[ERIC] Ericsson: Q3 2026 Gross Margin and Inventory Cash Conversion

Ericsson supplies radio access network equipment, core network and business support software, network deployment and managed services to mobile operators worldwide, and collects licensing fees on its standard-essential patent portfolio; the company reports third-quarter results on 2026-10-15, covering Q3 2026[1]. The most recent disclosed quarter is the second quarter of 2026: net sales of SEK 52.7 billion against SEK 56.1 billion a year earlier, organic sales down 1%, an adjusted gross margin of 48.4% versus 48.0%, adjusted EBITA of SEK 6.9 billion at a 13.1% margin, diluted earnings per share of SEK 1.22, and free cash flow before M&A of only SEK 0.4 billion[2]. By segment, Networks sales were SEK 33 billion, down 8% as reported and 4% organically, at a 50.4% adjusted gross margin, while Cloud Software and Services sales were SEK 14.7 billion at a 44.1% adjusted gross margin[3]. On the July 14 call management guided Networks adjusted gross margin to a range of 48% to 50% for the quarter, slightly below the second quarter because of a change in mix[4], guided Networks quarter-on-quarter sales growth above the three-year average seasonality with Cloud Software and Services broadly in line with that average[5], and noted that rolling four-quarter free cash flow conversion reached 12% of net sales in the second quarter, at the upper end of the company's 9% to 12% target[6].

Three things in the coming report can be checked directly. First is price pass-through at Networks: management said input costs rose further in the second quarter and that the financial impact will build up gradually over the coming quarters[7], while pricing has already been adjusted in current tenders and discussions to broaden increases with existing customers are continuing[8], so which end of the 48% to 50% range the margin lands on, and whether management attributes the sequential decline to mix or to unrecovered component costs, decides whether pricing is keeping up. Second is delivery volume at Networks: the company's own planning assumption puts quarter-on-quarter growth above the three-year average seasonality[5], yet Networks organic sales were still down 4% in the second quarter[3], and the one-off patent settlement booked in 2025 drops out of the comparison base from the third quarter, which makes this the first quarter in which volume can be read cleanly. Third is whether the inventory turns back into cash: the company disclosed an inventory build of roughly SEK 5 billion in the second quarter, most of it finished goods to be delivered in the third[9], and free cash flow before M&A fell to SEK 0.4 billion in the same quarter[2], so the size of the cash recovery will show whether this was delivery timing or a genuine backlog.

Company Background and Business Structure

Ericsson was founded in Stockholm in 1876 and today sells network equipment and software to mobile operators worldwide, listing on Nasdaq as an ADR under the ticker ERIC and reporting in Swedish kronor under IFRS, with FY2025 net sales of SEK 236,681 million[10]. The company keeps shrinking its headcount, ending the year with 88,826 employees, of whom 12,806 are in Sweden, down from 94,236 a year earlier[11]. Leadership is also changing: Börje Ekholm has been chief executive since 2017, and the company has announced that Per Narvinger, currently head of Networks, takes over on October 1, 2026[12].

Ericsson has reported in four segments since 2023, and Networks dominates the mix. Networks sells radio access network hardware, software, antenna and transport solutions plus network deployment services, and posted FY2025 net sales of SEK 151,014 million and gross income of SEK 75,103 million, or 63.8% of group net sales; Cloud Software and Services sells core network, BSS and OSS software, cloud infrastructure and professional services, with net sales of SEK 62,715 million and gross income of SEK 26,132 million, or 26.5%; Enterprise covers enterprise wireless solutions and global communication platforms, with net sales of SEK 21,117 million and gross income of SEK 11,378 million, or 8.9%, and a segment adjusted EBITDA that is still negative; Other accounts for SEK 1,835 million[13].

