Networks division reports 13% rise in sales thanks to demand from North America, Europe, LatAm

Ericsson on Thursday reported healthy third quarter revenue growth and an improvement in gross margin, thanks to growing 5G demand and the company’s aggressive cost cutting programme.

"There is strong momentum in the global 5G market with lead markets moving forward. The global radio access market is recovering from several years of negative growth and our investments in R&D have positioned us well to benefit from this development," said Ericsson CEO Börje Ekholm, in a statement.

Ericsson’s revenue for the three months to 30 September came in at 53.8 billion kronor (€5.2 billion), up 9% on the same quarter last year. Gross margin expanded to 36.5% from 26.9%, while operating margin improved to 6% from -7.4%. Ericsson swung to a third quarter operating profit of SEK3.2 billion from a SEK3.7 billion operating loss a year earlier, and Q3 net income came in at SEK2.7 billion compared to a net loss last year of SEK3.5 billion.

The improvement in profitability has been helped largely by Ericsson’s aggressive cost-cutting programme, which shaved SEK10 billion off its sales, general and administration expenses as part of an effort to reach a 12% sustainable operating margin by 2020.

Ericsson is also benefiting from a renewed appetite for network equipment.

The Networks division generated SEK35.9 billion of revenue in the third quarter, up 13% year-on-year. The increase was attributed to strong growth in North America and healthy demand in Europe and Latin America, which are investing in LTE upgrades and 5G readiness, Ericsson said.

"We continue to execute on our focused strategy, tracking well towards our 2020 targets," Ekholm said.