Telefonaktiebolaget LM Ericsson (publ) Q1 FY2025 earnings call

• Executed well in Q1 despite challenging macro backdrop. Organic sales stable, gross margin 48.5%, EBITA margin 12.6%. Improvement broad-based across segments. • Cloud Software & Services had first positive first quarter. • Strengthened leadership in mobile networks, announced new partnerships for programmable networks. • Mobile Networks expanded portfolio to 130 radios supporting programmable networks, announced first programmable network in Asia Pacific. • Enterprise saw improved commercial traction, e.g., Jaguar Land Rover implementing private 5G network. • Network APIs: Top 3 U.S. operators to launch fraud detection API in partnership with Aduna.

Networks: Sales increased 6% year-on-year to SEK 35.6 billion, organic sales up 3 percentage points. Adjusted gross margin 51%, adjusted EBITA SEK 7.5 billion with 21% margin. Cloud Software & Services: Sales stable, core networks and software grew, but Managed Services declined. Adjusted gross margin 39.9%, first positive first quarter. Enterprise: Sales decreased 1%, organic sales down 7%. Global Communications platform declined 9%, but Enterprise Wireless Solutions grew 20%. Adjusted EBITA minus SEK 0.5 billion.

• Global turmoil in Q1 and ongoing has impacts on currency and trade flows, increasing uncertainty. • Q2 expected to be broadly similar to average 3-year seasonality for networks and cloud software & services, assuming current exchange rates. • Networks gross margin expected in range of 48% to 50% in Q2, including retroactive IPR benefit and estimated 1 percentage point impact from tariffs. • Current currency volatility makes predictions difficult.

• Macro economic turmoil and tariffs impacting the industry, not immune. • Supply chain resilience built over years, but need to further build Western component ecosystem. • Uncertainty from global turmoil affecting customer behaviors and investment decisions.

Q: On margin guidance for Q2, how to view product side excluding IPRs?

A: Organic growth affected by currency impact in Q1. Margin guidance 48%-50% in Q2 based on product and market mix, with support from IPR and some tariff impact.

Q: On services decline, is it supply or demand led?

A: Varies. Proactive pruning of portfolio, but now seeing more positive customer discussions due to network complexity, with potential for managed service sales to increase.

Q: On regional market outlook, visibility on improvement in other regions?

A: North America growth is a good indicator. Europe started growing in second half of last year. Southeast Asia, Oceania, India had normalized investments. Overall, external analyst talks of flattish market recovery.

Q: On tariffs, 1 percentage point impact and production resilience?

A: 1% impact based on status on Friday. Production has sites in U.S., South America, Europe, and part of Asia, can shift volumes, but exact numbers not given.

Q: On competitive trends outside Americas, related to demand weakness?

A: Competition from Chinese vendors increased, some footprint losses and gains, market slower outside North America but footprint gains and losses evening out.