Two details in the revenue structure are easy to miss. The first is that standard-essential patent licensing revenue is not its own segment but is allocated 82% to Networks and 18% to Cloud Software and Services, so a one-off patent settlement lifts the gross margin of both segments at once[14]. The second is customer concentration: the largest customer accounted for 14% of FY2025 net sales and the ten largest for 46%, and net sales in the United States were SEK 96,467 million[14]; at the same time hardware revenue fell steadily from SEK 99,642 million in FY2023 to SEK 88,612 million in FY2025, so software and services carry a correspondingly larger share of revenue[10].

Financial History and Current Position

Over the past three fiscal years Ericsson's revenue declined while its gross margin improved. Group net sales fell from SEK 263,351 million in FY2023 to SEK 247,880 million in FY2024 and to SEK 236,681 million in FY2025[10], while gross income moved the other way, from SEK 101,602 million to SEK 109,365 million and then SEK 112,668 million, lifting the gross margin from 38.6% to 47.6%[13]. The violent swing in profit came from impairments and disposals rather than day-to-day operations: FY2024 EBIT was only SEK 4,313 million with diluted earnings per share of SEK 0.01, while FY2025 EBIT recovered to SEK 38,634 million with diluted earnings per share of SEK 8.51[10].

Cost reduction is the same three-year trend. Research and development expenses fell from SEK 53,514 million in FY2024 to SEK 48,852 million in FY2025, selling and administrative expenses from SEK 51,657 million to SEK 33,685 million, and restructuring charges from SEK 5,012 million to SEK 2,337 million[15], with headcount down from 94,236 to 88,826 over the same span[11]. Cash, by contrast, weakened in FY2025: operating cash flow fell from SEK 46,261 million to SEK 32,954 million and free cash flow before M&A dropped from 16.2% of net sales to 11.3%[15], while year-end inventories stood at SEK 23,451 million, accounts receivable at SEK 40,327 million and equity attributable to the parent at SEK 109,535 million[11].

Into 2026 the gap between reported and organic figures became the key to reading the numbers. First-quarter reported sales fell 10% while organic sales grew 6%, EBITDA was SEK 5.6 billion at an 11.3% margin, and net cash stood at SEK 68.1 billion[16]. Second-quarter net sales were SEK 52.7 billion against SEK 56.1 billion a year earlier, organic sales fell 1%, the gross margin was 45.8% and the adjusted gross margin 48.4%, adjusted EBITA was SEK 6.9 billion at a 13.1% margin, net income was SEK 4.1 billion and diluted earnings per share SEK 1.22; free cash flow before M&A fell to SEK 0.4 billion, net cash declined to SEK 59.8 billion, and SEK 8.2 billion was returned to shareholders in the quarter[2].

Operating Model

Revenue is the sum of four lines, each recognized on a different rhythm. Networks radio access network hardware and software is recognized on delivery, following operator tenders and offtake under frame agreements, and produced FY2025 net sales of SEK 151,014 million; Cloud Software and Services core network and BSS or OSS software licences plus professional services are recognized on project progress, at SEK 62,715 million; Enterprise wireless solutions and communication platforms contributed SEK 21,117 million[13]. The fourth line is standard-essential patent licensing, allocated 82% and 18% to the first two segments and capable of producing a step-up in any quarter that contains a one-off settlement[14]. The quarterly shape of revenue is delivery volume multiplied by realized price, with Swedish krona translation layered on top of the reported figure: first-quarter reported sales fell 10% while organic sales grew 6%[16], and second-quarter reported sales fell 6% while organic sales fell 1%[2].

Gross income is set by three things: the gap between the realized unit price at Networks and the unit component cost that includes memory chips, the mix between Networks product deliveries and lower-margin rollout projects, and project execution efficiency at Cloud Software and Services. FY2025 group gross income was SEK 112,668 million at a 47.6% margin, split between Networks at SEK 75,103 million, Cloud Software and Services at SEK 26,132 million and Enterprise at SEK 11,378 million[13]. Below gross income sit two nearly fixed cost blocks, research and development at SEK 48,852 million, or 20.6% of net sales, and selling and administrative expenses at SEK 33,685 million, plus SEK 2,337 million of restructuring charges[15], so one percentage point of gross margin lands almost fully in EBIT, and the second quarter's 48.4% adjusted gross margin with adjusted EBITA of SEK 6.9 billion at a 13.1% margin is the direct output of that structure[2].

