Ericsson shares jump 7% on third-quarter beat, growth in North America sales

Shares of Swedish telecom firm Ericsson jumped amid third-quarter core earnings that surpassed analyst expectations and growth in North American demand.

The company’s stock had edged up near 9% at 8:28 a.m. London time, before lightly paring gains to 7.6% at 9:52 a.m.

Ericsson on Tuesday declared adjusted third-quarter earnings, excluding impairments, of 7.327 billion Swedish crowns ($0.7 billion), compared with 3.9 billion Swedish crowns in the same period of last year and exceeding the 5.75 billion crown mean forecast of analysts cited by Reuters.

Net sales shed 4% year-on-year to 61.8 billion Swedish crowns in the third quarter, but nevertheless surpassed analyst expectations of near 61.6 billion, according to Reuters estimates. North America emerged as a bright spot in the sales picture, with year-on-year growth of more than 50%.

“This has been a challenging market for various reasons for quite some time,” Ericsson CEO Börje Ekholm told CNBC’s “Squawk Box Europe.” “So we’re starting to see some signs here that the market is stabilizing. I think that’s encouraging.”

The company bolstered its footing in the U.S. last year, when it beat out Finnish rival Nokia and won a sizable contract to build a telecom network using so-called ORAN technology that aims to cover 70% of carrier AT&T’s traffic in the U.S. by late 2026.

“North America was the first to roll out 5G, and of course they were also the first to therefore slow down the pace. But they are now coming back, so… so I think it fuels a bit of optimism that we can see coming,” Ekholm said.

He acknowledged the boost received from the AT&T contract, adding that “in general what drives demand for 5G is actually the growth in, I call it, the consumer mobile internet. So data growth continues at a rather high pace. And that of course needs new investments.”

The North American growth offset steep third-quarter sales declines in both north east and south east Asia, where telecommunication companies have recently been focusing on developing markets such as India.

“India is a bit of a… you can call it a distortion,” Ekholm said, noting that the country rolled out its 5G access “at an unprecedented pace during 2023,” inflating sales over the period. He maintained that he stills sees “growth opportunities in that region for the company, which he admits is “hurting a bit” from a lower presence in China.

Citing a new “market mix, commercial discipline, and cost actions,” Ericsson on Tuesday said its adjusted gross margin picked up to 46.3% in the third quarter, versus 39.2% in the same period of last year. The “strong gross margin” and Ericsson’s outlook comments prompted UBS analysts to forecast a 5-10% upgrade in the company’s consensus earnings before interest and tax (EBIT) for 2024 “and likely similar onto 2025.”

The Tuesday results mark a rebound for Ericsson, which has been contending with slowing demand for its 5G equipment, which pushed it to announce plans to lay off 1,200 employees in Sweden back in March. It previously eliminated 8,500 positions globally — equivalent to around 8% of its workforce — in a bid to lower costs.