Ericsson Warns On Growth As US Tariffs And Asia Slowdown Create Uncertainty
Ericsson (NASDAQ: ERIC) reported second-quarter fiscal 2025 results on Tuesday. The stock price dropped after the print.
Ericsson earns most of its revenue by selling network infrastructure, software solutions, and professional services.
The Swedish telecom equipment maker’s sales declined 6% year-over-year (Y/Y) in local currency to 56.13 billion Swedish Krona ($5.80 billion), driven by a 6% decline in Europe, the Middle East, and Africa, a 28% decline in South East Asia, and a 17% decline in North East Asia.
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Lower sales in Global Communications Platform and Technologies and New Businesses were partly offset by organic sales growth in Enterprise Wireless Solutions. The revenue missed the analyst consensus estimate of $5.94 billion.
Organic sales grew by 2%, with 10% growth in the Americas market offset by declines in other market areas.
Adjusted gross margin improved to 48.0% from 43.9% Y/Y, supported by improvements in all segments, despite currency headwinds.
Adjusted EBIT margin was 12.6% versus (19.9)% Y/Y. Adjusted EBITA margin improved to 13.2% from 6.8% a year ago.
Ericsson reported an EPS of SEK 1.37 (14 cents) versus SEK (3.34) Y/Y. It beat the analyst consensus estimate of 12 cents.
Free cash flow before M&A was SEK 2.6 billion in the quarter versus SEK 7.6 billion Y/Y. As of June 30, 2025, net cash stood at SEK 36.04 billion.
Shareholders approved the proposed 2024 dividend of SEK 2.85 per share at the AGM on March 25, 2025. The company will pay the dividend in two installments. It made the first payment of SEK 1.43 per share to shareholders on April 1, 2025, based on the record date of March 27. The second payment of SEK 1.42 per share will follow on October 2, 2025, with a record date of September 29.
Ericsson stock is down 3% year-to-date, lagging the NASDAQ Composite Index’s 7% returns during the period as it grappled with U.S. semiconductor sanctions and tariff policies.
Outlook
Ericsson said increased uncertainty remains on the outlook, both in terms of the potential for further tariff changes and in the broader macroeconomic environment. It expects third-quarter sales growth for Networks to be below the 3-year average seasonality, reflecting higher second-quarter IPR revenue from previously unlicensed periods.
The company expects quarterly Cloud Software and Services sales to resemble the 3-year average seasonality.
Based on its current assessment of announced tariffs, it expects a quarterly adjusted gross margin of 48% to 50% for Networks.
Price Action: ERIC stock was trading lower by 1.91% to $7.69 premarket at last check Tuesday.
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