Quarterly earning increased by gross margins contracted at the Swedish tech giant in Q2 2019

Ericsson met analysts’ expectations when it released its Q2 2019 financial report this week, bringing to an end a series of 5 consecutive better-than-predicted results.

Ericsson’s quarterly earnings stood at SEK54.8 billion ($5.76 billion) for Q2 2019, meeting analysts’ expectations and representing a 10 per cent year on year increase from Q2 2018.

However, the Swedish tech giant saw its gross margin fall from 36.6 per cent in 2018 to 34.8 per cent in Q2 2019.

Perhaps unsurprisingly, Ericsson is pinning its future hopes on its portfolio of global 5G rollouts over the next 18 months.

"5G momentum is increasing. Initially, 5G will be a capacity enhancer in metropolitan areas. However, over time, new exciting innovations for 5G will come with IoT use cases, leveraging the speed, latency and security 5G can provide. This provides opportunities for our customers to capture new revenues as they provide additional benefits to consumers and businesses," said Ericsson’s CEO and president Börje Ekholm.

Ekholm said that the company expected its 5G launch campaigns would initially have a negative affect on operating margins but would strengthen the company’s position over the medium to longer term.

"We continue to take strategic contracts and the large-scale network deployments expected to commence in parts of Asia, will gradually impact margins negatively in the short term but strengthen our position in the long term. Continued technology and market investments, especially in 5G, automation and AI, are fundamental for long-term competitiveness and a key part of our focused strategy to strengthen our long-term business and path to reaching our targets for 2020 and 2022," he said.

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