Ericsson (NASDAQ:ERIC) stock rose Friday after the Swedish telecom giant reported stronger-than-expected fourth-quarter earnings.
Ericsson, which generates the bulk of its revenue from network infrastructure, software solutions, and professional services, reported EPS of 27 cents, beating the analyst consensus estimate of 23 cents.
The company’s reported sales for the quarter were 69.3 billion Swedish Krona ($7.37 billion).
Although this represented a 5% year-over-year (Y/Y) decline, it topped the consensus revenue estimate of $7.03 billion.
Organic sales, which exclude the impact of acquisitions, divestments, and foreign currency fluctuations, rose 6% for the period.
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The Networks division, a core business for the company, saw sales fall by 6%.
The Enterprise segment experienced a steep 25% decline, primarily due to the divestment of iconectiv during the third quarter.
However, this decline was partially offset by a 3% growth in Cloud Software and Services sales.
Within the Networks segment specifically, organic sales decreased by 4%, as sales growth in Europe, the Middle East, and Africa, as well as in South East Asia, Oceania, and India, was partly offset by lower sales in the other market areas.
Cloud Software and Services sales grew by 12%, with growth in all market areas.
Sales in the Enterprise segment grew by 2%, with higher sales in Global Communications Platform offsetting a decline in Enterprise Wireless Solutions.
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The adjusted gross margin improved to 48.0% from 46.3% Y/Y, a gain driven by successful cost-reduction actions and operational efficiency.
This translated down the income statement, where the adjusted EBIT margin improved to 17.7% from 13.1% Y/Y, and the adjusted EBITA margin improved to 18.3% from 14.1% a year ago.
Despite the financial outperformance, free cash flow before M&A was 14.9 billion Swedish Krona in the quarter, down from 15.8 billion Swedish Krona in the prior-year period.
The company’s net cash position stood at 61.2 billion Swedish Krona at year-end 2025.
Börje Ekholm noted that the company delivered organic growth despite a flat RAN market, driven by momentum in mission-critical networks, 5G core, and Enterprise.