Cash timing is driven by working capital. Hardware becomes inventory before it is delivered and operators pay on long cycles, so FY2025 ended with inventories of SEK 23,451 million and accounts receivable of SEK 40,327 million[11], against full-year operating cash flow of SEK 32,954 million and free cash flow before M&A of 11.3% of net sales, below the 16.2% of FY2024[15]. The company targets rolling four-quarter free cash flow conversion of 9% to 12% of net sales and reached 12% in the second quarter, at the top of that range[6], yet free cash flow before M&A in the quarter itself was only SEK 0.4 billion[2] because inventories were built up by roughly SEK 5 billion for third-quarter deliveries[9].

This model has clear observation limits. The company discloses segment adjusted gross margin only quarterly and does not disclose unit prices, unit component costs, the revenue share of rollout projects, or quarterly IPR licensing revenue[14], so price pass-through and structural dilution can only be separated indirectly, through where the margin lands and how management attributes the move[4]. Segment definitions changed in 2023 and earlier segment data is not comparable[13], so every quarterly baseline here comes from the first and second quarters of 2026[16].

Industry and Competitive Position

Ericsson operates in a highly concentrated market. Dell'Oro Group counts Huawei, Ericsson, Nokia, ZTE and Samsung as together taking 96% of worldwide RAN revenue in the first half of 2026[17], which means any increment on the demand side must be divided among those five, and share shifts explain a single vendor's revenue direction better than market expansion does. Ericsson is one of those five, with FY2025 Networks net sales of SEK 151,014 million[13].

The company's defences rest on three verifiable things: licensing revenue from its standard-essential patent portfolio, allocated 82% and 18% across two segments[14]; the high switching cost of an operator network; and accumulated 5G technology[10]. Pressure comes from two directions, the share Huawei and ZTE hold in price-sensitive markets, and the way Open RAN erodes vendor lock-in[18]. The net result of those forces does not appear in any single disclosed field and can only be tracked by watching Networks organic growth and adjusted gross margin together.

Management's own read on the market is conservative. On the second-quarter call the company said the core mobile RAN market is expected to remain flattish in the near term, that growth depends on an unproven timeline for scaling industrial and physical-world AI, and that Chinese competitors may face lower component cost inflation thanks to domestic supply chains[18]. That is not inconsistent with the third-quarter assumption of growth above the three-year average seasonality, but it confines the source of any increment to Ericsson's own delivery schedule and share rather than to total market size[5].

Core Debates

Component cost inflation is eating into the gross margin of Ericsson's largest segment — can renegotiated price increases recover it?

The stake in this debate converts directly into money. Networks contributed 63.8% of group net sales and SEK 75,103 million of gross income in FY2025[13], and on the second quarter's segment sales of SEK 33 billion each percentage point of adjusted gross margin is worth roughly SEK 0.33 billion of quarterly gross income[3]. The company itself set the third-quarter range at 48% to 50%, below the second quarter's 50.4%, so a single quarter is enough to test whether price increases can catch up with cost[4].

The current evidence supports both sides. Networks adjusted gross margin was 50.4% in the second quarter, flat against the prior quarter, and the group adjusted gross margin of 48.4% was still above the 48.0% of a year earlier[3]; at the same time management said input costs rose further in the quarter and that the impact will build up gradually over the coming quarters[7], and that pricing has been adjusted in current tenders while negotiations to broaden increases with existing customers continue[8]. The transmission runs as follows: higher component prices, memory chips above all, first settle into inventory cost and then enter Networks cost of sales as deliveries are recognized, while renegotiated price increases enter revenue only when the contracts take effect, and the difference between the two sets the segment adjusted gross margin and passes through to group gross income and adjusted EBITA at roughly a 63.8% revenue weight[13].

