Ericsson Q1 net income jumps 61% on strong networks, North America growth

Investing.com -- Ericsson (ST:ERICb) on Tuesday posted a 61% year-on-year increase in net income for the first quarter of 2025, reaching SEK 4.2 billion, as stronger performance in its core Networks business and sustained operator investments in North America offset declines in other regions and segments.

The Swedish telecom equipment maker reported net sales of SEK 55 billion for the quarter, up 3% from SEK 53.3 billion a year earlier. 

Growth in the Americas, particularly North America, drove the increase, while sales declined in other market areas. 

On an organic basis, adjusted for currency effects and changes in the company’s structure, sales were flat year-over-year.

Gross income rose to SEK 26.5 billion from SEK 22.7 billion, with the reported gross margin improving to 48.2% from 42.5%. 

Excluding restructuring costs, adjusted gross income was SEK 26.7 billion, with an adjusted gross margin of 48.5%, supported by improvements across all business segments.

In the Networks segment, which accounted for SEK 35.6 billion in reported sales, revenue rose 6% year-over-year. 

The segment benefited from a favorable product and market mix, better supply chain efficiency, and earlier contract wins in North America. 

Adjusted gross margin increased to 51% from 44.3%, while adjusted EBITA rose to SEK 7.5 billion from SEK 4.3 billion. The adjusted EBITA margin improved to 21% from 12.7%.

The Cloud Software (ETR:SOWGn) and Services segment reported sales of SEK 13 billion, unchanged from a year earlier. Organically, sales declined 3%.

Adjusted gross margin rose to 39.9% from 37.4%, and adjusted EBITA swung to a profit of SEK 0.2 billion from a loss of SEK 0.3 billion, reflecting a 1.2% adjusted EBITA margin.

Sales in the Enterprise segment dropped 1% year-over-year to SEK 5.9 billion. Growth in Enterprise Wireless Solutions, which saw a 20% increase, was outweighed by a 9% decline in the Global Communications Platform, following a strategic shift toward more profitable markets. 

Adjusted gross margin rose to 56.2% from 48.1%. The adjusted EBITA loss narrowed to SEK 0.5 billion from SEK 0.8 billion, with the margin improving to -8.9% from -13.1%.

In terms of regional performance, sales in the Americas rose 26% to SEK 20.8 billion, reflecting 20% organic growth. 

Gains in North America were supported by continued network investments and recent contract wins. Europe, the Middle East and Africa saw a 5% decline in reported sales to SEK 14.5 billion and a 7% organic decline. 

Sales in South East Asia, Oceania and India dropped 16% to SEK 7.2 billion, with a 17% organic decline due mainly to reduced operator spending in India. 

North East Asia posted a 6% decline in sales to SEK 3.2 billion, and the Other segment, which includes intellectual property licensing and most Enterprise revenue, fell 3% to SEK 9.3 billion.

Intellectual property rights licensing contributed SEK 3.2 billion in revenue, up slightly from SEK 3.1 billion in the first quarter of 2024, supported by new 5G patent agreements. The company noted that 82% of IPR licensing revenue was attributed to the Networks segment.

Ericsson (BS:ERICAs) generated free cash flow before mergers and acquisitions of SEK 2.7 billion, down from SEK 3.7 billion a year earlier.

Cash flow from operating activities was SEK 4.4 billion, compared with SEK 5.1 billion last year. The company ended the quarter with SEK 38.6 billion in net cash, up from SEK 10.8 billion in the prior-year period.

President and CEO Börje Ekholm said the company remained resilient in the face of a volatile macroeconomic environment. 

“We sustained solid momentum in Q1, despite a challenging and fast changing macro backdrop, and our results highlight our competitiveness,” Ekholm said in a statement. 

He added that Ericsson is on track to introduce 130 radios this year to support programmable networks and cited the deployment of the first such network in Asia-Pacific in partnership with Telstra (OTC:TLGPY), along with new API fraud detection deals in the U.S.

