48.4%, up from 48.0% a year earlier and 48.1% in Q1, while adjusted EBITA margin was 13.1% versus 13.2% a year ago and 11.3% sequentially.
- Sales mix: Reported sales fell 6% year over year to SEK 52.7 billion but rose 7% sequentially; organic sales declined 1%, largely because prior-year IPR licensing included a non-recurring settlement benefit.
- Cloud improvement: Cloud Software and Services organic sales grew 5% and reported sales rose 3% to SEK 14.7 billion; adjusted EBITA increased 33% to SEK 1.8 billion, lifting the margin to 12.4% from 9.6%.
- Networks execution: Networks sales fell 4% organically, with IPR licensing revenue down 30% to SEK 2.8 billion, but adjusted gross margin improved to 50.4% from 49.5%; adjusted EBITA margin was 17.7%.
- Enterprise drag: Enterprise organic sales grew 3%, but reported sales declined 19% to SEK 4.5 billion after the iconectiv divestment; adjusted EBITA loss widened to SEK 0.8 billion from SEK 0.5 billion.
- Cash returns and liquidity: Ericsson returned SEK 8.2 billion to shareholders in Q2, including SEK 5.0 billion of dividends and SEK 3.2 billion of buybacks; net cash ended at SEK 59.8 billion versus SEK 68.1 billion in Q1.
- Near-term caution: Management expects Networks Q3 adjusted gross margin of 48% to 50% and warned of pressure from component-cost inflation and higher network-rollout volumes; Q3 Networks sales growth is expected above three-year average seasonality.
Analysis
Ericsson’s second quarter was a sequential recovery in profitability, but not a return to year-over-year growth. Reported sales were SEK 52.7 billion, down 6% from SEK 56.1 billion a year ago but up 7% from Q1; organic sales declined 1%. Reported EBITA fell 7% year over year to SEK 6.3 billion, while adjusted EBITA declined 7% to SEK 6.9 billion. The adjusted EBITA margin of 13.1% was broadly stable against 13.2% last year and materially better than Q1’s 11.3%. EPS of 0.13 matched consensus, while diluted IFRS EPS was SEK 1.22 versus SEK 1.37 a year ago.
The defining feature was margin protection despite lower IPR licensing revenue, currency headwinds and restructuring. Prior-year IPR revenue benefited from a partial settlement, sending Q2 licensing revenue down to SEK 3.4 billion from SEK 4.9 billion. Cloud Software and Services provided the clearest operational improvement, with 5% organic growth and a 12.4% adjusted EBITA margin. Enterprise remained a material loss-making business, while Networks faces component inflation and expected Q3 rollout-mix pressure. Cash generation was weaker in the quarter, with free cash flow before M&A of SEK 0.4 billion versus SEK 2.6 billion a year earlier, partly due to inventory built for Q3 deliveries.
Margin resilience
Ericsson protected underlying profitability despite a difficult comparison and currency pressure. Adjusted gross income declined 5% to SEK 25.5 billion, but adjusted gross margin rose to 48.4% from 48.0% a year earlier and 48.1% in Q1. Management said the margin was approximately two percentage points higher after normalizing for the prior-year IPR settlement benefit. Adjusted EBITA fell 7% to SEK 6.9 billion, with the margin at 13.1% versus 13.2% a year ago. Cost reductions in R&D and SG&A helped offset lower gross income; reported restructuring charges were SEK 0.6 billion in Q2 versus SEK 3.8 billion in Q1.
- Currency: Reported sales included a SEK 1.8 billion negative currency impact, while adjusted EBITA absorbed a SEK 0.6 billion currency headwind.
- Year to date: Adjusted EBITA was SEK 12.4 billion, down 13% year over year, and the adjusted margin was 12.2% versus 12.9% in the first half of 2025.
- Cost base: R&D expense fell to SEK 10.5 billion from SEK 12.2 billion, and SG&A declined to SEK 7.7 billion from SEK 8.2 billion.
