Ericsson Q1 Earnings Surge 24% on 5G Demand, Warns of Tariff Impact

Ericsson, the Swedish telecommunications giant, reported first-quarter earnings that exceeded market expectations, driven by increased global demand for 5G equipment from mobile operators. The company's strong performance was attributed to the surge in 5G infrastructure investments, which boosted its profitability.

According to the financial report, Ericsson's adjusted EBIT for the first quarter reached 62.1 billion Swedish kronor (approximately $6.36 billion), significantly surpassing the average analyst expectation of 50 billion Swedish kronor. The adjusted gross margin for the quarter also rose to 48.5%, higher than the anticipated 45.9%.

The company warned that tariff policies could negatively impact its network business by approximately one percentage point. It also forecasted that the adjusted gross margin for the second quarter would remain within the range of 48% to 50%.

Börje Ekholm, Ericsson's CEO, stated, "Amid the evolving global trade landscape and macroeconomic fluctuations, we remain focused on controlling what we can and meeting customer demands. While we cannot entirely avoid risks, our diverse production bases close to customers and flexible adaptability demonstrate our strong resilience."

Over the past two years, Ericsson and its Nordic competitor Nokia have faced pressure as telecom operators delayed their 5G network upgrade plans. Although the 5G deployments in markets like India brought some highlights in 2022, geopolitical uncertainties and tariff barriers are constraining industry growth.

Following the recent imposition of additional tariffs by the United States, Ericsson's stock price experienced a significant decline of 15%. While the North American market accounts for approximately 30% of Ericsson's 2024 revenue, Ekholm emphasized in the annual report that the company is mitigating potential risks through a supply chain diversification strategy. This includes establishing a new 5G equipment factory in Texas to ensure supply for American customers.