“We are not immune, but we are resilient, with well diversified production close to the customer and the flexibility to adapt to changing conditions over time,” Ekholm said.

Ericsson posted a 61% year-on-year increase in net income for the first quarter of 2025, reaching SEK 4.2 billion, as stronger performance in its core Networks business and sustained operator investments in North America offset declines in other regions and segments.

The Swedish telecom equipment maker reported net sales of SEK 55 billion for the quarter, up 3% from SEK 53.3 billion a year earlier. 

Growth in the Americas, particularly North America, drove the increase, while sales declined in other market areas. 

On an organic basis, adjusted for currency effects and changes in the company’s structure, sales were flat year-over-year.

Gross income rose to SEK 26.5 billion from SEK 22.7 billion, with the reported gross margin improving to 48.2% from 42.5%. 

Excluding restructuring costs, adjusted gross income was SEK 26.7 billion, with an adjusted gross margin of 48.5%, supported by improvements across all business segments.

In the Networks segment, which accounted for SEK 35.6 billion in reported sales, revenue rose 6% year-over-year. 

The segment benefited from a favorable product and market mix, better supply chain efficiency, and earlier contract wins in North America. 

Adjusted gross margin increased to 51% from 44.3%, while adjusted EBITA rose to SEK 7.5 billion from SEK 4.3 billion. The adjusted EBITA margin improved to 21% from 12.7%.

The Cloud Software and Services segment reported sales of SEK 13 billion, unchanged from a year earlier. Organically, sales declined 3%.

Adjusted gross margin rose to 39.9% from 37.4%, and adjusted EBITA swung to a profit of SEK 0.2 billion from a loss of SEK 0.3 billion, reflecting a 1.2% adjusted EBITA margin.

Sales in the Enterprise segment dropped 1% year-over-year to SEK 5.9 billion. Growth in Enterprise Wireless Solutions, which saw a 20% increase, was outweighed by a 9% decline in the Global Communications Platform, following a strategic shift toward more profitable markets. 

Adjusted gross margin rose to 56.2% from 48.1%. The adjusted EBITA loss narrowed to SEK 0.5 billion from SEK 0.8 billion, with the margin improving to -8.9% from -13.1%.

In terms of regional performance, sales in the Americas rose 26% to SEK 20.8 billion, reflecting 20% organic growth. 

Gains in North America were supported by continued network investments and recent contract wins. Europe, the Middle East and Africa saw a 5% decline in reported sales to SEK 14.5 billion and a 7% organic decline. 

Sales in South East Asia, Oceania and India dropped 16% to SEK 7.2 billion, with a 17% organic decline due mainly to reduced operator spending in India. 

North East Asia posted a 6% decline in sales to SEK 3.2 billion, and the Other segment, which includes intellectual property licensing and most Enterprise revenue, fell 3% to SEK 9.3 billion.

Intellectual property rights licensing contributed SEK 3.2 billion in revenue, up slightly from SEK 3.1 billion in the first quarter of 2024, supported by new 5G patent agreements. The company noted that 82% of IPR licensing revenue was attributed to the Networks segment.

Ericsson generated free cash flow before mergers and acquisitions of SEK 2.7 billion, down from SEK 3.7 billion a year earlier.

Cash flow from operating activities was SEK 4.4 billion, compared with SEK 5.1 billion last year. The company ended the quarter with SEK 38.6 billion in net cash, up from SEK 10.8 billion in the prior-year period.

President and CEO Börje Ekholm said the company remained resilient in the face of a volatile macroeconomic environment. 

“We sustained solid momentum in Q1, despite a challenging and fast changing macro backdrop, and our results highlight our competitiveness,” Ekholm said in a statement. 

He added that Ericsson is on track to introduce 130 radios this year to support programmable networks and cited the deployment of the first such network in Asia-Pacific in partnership with Telstra, along with new API fraud detection deals in the U.S.

“We are not immune, but we are resilient, with well diversified production close to the customer and the flexibility to adapt to changing conditions over time,” Ekholm said.