From the newsletter (sign-up if you want it sooner): Ericsson’s latest results capture a company and an industry caught between resilience and stagnation: strong margins and disciplined execution offset weak 5G demand, while hopes for growth increasingly rest on AI, automation, standalone 5G, and future network upgrades.
So, it’s a little tough to cover the news, compile the newsletter, and prep and chair a bunch of sessions about quantum-safe networks. So we’re a little short today (Tuesday July 14). But we should probably take a look at these Ericsson figures, briefly, as delivered by outgoing chief Börje Ekholm in his final quarter before handing over to Per Narvinger. Ericsson’s margins are the standout – a 48.4% adjusted gross margin and a 13.1% adjusted EBITA margin. Which says something about cost control and operational discipline. Sales are still under pressure: SEK 52.7bn for revenue, down 6% from SEK 56.1bn a year ago, partly for currency impacts and a “one-off” IPR hit – but down 1% as organic growth anyway. Which tells the story everyone knows: that 5G sales, in all forms, are hard to come by.
There is some growth for the Swedish firm in cloud software and enterprise solutions; the drone sensing demo with AT&T yesterday, like its private-networks push, looks like another decent future gamble. But otherwise, the mobile industry is waiting on full-scale 5G SA, APIs, AI-RAN – and a far-off 6G upgrade cycle that cannot come fast enough. But the interesting thing, of course, is that AI is the opportunity and the problem, right now. Ericsson’s long-term thesis is that AI will create demand for more intelligent mobile access networks – some time after the upgrade work on fixed fiber backhaul and longhaul systems is done. But in the short term, the AI boom is creating supply-chain inflation, particularly around components such as memory and custom chips. Ericsson has warned that it expects to use internal measures and pricing actions to offset these pressures.
The challenge is that Ericsson’s growth narrative still depends on telcos completing a set of unfinished 5G SA upgrades, and making a proper leap on investments in automation and increasingly on autonomy – as the foundation for AI-driven services for the whole economy. Until they do, flat-lining in 5G looks more like a show of fighting spirit, and even of rude health. Which doesn’t much help the industry, of course, or its profile or its shareholders.
