VALUATION HIGHLIGHTS
- Networks constitute 93% of the Trefis price estimate for Ericsson's stock.
WHAT HAS CHANGED?
- Latest Earnings - Q3'2025
Net sales came in at SEK 56.2 billion, down 9% year-over-year, mainly due to currency headwinds and a 2% decline in organic sales. Despite the revenue drop, profitability surged: adjusted EBITA reached SEK 15.8 billion (28.1% margin), up from SEK 7.8 billion a year earlier, and net income more than doubled to SEK 11.3 billion, reflecting a strong boost from the divestment of iconectiv. Adjusted gross margin improved to 48.1%, and the reported gross margin was 47.6%, showing solid operational leverage. Free cash flow before M&A fell to SEK 6.6 billion, down from SEK 12.9 billion, but the company’s net cash position strengthened to SEK 51.9 billion, providing flexibility for shareholder returns. The results were driven by cost efficiencies, stronger margins in Networks and Cloud Software & Services, and a favorable one-time divestment gain, while organic sales pressures, currency headwinds, and weakness in the Enterprise segment remain risks.
- Outlook
Looking ahead, Ericsson expects enterprise sales to stabilize and adjusted gross margins of 49–51% in Q4, reflecting confidence in operational improvements and the ongoing 5G/Open RAN cycle. Overall, the quarter illustrates a classic turnaround pattern: top-line pressures alongside margin expansion and strong cash position, leaving the stock positioned for potential upside if the telecom-equipment cycle strengthens and slower segments recover.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of Ericsson's value that present opportunities for upside or downside to the current Trefis price estimate:
Networks
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Network Revenues: Ericsson is one of the top players in the Mobile (Wireless) Infrastructure market. The division also contributes roughly 65% of the company's revenues. We estimate that revenues will increase from levels of about $15 billion in 2024 to close to $19 billion by 2031, driven by slightly higher spending on 5G equipment. However, if Ericsson is not able to achieve this, due to increased competition and its revenue drops to about $17 billion in the same time frame, there could be a downside of about 10% to our price estimate.
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Networks EBITDA Margin: Margins for the networking division stood at 17% by 2024. We expect the metric to stabilise around similar levels by the end of our review period. However, if the metric falls to 15% due to competition from Chinese players, who are betting big on 5G technology, there could be a downside of about 10% to our price estimate. On the other hand, if the company boosts margins to 19% by the end of our review period, there could be an upside of close to 10% to our price estimate.
For additional details, select a driver above or select a division from the interactive Trefis split for Ericsson at the top of the page.
BUSINESS SUMMARY
Sweden-based Ericsson provides communication infrastructure, services, and software solutions to the telecom and other sectors. It operates through four segments: Networks, Cloud Software and Services, Enterprise, and Other.
SOURCES OF VALUE
Networks
Accounting for over 65% of Ericsson's overall revenues, Networks is the dominant division for the company. It is dominated by the Wireless division, which offers mobile communication equipment. Ericsson occupies the top spot in the global Wireless equipment market with about a 30% market share. It is positioned well to benefit from this $40 billion market over the short—to medium-term. The other products offered under this division are fixed-line products for copper and fiber, microwave backhaul systems, and modems.
KEY TRENDS
The 5G Upgrade Cycle
Cellular Internet of Things connections running on 5G have surpassed 4 billion by the end of 2024, representing approximately 22% of global overall IoT connections. Ericsson is betting on next-generation technology to drive growth after posting mixed results over the last few years amid intense competition from Chinese equipment manufacturers and weaker spending by wireless carriers.
Equipment Modernization in Europe and Capacity Building in Asia
Ericsson's mobile equipment modernization drive in Europe is likely to improve profitability due to increased efficiency and lower costs. Also, a gradual shift from coverage projects to capacity-building projects is being done by the company. Increasing coverage in Asia, Europe, and Latin America has come at the cost of margins in the past couple of years, but as it reaches completion in the near term, profitability is expected to rise, which will help counter the stiff competition being provided by Chinese manufacturers such as Huawei and ZTE.
Hardware to Software Shift in Telecommunications Market
There has been an industry-wide shift in demand from hardware networking solutions to software-based ones in the long run. This poses an interesting challenge to traditional hardware-based players such as Ericsson, Cisco, and Juniper. However, Ericsson is showing adaptability with its increased focus on software and support solutions, where it is competing with many small and local service providers.
