Ericsson (ERIC) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered strong gross margin expansion to 43.9%, supported by cost reduction actions, IPR revenue, and a competitive technology portfolio, despite a 7% sales decline and challenging market conditions.

• North America returned to growth, with organic sales up 14–20%, while other regions, including Europe, Latin America, Southeast Asia, Oceania, India, Northeast Asia, Middle East, and Africa, saw sales declines due to increased competition and macro pressures.

• Recorded a SEK 11.4b impairment mainly related to Vonage, reflecting lower anticipated market growth rates in that portfolio, resulting in a net loss of SEK -11.0b.

• New 5G licensing and patent agreements contributed positively, with IPR revenue on track for SEK 12–13b in 2024.

• Strategy execution remains focused on strengthening Mobile Networks, expanding Enterprise, and progressing the Global Network Platform for network APIs.

Financial highlights

• Net sales were SEK 59.8b in Q2 2024, down 7% year-over-year; organic sales also declined 7%.

• Adjusted gross margin rose to 43.9% (from 38.3% a year ago), benefiting from cost actions and strong IPR revenue.

• Adjusted EBITA increased to SEK 4.1b (margin 6.8%), up 10% year-over-year.

• Free cash flow before M&A was SEK 7.6b, driven by improved working capital and inventory reduction.

• Net cash increased sequentially by SEK 2.3b to SEK 13.1b at the end of Q2.

Outlook and guidance

• Q3 expected to follow normal seasonality, with continued growth in North America but overall challenging market conditions; Networks Q3 gross margin guided at 45–47%.

• Restructuring charges for 2024 expected at SEK 3.0–4.0b.

• No guidance provided beyond Q3 due to market uncertainties.

• IPR revenue run rate at SEK 12b, with full-year target of SEK 12–13b reaffirmed.

• Global RAN market forecast to decline 5–8% in 2024; North America expected to grow 5–15%.