Ericsson Q1 Earnings Beat Estimates on Higher Revenues

Ericsson ERIC reported mixed first-quarter 2025 results, with adjusted earnings beating the Zacks Consensus Estimate but revenues missing the same. The company reported a revenue improvement year over year, driven by strong demand in the Networks Segment. Higher IPR licensing revenues, cost optimization and a robust portfolio boosted the gross margin. A healthy increase in the free cash flow, backed by improvement in working capital, is a tailwind. However, weakness in the Middle East, Africa, South East Asia, Oceania and India regions affected top-line growth. Net IncomeEricsson recorded a net income of SEK 4.2 billion ($431 million) or SEK 1.24 (13 cents) per share compared with SEK 2.6 billion or SEK 0.77 per share in the prior-year quarter. Adjusted earnings beat the Zacks Consensus Estimate of 9 cents. (See the Zacks Earnings Calendar to stay ahead of market-making news.)Ericsson Price, Consensus and EPS Surprise Ericsson price-consensus-eps-surprise-chart | Ericsson QuoteRevenuesEricsson generated SEK 55 billion ($5.15 billion) in revenues, up 3% year over year. Net sales, adjusted for comparable units and currency, remained unchanged year over year. Solid demand in the Networks segment boosted the top line. However, the top line missed the Zacks Consensus Estimate of $5.31 billion.Segment ResultsNetworks segment generated SEK 35.6 billion ($3.33 billion), up 6% from the year-ago quarter’s tally of SEK 33.7 billion. The top line matched our revenue estimate of SEK 35.5 billion. The segment’s gross margin improved to 50.8% from 44% in the year-ago quarter. It benefited from a favorable product and market mix, better supply chain efficiency, and earlier contract wins in North America. The sales decline in South East Asia, Oceania and India partially reversed this trend.Cloud Software and Services revenues remained flat at SEK 13 billion ($1.28 billion), slightly missing our estimate of SEK 13.3 billion. Gross margin improved to 39.1% from 37.1% in the prior-year quarter. Increased IPR licensing revenues, commercial discipline and improvement in delivery performance propelled the gross margin.Enterprise segment generated SEK 5.9 billion ($553 million), down 1% from the year-ago quarter’s tally of SEK 6 billion owing to declining sales in the Global Communication Platform. Net sales missed our revenue estimate of SEK 6.2 billion. Adjusted gross margin was 56.3% compared with 48.1% in the year-ago quarter. Other revenues declined to SEK 0.5 billion ($47 million) from SEK 0.6 billion in the prior-year quarter. Effective March 15, 2025, two new market areas were created—the Americas and Europe, Middle East and Africa—by merging the markets of Europe and Latin America, North America, and Middle East and Africa.Region-wise, South-East Asia, Oceania and India registered revenues of SEK 7.2 billion ($674 million), down from SEK 8.6 billion in the prior-year quarter. Revenues from North East Asia decreased 6% year over year to SEK 3.2 billion ($299 million). Net sales from the Americas increased 26% year over year to SEK 20.8 billion ($1.94 billion).Europe, Middle East and African markets witnessed a 5% year-over-year decline to SEK 14.5 billion ($1.36 billion). Revenues from other regions declined to SEK 9.3 billion ($871 million) from SEK 9.6 billion in the prior-year quarter.Other DetailsGross income, excluding restructuring charges, improved to SEK 26.7 billion ($2.5 billion) from the year-ago figure of SEK 22.7 billion, driven by solid sales growth. Gross margin, excluding restructuring charges, was 48.5% compared with 42.7% in the year-earlier quarter, supported by improvements in all segments and strong operational execution.Cash Flow and LiquidityEricsson generated SEK 4.4 billion ($412 million) cash from operating activities during the quarter. As of March 31, 2025, the company had net cash of SEK 38.6 billion ($3.61 billion) and SEK 21.8 billion liabilities for post-employment benefits.OutlookFor the second quarter of 2025, revenues from the Networks, Cloud Software and Services segment are expected to be broadly similar to the three-year average seasonality. The gross margin in the Networks segment is likely to be in the range of 48-50%. Amortization of intangible assets is forecasted to be around SEK -0.5 billion per quarter, of which approximately SEK -0.4 billion is related to the Enterprise segment. Restructuring charges are projected to remain at elevated levels.ERIC’s Zacks RankEricsson currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Upcoming ReleasesNokia Corporation NOK is scheduled to release first-quarter 2025 earnings on April 24. The Zacks Consensus Estimate for earnings is pegged at 5 cents per share, indicating a decline of 50% from the year-ago figure.  International Business Machines Corporation IBM is scheduled to release first-quarter 2025 earnings on April 23. The Zacks Consensus Estimate for earnings is pegged at $1.42 per share, indicating a decline of 15.48% from the year-ago figure. AT&T Inc. T is scheduled to release first-quarter 2025 earnings on April 23. The Zacks Consensus Estimate for earnings is pegged at 52 cents per share, indicating a decline of 5.45% from the year-ago figure. 7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AT&T Inc. (T): Free Stock Analysis Report International Business Machines Corporation (IBM): Free Stock Analysis Report Ericsson (ERIC): Free Stock Analysis Report Nokia Corporation (NOK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks