Ericsson, one of the leaders in the telecom network market, has reported 9 percent drop in sales to SEK 64.4 billion during the second quarter of 2023.
Today, Nokia said it is expecting flat growth in Q2 2023 to EUR 5.7 billion with an operating margin of 11 percent due to tough market conditions.
Ericsson said it generated revenue of SEK 42.4 billion (–13 percent) from Networks, SEK 15.1 billion (+8 percent from Cloud Software and Services and SEK 6.4 billion from Enterprise.
Ericsson generated revenue of SEK 13.8 billion (+71 percent) from South East Asia, Oceania and India; SEK 5.1 billion (–32 percent) from North East Asia; SEK 14.4 billion (–42 percent) from North America; SEK 16 billion (–3 percent) from Europe and Latin America; and SEK 5.3 billion (–4 percent) from Middle East and Africa in Q2 2023.
“Building on our strong position and despite challenging market conditions we delivered a solid quarter meeting expectations. We continue to execute with discipline and focus without losing sight of the long term,” Borje Ekholm, President and CEO of Ericsson, said.
For Q3, Ericsson expects similar market mix and trends as in Q2. Q3 will benefit from an early impact of strong focus on cost-out execution. Q3 EBITA margin will be in line with or slightly higher than Q2, followed by a seasonally stronger Q4.
Ericsson feels the heat
Networks sales declined 13 percent. Ericsson Networks business accounted for 66 percent (74 percent) of Group sales.
Ericsson said networks sales doubled in South East Asia, Oceania and India while it declined in the other market areas, especially in North America where telecom operator customers have lowered their Capex spend and reduced inventory levels following high investment levels in 2021 and 2022.
Ericsson said Cloud Software and Services sales grew 1 percent, including 10 percent sales growth in North America. Sales in the quarter were supported by higher sales of 5G and IPR licensing revenues. Cloud Software and Services accounted for 23 percent (22 percent) of Group sales.
Ericsson said Enterprise sales increased 20 percent driven by Enterprise Wireless Solutions. Global Communications Platform (the consolidation of Vonage) sales were SEK 4.2 billion. in the quarter. Enterprise accounted for 10 percent (3 percent) of Group sales.
Ericsson said IPR licensing revenues increased to SEK 3.2 (1.4) billion. The increase in IPR licensing revenues is related to a contract signed in the fourth quarter 2022 and a new contract with a device vendor signed in the second quarter 2023. The new contract includes revenue for past unlicensed quarters.
