Ericsson reports strong third quarter results buoyed by China 5G push

By Lucy Ingham

Swedish telecoms giant Ericsson has today announced its third quarter results for 2020, which beat market estimates thanks in part to its growing 5G business in mainland China.

Adjusted operating earnings reached 9bn Swedish crowns ($1bn), significantly higher that average analyst predictions of 6.8bn crowns ($0.77bn). This represented a year-on-year increase of 38%, up from 6.5bn crowns ($7.3bn).

Ericsson also reported a 1% total revenue increase to 57.5bn crowns ($6.48bn) in its third quarter results, and an increase in its gross margin, excluding restructuring costs, from 37.8% to 43.2% year-on-year.

5G buoys third quarter results success for Ericsson

Central to its success in its third quarter results, however, is its growing presence in the 5G space, with Ericsson having now been awarded 112 5G infrastructure contracts, including several in mainland China.

This has helped drive adjusted sales by 7% year-on-year, and is in part down to Ericsson becoming the operator of choice as countries increasingly move away from Huawei, particularly in light of US efforts to ban the company.

However, sales in mainland China show that the company it not simply option B when Huawei is too politically sensitive to choose and is increasingly being selected on its own merit.

“We continue to win footprint in several markets leveraging our competitive 5G portfolio,” said Börje Ekholm, president and CEO of Ericsson in a results statement.

“Underlying business fundamentals remain strong in North America driven by consolidation in the US operator market, pending spectrum auctions, and increased demand for 5G. The 5G contracts in Mainland China have developed according to plan, contributing positively to profits in Q3 and are expected to improve further.”

Coronavirus impact remains limited

Meanwhile, while Ekholm reported that 80% of Ericsson’s workforce was working from home as a result of the Covid-19 pandemic, the company had so far remained relatively unaffected.

“Covid-19 has so far had limited impact on our business, but we are closely monitoring any signs of a change in the situation,” he said.

“While the pandemic has hurt revenues for several of our customers, and in some cases this has led to a reduction of capex, we have not seen any negative impact on our business, largely due to footprint gains. However, the pandemic negatively impacted our sales in Latin America and Africa.

“The year to date results strengthen our confidence in delivering on the 2020 Group target.”

Read more: Ericsson: We’re beating Huawei on 5G deployment