Ericsson (NASDAQ: ERIC) shares surged sharply on Tuesday after the Swedish telecom and software services provider posted quarterly earnings that exceeded analyst expectations.
The company’s stronger-than-expected third-quarter results, combined with management’s upbeat outlook and comments on shareholder returns, drove a rally of nearly 20% in its US-listed shares.
The company’s B shares (SE:ERIC.B), which are more actively traded in Sweden, climbed 18% to SEK 91.94, marking one of the stock’s strongest single-day gains this year.
Ericsson reported net profits of 11.15 billion Swedish krona, beating analysts’ estimates by 11%, according to FactSet data.
CEO Borje Ekholm suggested there may be “scope for increased shareholder distributions,” signaling potential for higher dividends or share buybacks.
Investors appeared to welcome that remark, especially following a challenging year for the telecom sector.
Despite recent volatility in global markets, Ekholm said the company’s cost-saving initiatives and operational efficiencies were driving improved margins and profitability.
Analysts anticipate upgrades to forecasts
Following the earnings announcement, several analysts hinted that the company’s better-than-expected performance could lead to upward revisions to profit forecasts for 2025 and 2026.
JPMorgan analysts, led by Sandeep Deshpande, noted that the results and management commentary pointed to possible low-single-digit upgrades to earnings estimates.
The bank maintained a neutral rating on Ericsson with a target price of SEK 93, suggesting modest upside potential prior to Tuesday’s sharp rally.
UBS, which has maintained a sell recommendation with a target price of SEK 57, acknowledged the company’s strong execution and progress on operational excellence.
The bank highlighted that cost-efficiency actions were helping push gross margins to “strong, sustainable levels.”
Based on the latest figures, UBS expects analysts’ earnings-per-share estimates for 2025 and 2026 to be revised upward by low-to-mid single digits.
Ekholm also disclosed a one-time gain of SEK 7.6 billion (approximately $800 million) from the sale of Iconectiv, a connectivity-services business.
Gross margins reached 50.1%, slightly above the company’s guidance range of 48% to 50%.
The CEO forecasted a fourth-quarter performance roughly in line with recent years, suggesting continued stability in the near term.
Regional trends and market sentiment
Ericsson’s cloud software and services unit contributed significantly to the earnings beat, with JPMorgan attributing much of the outperformance to higher margins in that segment.
UBS analyst Francois-Xavier Bouvignies observed that the company saw its strongest regional growth in northeast Asia, up 10%, followed by Europe, which rose 3%.
However, revenue across the Americas declined 8%, which management attributed to an unfavorable year-over-year comparison following a major AT&T (NYSE: T) deal in 2024.
Despite the rally, Ericsson’s stock remains largely flat for the year after earlier declines caused by concerns over tariffs and global growth uncertainty.
Shares had slumped from SEK 90 to around SEK 70 in April amid worries about trade tensions and slowing demand.
Market sentiment toward Ericsson has been cautious.
Of roughly two dozen analyst ratings tracked by FactSet, only a quarter rate the stock a “buy” or equivalent, while most maintain a “hold” stance.
The average target price of SEK 79.95 remains more than 13% below the current market level, reflecting lingering skepticism even after Tuesday’s surge.
Still, with improved margins, strong regional performance in Asia and Europe, and growing optimism about shareholder returns, Ericsson’s latest results have given investors a reason to reconsider the stock’s long-term potential.
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