MW Ericsson's stock rallies as bears surprised by earnings beat and positive guidance

By Jules Rimmer

Bearish sentiment toward the stock likely contributed to the sharp spike in the share price Tuesday

Ericsson's earnings beat estimates, triggering a sharp rally in the stock.

The third-quarter earnings of Ericsson (SE:ERIC.B), better known simply as Ericsson, exceeded consensus expectations, triggering a 14% jump in the price of the more liquid and actively traded B shares, and will most likely persuade analysts to up their profit forecasts for the remainder of 2025 and into 2026. Suggestions from Chief Executive Borje Ekholm that there may be "scope for increased shareholder distributions" - meaning higher dividends or share buybacks - were also welcomed.

Net profits at 11.15 billion Swedish krona were 11% ahead of analysts polled by FactSet.

JPMorgan and UBS assessed the latest set of results from the Swedish telecom and software-services provider, which reported Tuesday morning. Taking into account these figures and management guidance, JPMorgan said it anticipates low-single-digit upgrades to estimates for the stock. It has a neutral rating on the stock with a target price of SEK 93. That offered plenty of upside before this morning's sudden reappraisal of prospects by traders.

UBS, meanwhile, has been bearish on the stock, reflected by a sell recommendation and target price of just SEK 57.00 - some 30% below current levels on the stock in the market. However, UBS noted "strong execution continues" and cited management flagging that "operational excellence and cost efficiency actions (are) driving gross margins to strong, sustainable levels." Based on these numbers and the commentary, UBS said it expects analysts' 2025 and 2026 earnings-per-share estimates to be updated and improved gradually by low-to-mid single digits.

CEO Ekholm noted a one-off gain of SEK 7.6 billion (roughly $800 million) from the sale of Iconectiv, a connectivity-services business, and mentioned that cost-savings initiatives were enhancing profitability. Gross margins of 50.1% just beat the 48%-50% guidance. Ekholm predicted a fourth-quarter performance broadly in line with the past three years.

JPMorgan analysts, led by Sandeep Deshpande, attributed the bulk of the earnings beat to strong performance and better margins in the Cloud Software and Services division, leading to an overall improvement in earnings before interest, taxes and amortization that was 5.3% ahead of consensus.

UBS analyst Francois-Xavier Bouvignies observed that the group's best areas for revenue growth were northeast Asia, up 10%, and Europe, up 3% - but a decline in revenue across the Americas of 8% was the weak spot. This was explained by Ekholm as a reflection of an unfavorable year-over-year comparison after a major deal with AT&T $(T)$ in 2024.

Even after Tuesday's jump in trading and 25% rally in the last three months, Ericsson B shares are essentially unchanged on the year. Uncertainty around the tariff regime and the overall growth environment globally caused a major slump in the share price from SEK 90 to 70 in April.

Sentiment toward the stock, as today's price spike suggests, was relatively downbeat. Of the two dozen or so analyst recommendations on FactSet, only a quarter gave Ericsson B shares a buy or equivalent, while the majority were hold calls. The average target price of SEK 79.95 is more than 10% below the market price. The U.S.-listed ADRs $(ERIC)$ were trading up 14% in premarket trading.

-Jules Rimmer

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October 14, 2025 07:38 ET (11:38 GMT)

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