Ericsson's second-quarter adjusted profit outperformed market expectations, fueled by robust North American sales and aggressive cost-cutting initiatives. However, the Swedish telecommunications equipment giant revealed that U.S. tariffs hampered its margin expansion, triggering a 3% share price drop during early trading on Tuesday.

Stripping out restructuring expenses, operating profit reached 7 billion Swedish kronor ($728.5 million) – a dramatic reversal from last year's 11.9 billion kronor loss. This result comfortably exceeded the 6.1 billion kronor consensus forecast compiled by LSEG analysts.

"We've fundamentally lowered our cost structure while intensifying operational efficiency efforts," stated Chief Executive Börje Ekholm. Despite this progress, the company flagged U.S. tariffs as a significant constraint on profitability. This challenge emerges against the backdrop of heightened trade tensions, with former U.S. President Donald Trump recently threatening 30% tariffs on EU imports starting August 1.

Chief Financial Officer Lars Sandström detailed mitigation strategies: "With production facilities spanning multiple regions including North America, we're actively rebalancing manufacturing. Still, complete tariff immunity remains elusive." The company's quarterly revenue declined 6% annually to 56.1 billion kronor, missing the 59.3 billion kronor projection due partly to a 4.7 billion kronor currency headwind. Organic sales, however, grew 2%.

North America – Ericsson's largest market – delivered the strongest performance, offsetting sluggishness in India and other regions. Sandström noted sustained U.S. strength stems from mobile carriers' steady infrastructure investments, while anticipating India's imminent recovery. This regional shift boosted gross margins to 47.5%, a notable improvement from 43.1% last year when lower-margin markets like India dominated sales.