An equally reasonable alternative explanation is mix rather than cost. The company attributed the lower range to a change in product mix, meaning a higher share of low-margin rollout projects[4], which has nothing to do with price pass-through. Light Reading, reporting on the day of the second-quarter results, offered an independent read on the lag, noting that renegotiated contracts with higher prices did not flow through in the second quarter and will only become gradually visible, and that the vendor must redesign products, accelerate cost cuts and pursue structural actions to broaden price increases with existing customers[19]. Four things are therefore observable: whether adjusted gross margin lands inside 48% to 50% and at which end, whether management attributes the sequential decline to rollout mix or to unrecovered cost, whether the company states for the first time that renegotiated price increases have entered current revenue, and the direction of Networks adjusted EBITA against the second quarter's SEK 5.8 billion[3]. The falsifier is clear: a margin below 48% that management attributes to cost would show pricing failed to offset inflation in time, while a margin inside the range alongside a group adjusted gross margin below 48.4% would show the pressure merely moved elsewhere.

With the worldwide RAN market broadly flat, can Ericsson's third-quarter delivery volumes really run stronger than its normal seasonality?

The volume assumption the company gave is more optimistic than the current run rate. The third-quarter planning assumption puts Networks quarter-on-quarter growth above the three-year average seasonality[5], while second-quarter Networks sales were SEK 33 billion, down 8% as reported and 4% organically[3], and group net sales were SEK 52.7 billion with organic sales down 1%[2]. The company stated explicitly that the second-quarter decline was driven mainly by the one-off IPR settlement in 2025 dropping out of the comparison[14], and that base effect disappears from the third quarter, which makes this the first quarter in which volume can be read cleanly.

How volume becomes profit is clear. Operator tender outcomes and rollout scheduling set Networks delivery volume in a given quarter, that volume converts into segment gross income at roughly a 50% adjusted gross margin, and at Networks' roughly 63.8% weight in group net sales it then sets the absolute level of group revenue and adjusted EBITA[13]. Networks grew 7% organically in the first quarter, which shows the segment is not structurally locked into decline[16].

The opposite reading stands up just as well: third-quarter sequential strength may be nothing more than a timing effect. The company disclosed an inventory build of roughly SEK 5 billion in the second quarter, most of it finished goods to be delivered in the third[9], which means part of the sequential growth could come from pre-built goods shipping in a cluster rather than from recovering demand; Dell'Oro Group also left its judgment that worldwide RAN revenue stays broadly flat in 2026 unchanged[17], and management itself said the core mobile RAN market remains flattish in the near term[18]. Four things matter here: where Networks quarter-on-quarter sales growth lands relative to the three-year average seasonality the company cited, whether organic growth turns positive once the IPR base effect is gone, the direction of group net sales against the second quarter's SEK 52.7 billion, and whether management attributes growth to the delivery timing of the second-quarter build. Sequential growth below the three-year average seasonality attributed to pushed-out orders would falsify a volume recovery, and organic growth still negative without an IPR base explanation would falsify it too.

Ericsson's software and services segment lifted its gross margin by nearly a point in a year — is that delivery efficiency, or a mix illusion from patent licensing?

This segment is the main source of the group's gross margin improvement, so whether the improvement can persist matters. Cloud Software and Services contributed 26.5% of group net sales in FY2025 and lifted gross income from SEK 22,088 million in FY2023 to SEK 26,132 million[13], precisely while Networks was absorbing cost inflation. If the margin lift comes from delivery efficiency it can continue; if it comes from the allocation of IPR revenue it will swing with the settlement calendar[14].

The second-quarter numbers support the efficiency side. Segment sales were SEK 14.7 billion, up 3% as reported and 5% organically, adjusted gross margin rose from 43.2% a year earlier to 44.1%, adjusted EBITA was SEK 1.8 billion, and management attributed the improvement to better delivery efficiency[3]; the same segment's adjusted gross margin was 43.2% in the first quarter[16]. The transmission is that core network and BSS or OSS software, cloud infrastructure and professional services make up segment revenue, better delivery efficiency directly lowers project execution cost and lifts segment adjusted gross margin, and that flows to group adjusted EBITA at roughly a 26.5% revenue weight through segment adjusted EBITA[13].

The counter-explanation cannot avoid how IPR is allocated. Eighteen percent of group licensing revenue lands in this segment and that revenue is close to pure gross income, so the margin lift may simply reflect a rising share of licensing inside the segment; the company does not disclose quarterly IPR amounts, leaving only management attribution and performance in quarters without a one-off settlement to separate the two[14]. What to watch is whether adjusted gross margin holds above 44%, whether quarter-on-quarter sales growth matches the three-year average seasonality the company cited[5], the direction of segment adjusted EBITA against SEK 1.8 billion, and whether management attributes the result to delivery efficiency or to IPR. A margin back near 43% would erase a year of improvement, and a margin that holds while the attribution shifts to IPR would show the gain is not structural.

Ericsson tied up about SEK 5 billion of inventory in the second quarter for third-quarter deliveries — will it turn back into cash on schedule?

Cash was the weakest line in the second quarter. Free cash flow before M&A was only SEK 0.4 billion against SEK 2.6 billion a year earlier[2]; full-year FY2025 free cash flow before M&A was 11.3% of net sales[15], and the rolling four-quarter conversion rate of 12% already sits at the top of the 9% to 12% target range[6]. The third quarter is, on the company's own account, the quarter in which that build should be delivered, which makes it the quarter that separates delivery timing from a backlog.

Mechanically, where this inventory goes determines two lines at once. The company disclosed an inventory build of roughly SEK 5 billion in the second quarter and management said most of it is finished goods for third-quarter delivery, with a smaller part reflecting the absorption of higher component costs[9]. If those finished goods ship and are collected as planned, the working capital release lifts operating cash flow and free cash flow directly; if delivery slips, the same inventory keeps tying up working capital, and the expensive components embedded in it will eventually enter gross income as higher cost of sales whenever they are delivered[7].

The counter-explanation is that this inventory does not all correspond to locked-in deliveries. Part of it may be a buffer against supply chain risk, which would keep weighing on working capital through the third quarter if operators delay offtake; FY2025 ended with inventories of SEK 23,451 million, below the prior year's SEK 27,125 million, so the second quarter moved in the opposite direction[11]. What to watch is how far third-quarter free cash flow before M&A recovers from SEK 0.4 billion, whether rolling four-quarter conversion stays inside 9% to 12%, whether the inventory balance falls or keeps rising, and whether group adjusted gross margin drops below 48.4% as the inventory is released. Inventories that keep rising alongside free cash flow still below SEK 1 billion would falsify the claim that the build was only about delivery timing, and a conversion rate below 9% would do the same.

Risks and Falsifiers

Customer concentration has risen for three straight years, so one operator's capital expenditure rhythm can change a quarter's delivery volume. The largest customer took 14% of FY2025 net sales against 13% in FY2024 and 8% in FY2023, and the ten largest took 46%[14]; the exposure is the SEK 96,467 million of United States net sales inside FY2025 group net sales of SEK 236,681 million, plus the roughly 14% of revenue tied to the largest customer[10]. A decline in the disclosed largest-customer and top-ten shares in a future 20-F, or a quarter in which a volume decline is shown to be unrelated to a single customer, would falsify this reading[11].

