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Ericsson (NASDAQ:ERIC) reported what management described as a strong finish to 2025, highlighting continued margin expansion, disciplined cost actions, and a strengthened balance sheet in its fourth-quarter earnings call.
Management highlights: margin expansion and a stronger balance sheet
CEO Börje Ekholm said Ericsson “expanded EBITDA margins year-on-year for the ninth consecutive quarter” and is getting closer to its long-term target of 15%–18% EBITDA margin. Ericsson posted an 18% EBITDA margin in Q4 and for the full year, Ekholm noted, and ended the year with a net cash position of more than SEK 61 billion.
Q4 and full-year financial performance
CFO Lars Sandström said fourth-quarter net sales were SEK 69.3 billion, with organic sales growth of 6% year-over-year and growth across all segments. Reported sales declined 5% due to a negative currency effect of SEK 6.8 billion. Adjusted gross margin reached 48%, supported by cost reduction measures and “operational excellence” in both Networks and Cloud Software and Services.
Sandström reported adjusted EBITDA of SEK 12.7 billion for the quarter, up SEK 2.4 billion year-over-year despite a negative currency impact of SEK 2.5 billion. Q4 adjusted EBITDA margin increased by around four percentage points to 18.3%.
For the full year, net sales totaled SEK 236.7 billion, and organic sales grew 2%. Reported sales decreased 5% due to a negative currency effect of SEK 13.9 billion. Adjusted gross margin was 48.1%, and adjusted EBITDA increased to SEK 42.9 billion, with a margin of 18.1% (or 14.9% excluding the capital gain from iconectiv). Full-year net income was SEK 28.7 billion, which included the iconectiv gain.
Segment trends: Networks, Cloud Software and Services, and Enterprise
In Networks, Q4 sales were SEK 44.2 billion, down 6% reported, reflecting a negative currency impact of SEK 4.4 billion. Organic sales increased 4%. Sandström cited organic growth in Europe, Middle East and Africa (driven by the Middle East and Africa) and in Southeast Asia (driven by Vietnam), while sales declined slightly in the Americas due to continued price competition in Latin America. North America was “broadly stable” with what he called continued healthy investment levels, and Northeast Asia declined due to timing of investments. Networks’ adjusted gross margin increased to 49.6%, and segment adjusted EBITDA was stable at SEK 10.1 billion; adjusted EBITDA margin rose to 22.8%.
Cloud Software and Services sales increased 3% reported to SEK 20.0 billion, despite a negative currency impact of SEK 1.8 billion. Organic sales grew 12%, driven primarily by higher core sales across market areas and timing of project deliveries. The segment’s adjusted gross margin improved to 44.3%, and adjusted EBITDA rose to SEK 3.7 billion, representing an 18.6% margin. On a full-year basis, Sandström said Cloud Software and Services reached new highs for both adjusted gross margin (43%) and adjusted EBITDA margin (11.4%).
In Enterprise, sales stabilized on an organic basis in Q4 with 2% organic growth, while reported sales declined 25% due to the iconectiv sale and currency. The Global Communications Platform grew 3% organically, helped by expansion in CPaaS. Adjusted gross margin declined to 52.1% due to the iconectiv divestment. Adjusted EBITDA was minus SEK 1.1 billion, improving by SEK 0.1 billion year-over-year, despite what Sandström described as a high restructuring impact.
Strategy: growth areas tied to 5G standalone, mission critical, APIs, and defense
Ekholm said the underlying mobile networks demand environment remains “flattish,” but described Q4’s 6% organic growth as evidence that Ericsson’s investments in growth initiatives—such as 5G Core, Mission Critical Networks, and enterprise—are beginning to contribute more meaningfully.
He argued that evolving AI use cases will increase demand for uplink capacity, low latency, and trusted connectivity, and that “best effort connectivity” including Wi‑Fi and 5G non-standalone will not be sufficient for many future applications. Ekholm pointed to the need for broader 5G standalone adoption and, eventually, 6G, alongside better mid-band coverage.
On commercial momentum, Ekholm said Ericsson signed agreements with “frontrunner” customers including Telstra and Vodafone and made “critical inroads” in Japan with all leading operators. He also pointed to fixed wireless access as the most mature new use case, noting that global subscribers reached 150 million during 2025.
Ekholm said Mission Critical applications are gaining traction and represent a “key growth opportunity,” citing new public safety agreements and efforts to target national security and defense operations. In Network APIs, he said the market is developing, highlighting that Vonage was first to offer aggregated access to Network APIs across all three major U.S. carriers in 2025, including fraud detection capabilities. He added that Aduna has onboarded and achieved full coverage in five countries: the U.S., Spain, Germany, Canada, and the Netherlands.
On defense, Ekholm said Ericsson expects to increase related R&D investment in 2026, citing increased defense spending in the U.S. and Europe and a shift toward 3GPP-enabled solutions. He also referenced sensing-related opportunities such as drone detection. He said these investments are not expected to be material relative to Ericsson’s overall R&D spend and that CapEx needs are “very, very limited.”
Capital allocation, shareholder returns, and outlook
Ericsson reiterated its capital allocation priorities: maintain technology leadership through continued R&D investment, support a stable-to-progressive dividend, remain selective with inorganic investments, and distribute excess cash to shareholders. Ekholm said the company does not see a need for large acquisitions, though it may pursue smaller tuck-in deals.
The board is proposing an increased dividend of SEK 3 per share and a share buyback program of up to SEK 15 billion, totaling approximately SEK 25 billion in shareholder distributions. Management described this as the largest shareholder distribution in Ericsson’s history, reflecting confidence in the company’s financial position and strategy. Sandström said the company remains committed to maintaining an investment-grade credit rating and a solid net cash position.
On outlook, Sandström said global uncertainty remains, including potential tariff changes and macroeconomic factors, while the company’s outlook assumes stable exchange rates and no tariff changes. For Networks, Ericsson expects Q1 sales growth to be broadly in line with the three-year average quarter-on-quarter seasonality, with Networks’ adjusted gross margin in a range of 49%–51%. For Cloud Software and Services, Q1 sales growth is expected to be below the three-year average quarter-on-quarter seasonality, with management noting project-delivery lumpiness and a significant year-over-year currency headwind in Q1.
Ekholm said Ericsson is planning for a “flattish RAN market” in 2026, while expecting growth from new areas. He added that ongoing operational efficiency efforts are intended to support both margin and cash flow while enabling increased R&D investments in areas such as defense and mission critical solutions.
About Ericsson (NASDAQ:ERIC)
Ericsson AB is a Swedish multinational telecommunications equipment and services company headquartered in Stockholm. Founded in 1876 by Lars Magnus Ericsson, the company designs, develops and sells infrastructure, software and services that enable mobile and fixed-line networks worldwide. Ericsson serves a global customer base that includes mobile network operators, enterprise customers and public-sector organizations across Europe, the Americas, Asia-Pacific, the Middle East and Africa.
The company’s core activities center on building and modernizing network infrastructure, with a particular focus on radio access networks (RAN), core network software, cloud-native solutions and network management systems.
