Ericsson Q2 Earnings Beat Estimates on Healthy Licensing Revenue

Ericsson ERIC reported mixed second-quarter 2025 results, with adjusted earnings beating the Zacks Consensus Estimate but revenues missing the same. Despite healthy traction in the Networks Segment in the Americas, ERIC’s top line was affected by weakness in the South East Asia, Oceania and India regions. Higher IPR licensing revenues, cost optimization and a robust portfolio boosted the gross margin.Net IncomeEricsson recorded a net income of SEK 4.6 billion ($476 million) or SEK 1.37 (14 cents) per share against a loss of SEK 11 billion or SEK 3.34 per share in the prior-year quarter. Adjusted earnings beat the Zacks Consensus Estimate of 2 cents.Ericsson Price, Consensus and EPS Surprise Ericsson price-consensus-eps-surprise-chart | Ericsson QuoteRevenuesEricsson generated SEK 56.1 billion ($5.8 billion) in revenues, down 6% year over year. However, sales improved 2% on an organic basis. Weakness in South East Asia, Oceania and India impacted the sales growth. The line missed the Zacks Consensus Estimate of $5.94 billion.Segment ResultsNetworks segment generated SEK 35.7 billion ($3.67 billion), down 5% from the year-ago quarter’s tally of SEK 37.7 billion. The top line missed our revenue estimate of SEK 42 billion. The segment’s gross margin improved to 49.5% from 46.1% in the year-ago quarter. It benefited from higher licensing revenue, cost reduction and market mix. Higher tariffs have hindered growth to some extent. Sales declined in Latin America, South East Asia, Oceania and India, partially reversing this trend.Cloud Software and Services revenues declined 5% year over year to SEK 14.4 billion ($1.49 billion), slightly missing our estimate of SEK 14.7 billion. Gross margin improved to 43.2% from 37.2% in the prior-year quarter. Increased IPR licensing revenues, commercial discipline and improvement in delivery performance propelled the gross margin.Enterprise segment generated SEK 5.5 billion ($569 million), down 14% from the year-ago quarter’s tally of SEK 6.5 billion, owing to declining sales in the Global Communication Platform and Enterprise Wireless solutions. Net sales beat our revenue estimate of SEK 3.05 billion. Adjusted gross margin was 54.9% compared with 51.1% in the year-ago quarter.Other revenues were SEK 0.5 billion ($52 million), matching the figure of the prior-year quarter.Region-wise, South-East Asia, Oceania and India registered revenues of SEK 5.5 billion ($569 million), down from SEK 7.7 billion in the prior-year quarter. Revenues from North East Asia decreased 17% year over year to SEK 3.8 billion ($393 million). Net sales from the Americas were 19.8 billion ($2.04 billion), matching the prior-year quarter’s figure. Europe, Middle East and African markets witnessed a 6% year-over-year decline to SEK 16.2 billion ($1.67 billion). Revenues from other regions increased to SEK 10.9 billion ($1.13 billion) from SEK 10.5 billion in the prior-year quarter.Other DetailsGross income, excluding restructuring charges, improved to SEK 27 billion ($2.79 billion) from the year-ago figure of SEK 26.3 billion, driven by solid sales growth. Gross margin, excluding restructuring charges, was 48% compared with 43.9% in the year-earlier quarter.Cash Flow and LiquidityEricsson generated SEK 4.2 billion ($434 million) cash from operating activities during the quarter. As of June 30, 2025, the company had net cash of SEK 36.04 billion ($3.8 billion) and SEK 24.9 billion liabilities for post-employment benefits.OutlookFor the third quarter of 2025, revenues from the Networks, Cloud Software and Services segment are expected to be broadly similar to the three-year average seasonality. The gross margin in the Networks segment is likely to be in the range of 48-50%. Amortization of intangible assets is forecasted to be around SEK -0.5 billion per quarter, of which approximately SEK -0.4 billion is related to the Enterprise segment. Restructuring charges are projected to remain at elevated levels.ERIC’s Zacks Rank & Stocks to ConsiderEricsson currently has a Zacks Rank #3 (Hold).Ubiquiti Inc. UI has a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.In the last reported quarter, it delivered an earnings surprise of 61.29%. Ubiquiti spends significantly on research and development (R&D) activities for developing innovative products and state-of-the-art technology to expand its addressable market and remain at the cutting edge of networking technology. The company believes its new product pipeline will help it increase average selling prices for high-performance, best-value products, thus raising the top line. Ubiquiti is witnessing healthy traction in the Enterprise Technology segment.Jabil, Inc. JBL currently sports a Zacks Rank #1. In the last reported quarter, it delivered an earnings surprise of 9.44%.Jabil’s focus on end-market and product diversification is a key catalyst. The company’s target that “no product or product family should be greater than 5% operating income or cash flows in any fiscal year” is commendable. This initiative should position Jabil well on the growth trajectory. HubSpot Inc. HUBS sports a Zacks Rank #1 at present. In the last reported quarter, it delivered an earnings surprise of 2.3%. HubSpot delivered an earnings surprise of 10.65%, on average, in the trailing four quarters. It is benefiting from growing user engagement across all segments. Pricing optimization and the transition to a seat pricing model are expected to drive customer growth. HubSpot is benefiting from growing user engagement across all segments. Pricing optimization and the transition to a seat pricing model are expected to drive customer growth.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent. Thousands have taken advantage of this opportunity.Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators, and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ericsson (ERIC): Free Stock Analysis Report Jabil, Inc. (JBL): Free Stock Analysis Report HubSpot, Inc. (HUBS): Free Stock Analysis Report Ubiquiti Inc. (UI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks