Ericsson came into this earnings print with the stock already grinding higher, up roughly 9% over three months and closing at SEK103.7 on the day of the release. The market had quietly priced in progress. The headline from the numbers is that profit quality is doing the heavy lifting. Net margin over the last year sits at 10.8% compared with 7.0% a year earlier while the P/E around 13.7x still trails both peers and the wider European communications sector. For a telecom gear supplier, that mix of firmer profitability and lower multiple is what moved attention, not just the latest quarter’s sales line.
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Q3 2026 Earnings Summary
- Total Revenue (TTM to Q3 2026): SEK 227,546m vs. SEK 245,864m TTM to Q2 2025 (revenue softened over the period)
- Net Income from Continuing Operations (TTM to Q3 2026): SEK 24,834m vs. SEK 17,603m TTM to Q2 2025 (earnings higher over the period)
- Basic EPS (TTM to Q3 2026): SEK 7.41 vs. SEK 5.19 TTM to Q2 2025 (earnings per share higher over the period)
- Net Profit Margin (TTM to Q3 2026): 10.8% vs. 7.0% a year earlier (profitability ratio improved over the year)
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Ericsson’s Bull Story: Margin Mix And New Engines On Trial
The bullish pitch around Ericsson is simple. Profits are meant to come less from cyclical radio hardware and more from software, enterprise APIs and mission critical networks, with buybacks tightening the share count. Q3 gives partial proof. Networks delivered 9% organic sales growth with a 23.1% EBITA margin and about 50.3% gross margin, which supports the idea that higher quality RAN and software mix can still produce healthy economics even as the wider market stays flat.
The enterprise leg is more of a work in progress. Vonage wins in healthcare and retail and new wallet-led fintech partnerships point in the right direction, yet Enterprise reported an adjusted EBITA loss of SEK 0.5b and only 1% organic sales growth. Cash returns are the cleanest milestone hit so far, with SEK 8b of buybacks and roughly SEK 5b of dividends year to date feeding the per share angle of the thesis.
Reveal where the surface looks calm but the longer term models start to disagree and see what the street is quietly baking in for Telefonaktiebolaget LM Ericsson across the next few years with the analyst estimates for Telefonaktiebolaget LM Ericsson.Ericsson Bear Case: Margin Strain And Enterprise Drag Intact
The bearish line on Ericsson is that rising component costs, weak operator capex and a loss making enterprise arm will slowly chip away at earnings quality. Q3 does not clear that bar. Group adjusted gross margin at about 47.7% and Networks at roughly 50.3% still look healthy, yet diluted EPS dropped 46.9% year on year to SEK 1.77, which shows that margin pressure is already hitting per share profit even with 7% organic sales growth.
Enterprise remains a clear missed milestone. The segment posted an adjusted EBITA loss of SEK 0.5b despite modest organic growth and is now going through restructuring rather than already funding the group. Management itself points to 2027 as a transition year as higher semiconductor prices pass through long contracts, which aligns with bears worried about a lagged cost squeeze on profitability and free cash flow.
After a year where diluted EPS fell sharply despite healthier group margins and Enterprise still burns cash, it is fair to ask whether Telefonaktiebolaget LM Ericsson is quietly accruing deeper structural pressures that do not show up in headline ratios. Review the risk analysis for Telefonaktiebolaget LM Ericsson which shows 1 important warning sign to see whether this unstable dividend record and current segment drag are early signals of broader vulnerabilities.Own Your Next Investing Move
If the mix of firmer profitability and a still discounted P/E on Telefonaktiebolaget LM Ericsson has you interested but not ready to commit, register for free with Simply Wall St and add it to a Watchlist to track price against fair value and watch how the thesis develops. When you decide to take a position, keep control of the story with a Portfolio Command Center that cuts out noise and highlights only the updates that really affect your holdings. For the longer journey, lean on the crowd and use the Community to see how other investors are interpreting the same data and earnings trends. Spot potential catalysts and pressure points early, stay informed, and give yourself a better chance of staying ahead of the market.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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