Telefonaktiebolaget LM Ericsson GAAP EPS of SEK 1.37, revenue of SEK 56.1B; initiates Q3 outlook

• Ericsson reported a GAAP EPS of SEK 1.37 and revenue of SEK 56.13 billion for Q2 2024, indicating a year-over-year decline of 6.2%, yet achieved improved gross margins of 48.0% and an adjusted EBITA margin of 13.2%.

• The company is increasing investments in artificial intelligence to boost innovation and operational efficiencies, while its network API ecosystem is expanding significantly in Japan.

• A dividend of SEK 2.85 per share was approved during the AGM, with payments scheduled for 2025, highlighting the company’s commitment to returning value to shareholders.

• Looking ahead, Ericsson faces uncertainties from potential tariff changes and macroeconomic conditions, with projected sales growth in its Networks segment expected to be below the three-year average for Q3 2025.

Recommendation Rating: Strong Performance with Caution for Future Outlook

Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC) recently released its second-quarter financial report, highlighting notable achievements amid certain challenges. The company posted a GAAP earnings per share (EPS) of SEK 1.37 and generated revenue amounting to SEK 56.13 billion, reflecting a year-over-year decline of 6.2%.

Despite facing currency fluctuations, Ericsson demonstrated resilience with an adjusted gross margin of 48.0%, up from 43.9% in the previous period. This improvement was facilitated by advancements across all business segments. The adjusted EBITA reached SEK 7.4 billion, achieving a significant margin of 13.2%, compared to 6.8% previously, thanks to enhanced gross income and reduced operating expenses. The free cash flow before mergers and acquisitions (M&A) stood at SEK 2.6 billion for Q2 2024.

Looking to the future, Ericsson is intensifying its investments in artificial intelligence (AI), particularly within its Swedish AI factory consortium. AI is viewed as instrumental in fostering innovation and enhancing operational efficiencies within the organization. Additionally, the network API ecosystem is expanding, with Aduna successfully broadening its API services to encompass all three major telecommunications providers in Japan.

The annual general meeting (AGM), held on March 25, 2025, approved a proposed dividend of SEK 2.85 per share, to be disbursed in two payments. The first installment of SEK 1.43 per share was recorded on March 27, 2025, with distribution occurring on April 1, 2025. The second dividend of SEK 1.42 per share will be processed with a record date of September 29, 2025, and an anticipated payment date of October 2, 2025.

As for the outlook, the company faces increased uncertainties, both regarding potential tariff modifications and broader macroeconomic conditions.

In the Networks segment, sales growth for Q3 2025 is anticipated to fall below the three-year average seasonality, largely due to elevated Q2 IPR revenues from previously unlicensed periods. The adjusted gross margin in this segment is projected to range between 48% and 50%.

In Cloud Software and Services, sales growth for Q3 2025 is expected to align closely with the three-year average seasonality. Additionally, amortization of intangible assets is forecasted at approximately SEK -0.5 billion per quarter, with about SEK -0.4 billion attributed to the Enterprise segment.

Overall, while Ericsson showcases promising financial metrics, the company must navigate a complex landscape marked by uncertainties in tariffs and macroeconomic conditions, along with ongoing elevated restructuring charges in 2025.