Ericsson will have a new chief executive in place when third-quarter results are published, so the cost plan itself could change. Per Narvinger takes over on October 1, 2026 while third-quarter results are released on 2026-10-15[12], and the incoming chief executive could adjust the cost plan, the restructuring pace or segment priorities at the same time; the company has already said full-year 2026 restructuring charges stay at elevated levels[20]. The exposure is the volatility of restructuring charges themselves: SEK 2,337 million in FY2025 against SEK 5,012 million in FY2024 and SEK 6,521 million in FY2023[15], with headcount already down from 94,236 to 88,826[11]. If the company keeps its existing segment structure, cost plan and restructuring guidance unchanged at the third-quarter release, this risk has not materialized.

Long-term customer contracts carry no automatic inflation clauses, so price increases must be renegotiated one by one and the pass-through lag can run longer than costs rise[8]. On the second quarter's SEK 33 billion of quarterly segment sales, each percentage point of Networks adjusted gross margin is worth roughly SEK 0.33 billion of quarterly gross income, against segment FY2025 gross income of SEK 75,103 million[3]. The falsifier is management disclosing that renegotiated price increases have entered current revenue while Networks adjusted gross margin returns above 50% and holds there for two quarters[13].

The core mobile RAN market is expected to stay flattish in the near term while growth depends on an unproven timeline for scaling industrial and physical-world AI, and Chinese vendors may face lower component cost inflation through domestic supply chains, creating price pressure[18]. The exposure is Networks FY2025 net sales of SEK 151,014 million, or 63.8% of the group, together with the trend of group net sales falling from SEK 263,351 million in FY2023 to SEK 236,681 million[10]. Two consecutive quarters of positive Networks organic growth that management attributes to delivery volume rather than to IPR or currency would falsify this risk.

The 18% IPR allocation into Cloud Software and Services and one-off patent settlements can mask true delivery efficiency, so the margin improvement could be given back in quarters without a settlement[14]. The exposure is segment FY2025 gross income of SEK 26,132 million, where each percentage point of adjusted gross margin is worth roughly SEK 0.15 billion of quarterly gross income on the second quarter's SEK 14.7 billion of sales[13]. The falsifier is an adjusted gross margin that stays at or above 44% for two consecutive quarters without a one-off IPR settlement[3].

Inventory built for third-quarter deliveries and supply chain risk keeps tying up working capital if operators delay offtake, and the expensive components embedded in it will enter gross income as higher cost of sales whether or not they ship on schedule[9]. The exposure is second-quarter free cash flow before M&A already down to SEK 0.4 billion from SEK 2.6 billion a year earlier[2], against FY2025 operating cash flow of SEK 32,954 million and free cash flow before M&A at 11.3% of net sales[15]. If inventories fall in the third quarter and free cash flow before M&A returns to a level consistent with 9% to 12% rolling conversion, this risk has not materialized[6].

What to Watch Next

• Networks adjusted gross margin and adjusted EBITA, against a baseline of 50.4% and SEK 5.8 billion in the second quarter of 2026: whether the margin lands inside the 48% to 50% range the company gave and at which end, and whether management attributes the move to rollout mix or to unrecovered component cost. A margin below 48% attributed to cost falsifies the pass-through case; a margin inside the range alongside a group adjusted gross margin below 48.4% shows the pressure only moved.
• Networks quarter-on-quarter sales growth and organic growth, against a baseline of SEK 33 billion and organic sales down 4% in the second quarter of 2026: where sequential growth lands relative to the three-year average seasonality, and whether organic growth turns positive once the IPR base effect is gone. Sequential growth below that seasonality attributed to pushed-out orders falsifies a volume recovery, as does organic growth still negative without an IPR base explanation.
• Cloud Software and Services adjusted gross margin and adjusted EBITA, against a baseline of 44.1% and SEK 1.8 billion in the second quarter of 2026: whether the margin holds above 44%, and whether management attributes it to delivery efficiency or to IPR. A margin back near 43% erases a year of improvement; a margin that holds while attribution shifts to IPR shows the gain is not structural.
• Free cash flow before M&A, rolling four-quarter conversion and the inventory balance, against a baseline of SEK 0.4 billion, 12% and FY2025 year-end inventories of SEK 23,451 million: how far cash recovers, whether conversion stays inside 9% to 12%, and whether inventories fall or keep rising. Rising inventories alongside free cash flow below SEK 1 billion falsify the timing explanation, and conversion below 9% does the same.

