Ericsson’s revenue drops, profits soar; deal with Vodafone and partnership with Export Development Canada
Ericsson’s 3rd quarter results out today showed a 9% drop in revenues, to 56.2 billion Swedish kronor (US$5.9 billion), compared with the same period last year. Ericsson’s gross margin rose 2% to 47.6%. U.S. sales fell by as much as 17% year-over-year for the third quarter, to about SEK22.5 billion ($2.4 billion), after an especially busy period in 2024. And the only region where Ericsson realized any growth was northeast Asia, due to Japan’s new 5G rollout.
At Ericsson’s big mobile networks unit, sales fell 11% year-over-year, to SEK35.4 billion ($3.7 billion), while the decline on a constant-currency basis was just 4%. The division’s operating income also slid by 6%, to SEK7.1 billion ($740 million).
Sales were much better at the company’s cloud software and services group, responsible for the development of Ericsson’s core network software as well as its business and operational support systems. Reported sales rose 3%, to SEK15.3 billion ($1.6 billion), while Ericsson put the organic improvement at 9%. More importantly, it swung from an operating loss of SEK400 million ($42 million) a year earlier to a profit of SEK1.7 billion ($180 million).
Net income soared by an astonishing 191%, to SEK11.3 billion ($1.2 billion). That sharp increase in net income was due to Ericsson’s recent sale of iconectiv, a provider of number-portability and data-exchange services, to a private equity firm. The deal landed Ericsson a capital gain of SEK7.6 billion ($800 million) that flattered its profits at the operating income level. In Stockholm, Ericsson’s share price soared more than 14% in mid-morning trade, although it remained almost 2% below its level at the start of the year.
CEO Börje Ekholm said on today’s earnings call: “The margin expansion reflects actions we’ve taken over the last years to increase operational excellence and efficiency, including the work we’ve done on our cost base. Over the last year, we’ve reduced our headcount by some 6,000, leveraging new ways of working, and that of course includes AI.”
Since the end of 2022, the year Ericsson acquired VoIP software developer Vonage for $6.2 billion, headcount has fallen by more than 15,600, to just 89,898 at the end of June, the company revealed in its latest earnings report.
The Vonage business suffered a 17% drop in sales, to SEK3.2 billion ($330 million), and saw its loss widen by 50%, to SEK600 million ($63 million). It is where Ericsson believes it can monetize the network application programming interfaces (APIs) that will link software apps to networks and hopefully revitalize the 5G market. However, that’s not happening yet.
“The geopolitical situation has required us to shift resources a bit politically. As we went through that transition, we duplicated a large part of the R&D spend. We don’t need to have that anymore as we have relocated R&D,” said Ekholm. “We are not going to jeopardize technology leadership and if we feel there is any risk – and that is a risk I don’t see today – then we would of course need to reassess.”
After years of growth, R&D spending fell by 10% year-over-year for the first nine months of 2025, to SEK35.8 billion ($3.8 billion), prompting concern among analysts that Ericsson could lose competitiveness versus Chinese rivals.
AI is now being used to refine the algorithms that are fed into Ericsson’s software products, said Per Narvinger, the head of Ericsson’s mobile networks business group, on a call with Light Reading. No indication was given if that would reduce headcount any further.
Ericsson hopes the new 5G contract it announced with Vodafone earlier today will boost sales in Europe, where underinvestment in midband 5G coverage and the “standalone” variant of 5G have been constant bugbears for the company. After the rollout of “non-standalone” 5G, which maintains the 4G core, operators just continued to sell a “4G plus” service, Ekholm said.
“It was the established business model of most operators around the world, so it became very natural to take that step and then use 5G almost as a marketing icon on the phone, but, in reality, it didn’t give the extra capabilities,” he added. Standalone features such as low latency and network slicing will be critical in future apps, Ekholm correctly said, arguing that 6G will necessitate edge cloud and AI investments that have also not yet happened.
In summing up, Ericsson said “Increased uncertainty remains on the outlook, both in terms of potential for further tariff changes as well as in the broader macroeconomic environment.”
Looking ahead:
– Continue to invest in technology leadership to strengthen competitive position
– Future-proofed Open RAN-ready portfolio
– New use cases to monetize network investments taking shape
● AI applications becoming a key driver for network investments
● Structurally improving the business through rigorous cost management
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Separately,
Ericsson today announced the signing of a USD $3 billion partnership agreement with Export Development Canada (EDC) to expand investment in Canadian research and development, deepen domestic supply chains, and accelerate next-generation technologies including 5G, Cloud RAN, AI, and quantum innovation.
Börje Ekholm, President and CEO, Ericsson, says: “Canada is one of Ericsson’s most important hubs for global research and development, and this partnership with Export Development Canada will allow us to scale that leadership even further. By strengthening our collaboration with Canadian businesses, universities and government partners, we can accelerate breakthroughs in 5G, quantum, and Cloud RAN that will drive growth, create opportunities, and reinforce Canada’s position as a global leader in next generation networks.”
With more than 3,100 employees nationwide and R&D centres in Ottawa, Montreal, and Toronto, Ericsson Canada is at the heart of the company’s global innovation footprint. Canadian teams are driving advancements in 5G, 5G Advanced, and 6G, while also contributing to new research in quantum communications and AI-powered network management.
The three-year partnership will enable Ericsson to expand its Canadian-led innovation and global projects with the support of financial and insurance solutions from EDC. By reinforcing Ericsson’s Canadian supply chain and connecting the company with innovative domestic businesses, the agreement will also amplify Ericsson’s ability to bring Canadian technology to the world, strengthen competitiveness, and create new opportunities for Canadian companies within Ericsson’s global network of partners.
Across all wireless network equipment vendors, annual sales of RAN products fell from $45 billion in 2022 to $35 billion last year, according to Omdia, a Light Reading sister company. Market research firms Omdia and Dell’Oro have encouragingly guided for a more stable market this year.
Most wireless network providers have seen no incentive to spend more on 5G when their returns to date have been so disappointing. And there is skepticism about the business case for low latency services and network slicing. Telcos increasingly sell large bundles of gigabytes to their customers and have struggled to monetize other features.
References:
https://www.lightreading.com/5g/ericsson-says-world-is-flat-amid-us-gloom-and-keeps-cutting
https://www.ericsson.com/en/press-releases/6/2025/ericsson-edc-advance-canadas-technology-leadership
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