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Investing.com --Telefonaktiebolaget LM Ericsson (BS:ERICAs) shares surged 9.8% on Tuesday after the Swedish telecom equipment maker reported third-quarter results that showcased significant margin improvements driven by strong cost control measures, despite a slight decline in organic sales.
The Swedish telecom equipment maker posted adjusted earnings before interest and taxes (EBIT) of 15.5 billion Swedish crowns ($1.62 billion) for the quarter ended September 30, beating analyst estimates of 14.1 billion crowns. Reported sales fell to 56.2 billion crowns from 61.8 billion crowns a year earlier, while organic sales declined by 2%.
Ericsson’s adjusted gross margin improved to 48.1% from 46.3% in the same period last year, reflecting strong operational execution and cost efficiency measures. The company’s EBITA margin jumped to 27.6%, boosted by a 7.6 billion crown capital gain from the divestment of its iconectiv business.
"In Q3, we established margins at a new long-term level following strong operational execution over the past few years," said CEO Börje Ekholm. "Cloud Software and Services sales grew 9%, driven by strong growth in core networks."
The company secured significant customer agreements during the quarter, including deals in India, Japan and the UK. Ericsson’s 5G Open RAN-ready portfolio was reaffirmed as industry-leading by Gartner and Omdia.
Looking ahead, Ericsson expects Enterprise organic sales to stabilize in the fourth quarter and the RAN market to remain broadly stable. The company’s net cash position increased to 51.9 billion crowns, which could lead to increased shareholder distributions.
"Solid recurring cash flow and the iconectiv sale contributed to a strong Q3 cash position, offering scope for increased shareholder distributions," Ekholm added.