Conclusion

Ericsson's results are set by three things: Networks delivery volume, the gap between the realized unit price and the unit component cost at Networks, and the speed at which both turn into cash. The current financial position is revenue contracting while the gross margin improves, with group net sales down from SEK 263,351 million in FY2023 to SEK 236,681 million in FY2025 and the gross margin up from 38.6% to 47.6% over the same span[13], but the second quarter of 2026 opened a new gap: the adjusted gross margin still held at 48.4% while free cash flow before M&A fell to SEK 0.4 billion[2], because roughly SEK 5 billion of inventory was staked on third-quarter deliveries[9]. The unresolved relationship is exactly that one — whether cost enters cost of sales faster than renegotiated price increases enter revenue[7].

Two independent assessments published after the second-quarter results cover the demand side and the price side, and they do not point to the same conclusion. Stefan Pongratz of Dell'Oro Group wrote in the August 18 quarterly RAN report that "The coverage-to-capacity correction is largely in the past, and the RAN market is stabilizing," noting that worldwide RAN revenue grew modestly year over year in the second quarter, the third consecutive quarter of growth after more than two years of contraction, while Dell'Oro left its full-year outlook unchanged and still judged worldwide RAN revenue to stay broadly flat in 2026[17]; for the volume debate that implies demand is stabilizing rather than expanding, meaning that if the third quarter really does run above the three-year average seasonality, the source is more likely Ericsson's own delivery schedule and share than total market size. Michelle Donegan of Light Reading, writing on July 14, credited management's confidence in passing cost through but pointed to the execution resistance, noting that renegotiated higher prices did not flow through in the second quarter and will only become gradually visible, and that the vendor must redesign products, accelerate cost cuts and pursue structural actions to broaden increases with existing customers[19]. The two agree that the industry will not solve the problem for Ericsson through market size, and they diverge on the lag — Dell'Oro sees the contraction cycle as over, Light Reading sees price recovery taking longer — which maps onto the two ends of the 48% to 50% range[4].

What would materially change the current understanding is a combination of observations rather than any single one. On the stronger side: Networks adjusted gross margin landing at the upper end of 48% to 50% while management states for the first time that renegotiated price increases have entered current revenue, together with Networks organic growth turning positive once the IPR base effect is gone, sequential growth genuinely above the three-year average seasonality, and free cash flow before M&A recovering clearly from SEK 0.4 billion with the inventory balance falling[5]. On the weaker side: adjusted gross margin below 48% attributed to unrecovered cost, or sequential growth below the three-year average seasonality attributed to pushed-out orders, or inventories still rising while free cash flow stays below SEK 1 billion and rolling four-quarter conversion drops under 9%[6]. The cost and restructuring arrangements the incoming chief executive presents on 2026-10-15, two weeks after taking over on October 1, will determine whether these readings are interpreted against the old plan or a new one[12].

Sources

[1] Drillr earnings-call calendar for ERIC, scheduled 2026-10-15 (calendar last updated 2026-09-17) · 2026-09-17 · Drillr earnings-call calendar

[2] ERIC Q2 2026 report 6-K 2026-07-14 · 2026-07-14 · 6-K · https://www.ericsson.com/en/press-releases/2026/7/ericsson-reports-second-quarter-results-2026

[3] ERIC Q2 2026 earnings call 2026-07-14 · segment results · 2026-07-14 · earnings-call · https://www.fool.com/earnings/call-transcripts/2026/07/14/ericsson-eric-q2-2026-earnings-call-transcript/

