Ericsson Hints at Higher Shareholder Returns After Cost-Savings, Unit Sale Boost Earnings — Update

By Dominic Chopping

STOCKHOLM--Ericsson suggested it could lift its shareholder payout this year after third-quarter earnings beat expectations, driven by cost-cutting measures and the sale of its U.S.-based Iconectiv business.

"Solid recurring cash flow and the Iconectiv sale contributed to a strong third-quarter cash position, offering scope for increased shareholder distributions," Chief Executive Borje Ekholm said.

Shares rose 13% in early European trade.

The sale of connectivity services business Iconectiv generated a 7.6 billion Swedish kronor ($799.5 million) capital gain, while continuing cost-saving efforts also boosted profitability, the Swedish telecommunications-equipment company said Tuesday.

Details of the distribution will be outlined in the company's fourth-quarter report, Ericsson said.

Ericsson's key networks business posted an 11% fall in sales overall in the third quarter, it said. North America networks sales declined after a strong pace of deliveries from a large AT&T deal last year, while sales also fell in India. Latin America saw continued intense competition and lower customer network investments, it added.

The unit registered sales growth in the Europe, Middle East and Africa and northeast Asia regions. The company also benefited from more sales of higher-margin services.

It reported an adjusted gross margin in the networks unit of 50.1%, topping its guided 48% to 50% range, and said the margin is expected to land within a 49% to 51% range in the fourth quarter.

Fourth-quarter sales growth at the unit is expected to be broadly similar to three-year average seasonality, while the overall network market is expected to remain broadly stable, it added.

However, the company continued to point to increased uncertainty surrounding the outlook, both in terms of potential for further tariff changes as well as in the broader macroeconomic environment.

The tariff impact is mostly felt by the company through sourcing of components and materials, but Ericsson has previously highlighted its potential to navigate the situation through its broad supply-chain footprint while it can already manufacture network gear at its U.S. production base.

Net profit attributable to shareholders in the third quarter came in at 11.15 billion kronor, above the 10 billion kronor expected in a FactSet analyst poll.

The group gross margin rose to 47.6% from 45.6%. The company said it views the current level as sustainable.

"In 3Q, we established margins at a new long-term level following strong operational execution over the past few years," Ekholm added.

Sales fell 9% to 56.24 billion kronor, versus the 56.49 billion kronor FactSet estimate.

In a separate announcement Tuesday, Ericsson said it agreed in a new five-year deal to modernize Vodafone's network by deploying advanced 5G hardware and software.

Ericsson will be the U.K.-based telecommunication group's sole radio access network vendor in Ireland, Netherlands, and Portugal, as well as a major vendor in Germany, Romania, and Egypt.

"By modernizing our network with latest generation equipment and embracing high-performing new 5G Advanced capabilities, we're transforming our infrastructure for best customer experience and high network efficiency," Vodafone's Chief Network Officer Alberto Ripepi said in a statement.

Financial terms weren't disclosed.

Write to Dominic Chopping at dominic.chopping@wsj.com

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October 14, 2025 03:38 ET (07:38 GMT)