By Gianluca Lo Nostro
(Reuters) -Ericsson’s first-quarter core earnings trounced analysts’ expectations on Tuesday as North American telecom customers placed more orders for its gear ahead of the impact of potential U.S. tariffs.
Adjusted operating earnings excluding restructuring charges rose 44% year-on-year to 6.2 billion Swedish crowns ($636 million), a nearly 40% beat to the average estimate of 4.44 billion crowns in an LSEG poll of analysts.
The Swedish telecom gear maker has been offsetting lower investments in 5G across Europe by tapping into other regions such as India and the United States.
However, if faced with price increases related to tariffs, telecoms providers might hold off from buying new gear so that they can avoid passing on the costs to end users.
Ericsson’s net sales in the first quarter grew 3% to 55 billion crowns, but missed analysts’ 55.7 billion crown forecast.
Growth in North America, its biggest market accounting for 29% of the group’s revenue, made up for losses in other markets, with sales rising 20% from last year.
The positive earnings surprise should boost sentiment, Danske Bank analyst Mads Lindegaard Rosendal said, but noted this may be tempered by concerns of “pulled-forward demand” ahead of U.S. President Donald Trump’s tariffs.
Ericsson’s shares were up 10% in early Stockholm trading on Tuesday.
“With the current tariffs coming, now we see approximately one percentage point impact on the margin for Q2,” Chief Financial Officer Lars Sandstrom told Reuters in an interview.
Sandstrom added he was not aware of conversations with governments about an exemption from duties.
Ericsson built up some inventory at its sites ahead of the tariffs, but does not expect it to have a big impact on its business going forward, he later said in a call with analysts.
The company also needs to be more active in building a “Western ecosystem” for components suppliers, CEO Borje Ekholm said.
Ericsson employs more than 500 people at its factory in Lewisville, Texas, where it has been producing 5G and advanced antenna system radios since 2020, serving U.S. clients.
It also hosts five research and development centres across four states, with 7,000 U.S. employees in total.
($1 = 9.7479 Swedish crowns)
(Reporting by Gianluca Lo Nostro in Gdansk, additional reporting by Supantha Mukherjee in Stockholm and Elviira Luoma in Gdansk; editing by Milla Nissi)
