Ericsson Q3 Earnings Beat Estimates Despite Lower Revenues

Ericsson ERIC reported mixed third-quarter 2025 results, with adjusted earnings beating the Zacks Consensus Estimate but revenues missing the same. ERIC’s top line was affected by weakness in the South East Asia, Oceania and India regions. Focus on improving operational efficiency, cost optimization and a robust portfolio boosted the gross margin.Net IncomeEricsson recorded a net income of SEK 11.3 billion ($1.19 billion) or SEK 3.33 (35 cents) per share against a loss of SEK 3.9 billion or SEK 1.14 per share in the prior-year quarter. Capital gain from iconective disinvestment boosted the bottom line. Adjusted earnings were 16 cents, which beat the Zacks Consensus Estimate of 13 cents.Ericsson Price, Consensus and EPS Surprise Ericsson price-consensus-eps-surprise-chart | Ericsson QuoteRevenuesEricsson generated SEK 56.2 billion ($5.8 billion) in revenues, down 9% year over year. Weakness in South East Asia, Oceania and India impacted the sales growth. The line missed the Zacks Consensus Estimate of $5.89 billion.Segment ResultsNetworks segment generated SEK 35.4 billion ($3.72 billion), down 11% from the year-ago quarter’s tally of SEK 40 billion. The top line missed our revenue estimate of SEK 36.6 billion. The segment’s gross margin improved to 50% from 48.3% in the year-ago quarter. It benefited from cost reduction and improved operational efficiency. Sales declined in the Americas, South East Asia, Oceania and India. Sales growth in Japan, Europe, the Middle East and Africa partially reversed this trend.Cloud Software and Services revenues increased 3% year over year to SEK 15.3 billion ($1.6 billion), slightly beating our estimate of SEK 14.5 billion. Gross margin improved to 42.1% from 37% in the prior-year quarter. Sales grew in multiple regions.Enterprise segment generated SEK 5.1 billion ($536 million), down 20% from the year-ago quarter’s tally of SEK 6.3 billion, owing to declining sales in the Global Communication Platform and disinvestment of iconective. Net sales missed our revenue estimate of SEK 5.56 billion. Adjusted gross margin was 51.6% compared with 52.4% in the year-ago quarter.Other revenues were SEK 0.4 billion ($42 million), matching the figure of the prior-year quarter.Region-wise, South-East Asia, Oceania and India registered revenues of SEK 7.1 billion ($746 million), down from SEK 7.7 billion in the prior-year quarter. Revenues from North East Asia decreased 4% year over year to SEK 3.8 billion ($399 million). Net sales from the Americas were 19.8 billion ($2.08 billion), down 15% year over year.Europe, Middle East and African markets witnessed a 1% year-over-year decline to SEK 16.72 billion ($1.75 billion). Revenues from other regions increased to SEK 8.8 billion ($1 billion) from SEK 10.1 billion in the prior-year quarter.Other DetailsGross income, excluding restructuring charges, declined to SEK 26.8 billion ($3 billion) from the year-ago figure of SEK 28.2 billion. Adjusted gross margin was 48.1% compared with 46.3% in the year-earlier quarter.Cash Flow and LiquidityEricsson generated SEK 7.9 billion ($830 million) cash from operating activities during the quarter. As of Sept. 30, 2025, the company had net cash of SEK 51.9 billion ($5.51 billion) and SEK 19.3 billion in liabilities for post-employment benefits.OutlookFor the fourth 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 49-51%. 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 #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 82.47%. 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.Corning Incorporated GLW currently carries a Zacks Rank #2. In the last reported quarter, it delivered an earnings surprise of 5.26%.Corning’s competitive strength lies in its focus on innovation. The growing adoption of innovative optical connectivity products for generative AI applications is expected to be a key growth driver in its Optical Communication segment. Some of its businesses stand to benefit from government regulations. For example, the fiber optic business is a direct beneficiary of the government-mandated bridging of the digital divide across the United States.Celestica CLS carries a Zacks Rank #2 at present. In the last reported quarter, it delivered an earnings surprise of 12.1%. CLS delivered an earnings surprise of 7.71%, on average, in the trailing four quarters. The growing proliferation of AI-based applications and generative AI tools across industries presents a solid growth opportunity for Celestica. In addition, a diligent focus on product diversification and increasing its presence in high-value markets is a tailwind.Zacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>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 Corning Incorporated (GLW): Free Stock Analysis Report Celestica, Inc. (CLS): 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