Ericsson's US Clients Accelerate Purchases In Q1 Ahead of Tariffs, Eyes Solid Q2 Despite Global Uncertainty

Ericsson (NASDAQ: ERIC) reported first-quarter fiscal 2025 results on Tuesday. The stock price gained after the print.

The Swedish telecom equipment maker’s sales grew 3% year-over-year to 55.0 billion Swedish Krona ($5.15 billion), driven by 20% growth in the Americas market. The revenue beat the consensus of $5.10 billion.

Organic sales were stable, with strong growth in the Americas market offset by declines in other market areas.

Also Read: Ericsson Accelerates 5G Growth in India with Bharti Airtel Deal

Adjusted gross margin improved to 48.5% from 42.7% Y/Y, driven primarily by improved gross margin in Networks.

Adjusted EBIT margin was 11.3% versus 8.1% Y/Y. Adjusted EBITA margin improved to 12.6% from 9.6% a year ago.

Ericsson reported an EPS of SEK 1.24 ($0.12) versus SEK 0.77 Y/Y. It beat the consensus of $0.09.

Free cash flow before M&A was SEK 2.7 billion in the quarter. As of March 31, 2025, net cash stood at SEK 38.6 billion.

Dividend: The board approved the 2024 proposed dividend of SEK 2.85 per share on March 25. The company will pay the dividend in two installments of SEK 1.43 per share and SEK 1.42 per share.

Outlook: Ericsson expects second-quarter sales growth for Networks and Cloud Software and Services to be similar to the 3-year average seasonality.

Based on its current assessment of announced tariffs, it expects second-quarter adjusted gross margin for networks of 48% % to 50%.

Ericsson remains confident in its strong position in Mobile Networks and expects Enterprise to stabilize in 2025.

Bloomberg’s Matthew Bloxham expects Ericsson to tackle global tariff storms better than analysts’ expectations via cost-cutting tailwinds, preemptive U.S. inventory restocking, and limited exposure to China-sourced components.

While North America accounted for about 30% of the company’s revenue in 2024, Bloomberg cited Ericsson’s 2024 annual report as citing the company’s diversification of its supply chain. The company is building a factory in Texas to produce 5G equipment for U.S. customers.

Morgan Stanley’s Sandeep Deshpande told Bloomberg that Ericsson’s U.S. business strength was partially driven by customers “buying products in anticipation of tariffs.

Price Action: ERIC stock is up 8.66% at $8.09 at the last check on Tuesday.

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