Sweden’s telecom giant Ericsson (ERICb.ST) announced on Tuesday that it is witnessing signs of demand recovery in the telecom equipment market, bolstered by better-than-expected core earnings and sales in the third quarter, primarily driven by a resurgence in 5G equipment demand across North America.
Following the report, Ericsson’s shares surged 9% in early trading, reaching their highest value since April 2022.
In recent years, a decline in demand from North American mobile operators had impacted major industry players like Ericsson and Nokia (NOKIA.HE), forcing them to seek growth in emerging markets such as India, often at the expense of profit margins.
Ericsson CEO Börje Ekholm stated, “We see signs that the overall market is stabilizing with North America, as an early adopter market, returning to growth.”
While net sales fell by 4% to 61.8 billion Swedish crowns ($5.92 billion), they exceeded estimates of 61.6 billion crowns. On an underlying basis, sales declined by just 1%, a notable improvement compared to a 7% drop in the previous quarter. Danske Bank Credit Research analyst Mads Lindegaard Rosendal highlighted that “net sales declined ‘only’ 1% year over year, which was a marked improvement.”
North American sales soared by over 50%, reaching 20.4 billion crowns. Finance chief Lars Sandström explained that “North America is recovering from very low levels, with last year’s Q3 being our lowest quarter, so growth in percentage points has become very large, but it is also a very strong quarter.”
The increase in North American sales can be attributed to a ramp-up in sales to AT&T (T.N), following a substantial $14 billion, five-year agreement established last year. Sandström noted, “It has an impact… we also see other customers continuing to invest, supporting the growth in North America.”
However, challenges persist in other markets. Sales in Europe and Latin America dropped by 2%, while other regions saw declines in double digits. India, which had been a strong performer last year, has also experienced a significant slowdown. Nonetheless, Ericsson has secured new contracts with Vodafone Idea and Bharti Airtel in the Indian market.
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