Shares of LM Ericsson experienced an increase of over 8% during early morning trading in Stockholm and in pre-market activity on the Nasdaq. The rise follows the Swedish telecom giant's announcement of a profitable third quarter, in contrast to a loss in the same period last year, despite a decline in sales.
Looking ahead, Borje Ekholm, President and CEO, expressed optimism about the company's growth trajectory, stating, "We are observing increasing momentum among customers for programmable networks delivering differentiated performance. Additionally, we see encouraging signs of market stabilization, with North America, as an early adopter, returning to growth... We anticipate that our Networks sales will stabilize year-on-year in the fourth quarter, bolstered by continued solid growth in North America. However, we foresee short-term sales pressure in the Enterprise segment as we prioritize profitable sectors."
In the third quarter, Ericsson reported a net income of 3.88 billion Swedish kronor, contrasting with a net loss of 30.49 billion kronor in the same period the previous year. Earnings per share reached 1.14 kronor, a significant improvement from the loss of 9.21 kronor per share a year earlier.
The prior year's performance was adversely affected by an impairment charge of 31.9 billion kronor. Without this charge, net profit for the previous year would have been 1.4 billion kronor.
Sequentially, the company showed marked improvement from a net loss of 11 billion kronor in the second quarter.
During the third quarter, Ericsson's earnings before interest and tax (EBIT) rose to 5.77 billion kronor, a turnaround from a loss of 28.91 billion kronor the previous year. EBIT margin enhanced to 9.3% from a negative 44.8% last year.
Adjusted EBIT, excluding impairments, increased by 88% year over year to 7.33 billion kronor, with the adjusted EBIT margin rising to 11.9% from 6.0% the previous year.
The key earnings measure, adjusted EBITA, stood at 7.76 billion kronor, representing a 64% increase from 4.72 billion kronor the previous year. The adjusted EBITA margin improved to 12.6% from 7.3% last year, benefitting from increased gross income and cost-saving measures, partially countered by strategic R&D investments.
The adjusted gross margin rose to 46.3% from 39.2% the previous year, mainly due to better margins in the Networks segment.
Sales during the quarter decreased by 4% to 61.79 billion kronor, down from 64.47 billion kronor as compared to last year, with organic sales seeing a 1% decline. Significant growth in North America, at 55%, was counterbalanced by decreases in most other regions.
Sequentially, sales increased by 3% from the prior second quarter's figure of 59.8 billion kronor.
Both the Networks and Cloud Software & Services segments saw a 1% organic sales reduction. While Networks experienced robust growth in North America, customer investments waned in other regions.
The Enterprise segment experienced a 3% organic sales decline, largely due to reduced sales in the Global Communications Platform area.
In pre-market trading on the Nasdaq, Ericsson shares rose approximately 8.49% to $8.18, while in Stockholm, shares traded at 84.84 kronor, an increase of 8.32%.