[4] ERIC Q2 2026 earnings call 2026-07-14 · Networks Q3 gross margin assumption · 2026-07-14 · earnings-call · https://www.fool.com/earnings/call-transcripts/2026/07/14/ericsson-eric-q2-2026-earnings-call-transcript/

[5] ERIC Q2 2026 earnings call 2026-07-14 · Q3 seasonality assumption · 2026-07-14 · earnings-call · https://www.fool.com/earnings/call-transcripts/2026/07/14/ericsson-eric-q2-2026-earnings-call-transcript/

[6] ERIC Q2 2026 earnings call 2026-07-14 · cash conversion · 2026-07-14 · earnings-call · https://www.fool.com/earnings/call-transcripts/2026/07/14/ericsson-eric-q2-2026-earnings-call-transcript/

[7] ERIC Q2 2026 earnings call 2026-07-14 · input cost inflation · 2026-07-14 · earnings-call · https://www.fool.com/earnings/call-transcripts/2026/07/14/ericsson-eric-q2-2026-earnings-call-transcript/

[8] ERIC Q2 2026 earnings call 2026-07-14 · pricing actions · 2026-07-14 · earnings-call · https://www.fool.com/earnings/call-transcripts/2026/07/14/ericsson-eric-q2-2026-earnings-call-transcript/

[9] ERIC Q2 2026 earnings call 2026-07-14 · inventory build · 2026-07-14 · earnings-call · https://www.fool.com/earnings/call-transcripts/2026/07/14/ericsson-eric-q2-2026-earnings-call-transcript/

[10] ERIC 20-F filed 2026-03-12 · 2026-03-12 · 20-F · https://www.sec.gov/Archives/edgar/data/717826/000119312526104149/

[11] ERIC 20-F 2026-03-12 · balance sheet and employees · 2026-03-12 · 20-F · https://www.sec.gov/Archives/edgar/data/717826/000119312526104149/

[12] ERIC Q2 2026 earnings call 2026-07-14 · CEO transition · 2026-07-14 · earnings-call · https://www.fool.com/earnings/call-transcripts/2026/07/14/ericsson-eric-q2-2026-earnings-call-transcript/

[13] ERIC 20-F 2026-03-12 · segment gross income · 2026-03-12 · 20-F · https://www.sec.gov/Archives/edgar/data/717826/000119312526104149/

[14] ERIC 20-F 2026-03-12 · customers and IPR split · 2026-03-12 · 20-F · https://www.sec.gov/Archives/edgar/data/717826/000119312526104149/

[15] ERIC 20-F 2026-03-12 · operating expenses and cash flow · 2026-03-12 · 20-F · https://www.sec.gov/Archives/edgar/data/717826/000119312526104149/

[16] ERIC Q1 2026 earnings call 2026-04-17 · 2026-04-17 · earnings-call · https://www.ericsson.com/en/investors/financial-reports-and-presentations

[17] Dell'Oro Group RAN report 2Q 2026, 2026-08-18 · 2026-08-18 · Dell'Oro Group · https://www.delloro.com/news/ran-market-growth-continues-in-2q-2026/

[18] ERIC Q2 2026 earnings call 2026-07-14 · market and competition risks · 2026-07-14 · earnings-call · https://www.fool.com/earnings/call-transcripts/2026/07/14/ericsson-eric-q2-2026-earnings-call-transcript/

[19] Light Reading 2026-07-14 · Ericsson warns of price rises · 2026-07-14 · Light Reading · https://www.lightreading.com/finance/ericsson-warns-of-price-rises-to-counter-high-component-costs

[20] ERIC Q2 2026 earnings call 2026-07-14 · restructuring charges 2026 · 2026-07-14 · earnings-call · https://www.fool.com/earnings/call-transcripts/2026/07/14/ericsson-eric-q2-2026-earnings-call-transcript/