Ericsson’s sales rose for the first time in 8 quarters; mobile networks need an AI boost
Ericsson today said sales in its key networks unit grew 4% in the 4th quarter as contract wins and network investments by some large customers contributed to a 70% jump in North America (NA) sales, but its cloud software and enterprise units both saw sales and earnings decline. Revenue in the NA region rebounded sharply in the third quarter and continued to do so in the fourth quarter, helped by deliveries under a major AT&T “Open RAN” contract that began last year and will continue into 2025. AT&T’s Open RAN plan is for 70% of its wireless network traffic to flow across open-capable platforms by late 2026.
India has largely completed a rapid phase of network upgrades that saw deployments peak in 2023, and operator investments in the country have now normalized, Ericsson said. Total sales rose 1.4% to 72.91 billion kronor, after declining at double-digit rates in both 2023 and 2024.
“The near-term market recovery is in the hands of our customers, but our confidence in the stabilizing market is growing,” Chief Executive Borje Ekholm said on an analyst call Friday. “We are starting to see a change in sentiment.” He later said, “5G has not been built out. If you take the North American market, 5G standalone is not rolled out [1.]. London in Europe has very limited buildout. Most of the time when you get the 5G icon on your phone, you are basically on dynamic spectrum sharing using 4G spectrum.”
Note 1. Not true. Both T-Mobile and Dish Network have deployed 5G SA networks.
“I think the whole world is moving from a cost-optimized supply chain to resilience. You need to factor in resilience in the supply chain and that is why we built a US factory, and we are investing to increase capacity in the U.S. as well,” said Ekholm.
On that analysts call, Chief Financial Officer Lars Sandstrom said the company has production in North America, Latin America, Europe, Asia and India, so it has the opportunity to move production between different sites depending on President Trump’s plans. “Of course tariffs could have an impact going into 2025, but I think we’re all waiting a little bit to what is going to happen there,” he said, adding that there might also be tariff exemptions for critical products.
Ericsson said restructuring charges rose to 1.6 billion kronor in the quarter, mainly related to redundancies, efficiency measures and right-sizing operations to align with lower demand in some markets. The company said that restructuring charges for 2025 are expected to remain at elevated levels. Indeed, Ericsson has heavily cut costs, eliminating 9,400 “internal and external” jobs in 2024. The net reduction leaves the company with 94,236 employees, down from 99,952 a year earlier and more than 111,000 back in 2017, when Ekholm first took charge. Over this period, it has retreated from various activities in TV and cloud hardware to concentrate on 5G, although its $6.2 billion takeover of Vonage in 2022 brought additional staff into the business.
Ekholm acknowledged what IEEE Techblog readers already know – that mobile network data traffic growth has slowed down, which reduces demand for Ericsson’s products. Ericsson’s response has included putting heavy emphasis on the concept of programmability, whereby 5G networks could be dynamically adapted to support different services and scenarios, including artificial intelligence (AI) applications.
“The network needs to be prepared for the AI traffic,” said Ekholm. “It’s going to require more uplink. It’s going to require a different performance of the network. That, I think, may be more important in the next few years as a traffic definition. So yes, overall traffic is probably going to continue to taper down. But I think the demand coming from the new applications on top will materially impact the way you need to invest in the network.” However, that AI RAN initiative is in its infancy and yet to be commercially deployed.
References:
https://www.lightreading.com/5g/ericsson-boosted-by-us-but-axed-9-400-jobs-last-year
https://about.att.com/story/2023/commercial-scale-open-radio-access-network.html