Ericsson reported Q3 sales of SEK 57.5 (57.1) billion, up 7% YoY when adjusted for comparable units and currency.
The company said growth was driven by 5G sales in mainland China.
Börje Ekholm, President and CEO of Ericsson, states: “We continue to win footprint in several markets leveraging our competitive 5G portfolio. The gross margin[1] improved in all segments in the third quarter and reached 43.2% (37.8%), the highest since 2006. With the acquisition of Cradlepoint, expected to close in Q4, we are making further progress in our strategy to build an enterprise business. Covid-19 has so far had limited impact on our business, but we are closely monitoring any signs of a change in the situation. The year to date results strengthen our confidence in delivering on the 2020 Group target.
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Networks grew organically by 13% and reported a gross margin of 46.7% (41.6%), reflecting high activity levels in North East Asia and North America. Underlying business fundamentals remain strong in North America driven by consolidation in the US operator market, pending spectrum auctions, and increased demand for 5G. The 5G contracts in Mainland China have developed according to plan, contributing positively to profits in Q3 and are expected to improve further. Ericsson’s business in Europe grew based on several footprint gains. While the pandemic has hurt revenues for several of customers, and in some cases this has led to a reduction of capex, we have not seen any negative impact on our business, largely due to footprint gains. However, the pandemic negatively impacted sales in Latin America and Africa.
- Digital Services continued to make good progress on the execution of the turnaround plan, transforming the business and increasing software sales. The gross margin[1] improved to 43.5% (38.3%), supported by increased software sales and improvements in the underlying business. Our cloud-native 5G core portfolio shows very positive momentum with a high win-ratio and a significant number of new customer contracts. We are selectively increasing R&D investments to accelerate our growth portfolio to capture market opportunities. Sales in Ericsson’s legacy portfolio is declining faster than earlier predicted. In the short term, this shortfall will not be compensated by the growth in new offerings and therefore our sales volume is lower than expected. With weaker sales in combination with higher R&D investments, there is a risk of further delay in reaching the 2020 operating margin target for Digital Services.
- Managed Services delivered a gross margin[1] of 20.1% (17.9%). The 4Q rolling operating margin[1] is 7.4%. Sales declined mainly due to the US operator consolidation.
- Emerging Business and Other reported a gross margin of 30.5% (20.5%). IoT platform sales grew by more than 40% despite an impact on demand from Covid-19.
Ericsson 5G status on October 21: 65 live networks and
112 commercial agreements with unique operators
– Strong growth in North East Asia and continued busi