Stockholm Bullets: Ericsson Surges on Earnings Beat, Profoto Plummets After Profit Warning

The Nordic tech sector has long been a battleground for contrarian investors, where market overreactions to earnings surprises and profit warnings can create asymmetric opportunities. This week, two Swedish titans-Ericsson and Profoto-exemplified this dynamic. Ericsson defied expectations with a blockbuster Q3 2025 earnings report, while Profoto's profit warning sent its shares into a tailspin. For investors willing to look beyond short-term noise, these moves highlight contrasting paths in the region's innovation-driven landscape.

Ericsson: A Contrarian's Dream in Disguise

Ericsson's Q3 2025 results, released on October 14, 2025, were a masterclass in operational resilience, according to Ericsson's press release. Despite a 9% year-over-year decline in net sales to SEK 56.2 billion, the company's adjusted EBITA soared to SEK 15.8 billion, with a margin of 28.1%-a 104% increase compared to Q3 2024. This was driven by aggressive cost-cutting, operational efficiencies, and a SEK 7.6 billion capital gain from the sale of its iconectiv business. CEO Börje Ekholm emphasized that gross margins had reached "strong sustainable levels," with free cash flow before M&A hitting SEK 6.6 billion, a detail highlighted in a Morningstar report.

Yet, the stock closed at $8.17 on October 14, down 0.85% from the previous day, according to MarketBeat's earnings calendar. This muted reaction, despite beating earnings estimates, suggests the market is fixated on the sales decline rather than the underlying profitability. Contrarian investors, however, should note Ericsson's robust cash position (SEK 51.9 billion in net cash) and hints of increased shareholder distributions, as reported by Reuters. With 5G infrastructure demand surging globally and Ericsson reaffirming its leadership in Gartner and Omdia rankings, the stock's short-term dip may present a buying opportunity for those who value long-term operational strength over transient revenue fluctuations.

Profoto: A Cautionary Tale of Market Overreaction

On the same day Ericsson impressed, Profoto delivered a profit warning that sent its shares tumbling. The company reported Q3 2025 net sales of SEK 119 million-a 27.5% year-over-year decline-and an adjusted EBIT of SEK -10 million, with a margin of -8.4%, according to a Profoto announcement. Weak demand in the US and EMEA, coupled with rising tariffs and currency headwinds, painted a grim picture. The stock price dropped 19.53% to 13.60 SEK, trading near its 52-week low, per Investing.com.

While the short-term pain is evident, Profoto's strategic pivot to LED lighting and a 20% cost-cutting plan could be catalysts for recovery. The company's new B20 and B30 flash units, along with three LED products launching in Q4 2025, signal a bid to capture emerging markets, as noted in an Investing.com article. Management also plans to reduce R&D spending from 20% to 10% of sales by year-end, a move that, if executed well, could stabilize margins by 2026. For contrarians, the key question is whether the market has priced in all the negatives-or if the stock's 64% decline from long-term highs represents a mispricing opportunity. The stock's 98.53% projected upside from current levels (based on analyst price targets) implies significant volatility but also potential for a rebound, according to the Investing.com consensus.

Conclusion

The Nordic tech sector's duality-Ericsson's resilience versus Profoto's struggles-underscores the importance of separating signal from noise. For contrarians, Ericsson's earnings beat and cash fortifications warrant a closer look, while Profoto's discounted valuation offers a high-risk, high-reward proposition. As always, the key lies in assessing whether the market's reaction aligns with the fundamentals-or if it's time to take the opposite side of the trade.