Cloud Software progress
Cloud Software and Services was the strongest operating component of the quarter. Organic sales increased 5%, with growth in every market area, and reported sales rose 3% to SEK 14.7 billion despite a SEK 0.4 billion currency drag. Adjusted gross margin improved to 44.1% from 43.2%, supported by better delivery performance and operating efficiency. Adjusted EBITA rose 33% to SEK 1.8 billion, taking the margin to 12.4% from 9.6% a year earlier and 5.3% in Q1. Services represented 62% of segment sales.
- Regional breadth: Growth reflected core-network upgrades in Europe, Middle East and Africa, higher software sales in North East Asia and accelerated project deliveries elsewhere.
- IPR effect: Segment IPR licensing revenue declined 30% to SEK 0.6 billion, so the underlying software and services performance was stronger than reported sales growth suggests.
- Trajectory: Rolling-four-quarter sales were SEK 61.9 billion, with a 13.1% adjusted EBITA margin.
Networks outlook
Networks remained profitable and operationally resilient, though reported sales were pressured by IPR licensing and currency. Sales declined 8% to SEK 33.0 billion, or 4% organically; excluding IPR licensing, organic sales were broadly stable. IPR revenue fell 30% to SEK 2.8 billion from SEK 4.0 billion, reflecting the non-recurring prior-year settlement. Adjusted gross margin nevertheless improved to 50.4% from 49.5%, helped by product mix and cost actions, while adjusted EBITA decreased 10% to SEK 5.8 billion and the margin was 17.7% versus 18.2%.
- Q3 demand: Management expects Networks sales growth above average three-year seasonality.
- Q3 margin: Networks adjusted gross margin is expected to be 48% to 50%, below Q2’s 50.4% at the midpoint of the range.
- Cost risk: Component-cost inflation is building, and higher volumes of network-rollout projects are expected to pressure Q3 margins; Ericsson plans internal measures and pricing actions to offset it.
- Licensing pipeline: Agreements reached in July with a top-10 smartphone vendor and a payment-terminal vendor lifted annualized recurring IPR licensing revenue to approximately SEK 13.5 billion.
Enterprise losses
Enterprise remained the principal earnings drag even as its underlying top line grew. Organic sales increased 3%, led by Global Communications Platform and Enterprise Wireless Solutions, but reported sales fell 19% to SEK 4.5 billion because of the iconectiv divestment in Q3 2025. Adjusted gross margin fell to 50.9% from 54.9%, reflecting the divestment and product mix. Adjusted EBITA loss widened to SEK 0.8 billion from SEK 0.5 billion, although it improved from the SEK 1.4 billion loss in Q1.
- Business trends: Global Communications Platform benefited from higher CPaaS and network-API sales, while Enterprise Wireless Solutions grew on WWAN demand.
- Profitability: The adjusted EBITA margin was negative 18.7%, compared with negative 9.3% a year ago and negative 34.6% in Q1.
- Reported comparison: The rolling-four-quarter adjusted EBITA margin was 19.8%, but this included a 41.4 percentage-point benefit from the iconectiv gain in Q3 2025.
Cash returns and transition
Ericsson continued to return capital from a strong balance sheet, although quarterly cash conversion was weak. Free cash flow before M&A was SEK 0.4 billion, down from SEK 2.6 billion a year earlier and SEK 5.9 billion in Q1. Operating cash flow fell to SEK 1.9 billion from SEK 4.2 billion as inventories rose ahead of planned Q3 deliveries. After paying SEK 5.0 billion of dividends and repurchasing SEK 3.2 billion of shares, net cash declined to SEK 59.8 billion from SEK 68.1 billion in Q1, but remained well above SEK 36.0 billion a year earlier.
- Capital returns: Total Q2 shareholder returns were SEK 8.2 billion, including SEK 3.2 billion of buybacks; Ericsson repurchased 29.5 million Class B shares for SEK 3.3 billion during the quarter.
- Balance sheet: Gross cash ended at SEK 91.3 billion, while borrowings totaled SEK 31.5 billion; the equity ratio was 36.4% versus 35.5% in Q1.
- Leadership: Börje Ekholm will step down as CEO on September 30, 2026, with Per Narvinger appointed as his successor; Ekholm will remain an executive advisor through June 15, 2027.
