Investing.com – Shares of Ericsson ( ST 🙂 fell more than 8% on Friday after the Swedish telecom giant reported disappointing quarterly results, citing sluggish sales in India as a contributing factor.
The company’s adjusted EBITA for the fourth quarter missed analysts’ expectations by 8%, with weak performance in its enterprise and cloud Software (ETR 🙂 and sharing services that compose challenges in the Indian market.
India, a significant growth driver for Ericsson in past quarters, saw its contribution to total group sales shrink to 4% in Q4 from 8% a year earlier.
That decline came despite strong North American sales growth of 70% year-over-year, driven by demand for the network.
However, North American strength has not been enough to offset challenges elsewhere, particularly in markets such as Europe and India, which have struggled to grow.
The company’s total revenue for the quarter was in line with consensus expectations, but a higher-than-expected bonus payout pressured adjusted EBITA margins, which declined 1.2 percentage points compared to consensus.
Gross margins showed a modest improvement, helped in part by one-time intellectual property payments, but operational efficiencies in supply chains were not enough to offset weaker sales growth in several regions.
“Given the new IPR initiation rate, we estimate that the IPR pace was roughly half the IPR revenue and half offset payments,” said analysts at Barclays (Lon 🙂 In the note.
Ericsson’s guidance for the first quarter of 2025 suggests further headwinds, with expected seasonal declines in revenue from both the networks and cloud software and services divisions.
The company also indicated that restructuring costs would remain elevated through 2025, further weighing on profitability.
Barclays assesses a 13% risk to consensus EBITA for Q1 2025, marking operating costs as a critical variable in the company’s financial outlook.
