Ericsson reported Q2 2022 revenue of SEK 62.5 billion (US$5.9 billion), up 5% YoY driven primarily by Networks in North America and Europe. Reported gross income increased to SEK 26.3 (23.9) b. driven by higher sales. Gross margin was 42.1% (43.4%). Reported net income was SEK 4.7 (3.9) billion.
Networks sales grew organically by 6% in Q2 underpinned by market share gains. Gross margin was 45.1% (47.9%), impacted by lower IPR revenues, increased component and logistics costs, and proactive investments in supply chain resilience, which enabled continued delivery performance in the quarter. We continue to invest in enhancing and expanding our offerings, and we increased R&D in the quarter primarily for Cloud RAN and acceleration of the next-generation Ericsson Silicon (ASICs).
- Digital Services sales grew organically by 2% YoY with strong growth in cloud native 5G Core, and an EBIT of SEK -1.3 (-1.6) b. The accelerated 5G Core projects with initial deployment costs partly offset the margin improvement from increased software sales.
- Managed Services sales were flat YoY with an EBIT margin of 11.2% (8.1%). With a 4Q rolling EBIT margin of 9.5%, we achieved our 2022 target two quarters ahead of plan.
Some of the comments posted by Börje Ekholm, President and CEO of Ericsson:
Strong business momentum continued during the second quarter. Rollout of 5G networks and market share gains resulted in a 5% organic sales growth in the quarter. We have adjusted our group structure to strengthen execution of our strategy to be a leading mobile infrastructure provider and to establish a focused enterprise business. Consumers, enterprises, and society will be digitalized through 5G in a way we have not seen before. With our strategy, we are in a position to capture these opportunities to enable further growth.
The global supply chain situation remains challenging and inflationary pressures are strong. Combined, this results in cost increases which we work hard to mitigate as far as possible. As contracts expire, we aim to adjust pricing. However, we believe the best way to compensate for cost increases is the continued investment in technology to increase the cadence of bringing new innovative solutions to the market.
Fulfilling customer commitments under current challenging conditions, comes at a cost which dilutes gross margin. The increased costs have been largely absorbed through our investments in innovation and continuous improvements. Increased sales resulted in a gross income improvement in absolute terms of SEK 2.4 b. compared with Q2 last year, despite lower IPR revenues of SEK 0.9 b. YoY.
While 5G is the fastest scaling mobile technology, global penetration is still in an early phase. We foresee that the global 5G build-out will be larger and continue for longer than previous mobile generations. The build-out will include evolving consumer use cases, such as Fixed Wireless Access, mobile gaming and XR applications, in addition to new areas, such as enterprise and first responders.
Our strategy targets a higher growth trajectory as we aim to grow our core mobile infrastructure business and capitalize on the fast-growing enterprise market. With 5G, the world is experiencing the largest innovation platform to date, where anything that can go wireless, will go wireless.
https://www.ericsson.com/en/press-releases/2022/7/ericsson-reports-second-quarter-results-2022
