Telefonaktiebolaget LM Ericsson (ERIC) AI Stock Analysis

• Market Cap: $36.34B
• Dividend Yield: 2.51%
• Average Volume (3M): 10.34M
• Price to Earnings (P/E): 12.6
• Beta (1Y): 0.59
• Revenue Growth: 1.04%
• EPS Growth: N/A
• Country: US
• Employees: 92,866
• Sector: Technology
• Sector Strength: 88
• Industry: Communication Equipment
• EPS (TTM): 0.28
• Shares Outstanding: 3,071,530,800
• 10 Day Avg. Volume: 10,368,740
• 30 Day Avg. Volume: 10,344,714
• PEG Ratio: <0.01
• Price to Book (P/B): 2.71
• Price to Sales (P/S): 1.33
• P/FCF Ratio: 10.41
• Enterprise Value/Market Cap: 9.09
• Enterprise Value/Revenue: 1.44
• Enterprise Value/Gross Profit: 2.98
• Enterprise Value/Ebitda: 6.95
• 1Y Price Target: $9.10
• Price Target Upside: -18.46% Downside
• Rating Consensus: Moderate Sell
• Number of Analyst Covering: 3
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 70 Outperform
• Price Target: $11.50 ▲(3.05% Upside)

The score is driven primarily by recovering financial performance (improved profitability and manageable leverage) and constructive earnings-call takeaways (margin progress, strong net cash, and significant shareholder distributions), supported by strong technical momentum. The main constraints are uneven revenue/cash-flow trends and guidance pointing to a flattish 2026 RAN market with elevated restructuring costs.

Positive Factors

Sustained Margin Expansion

Nine consecutive quarters of EBITA margin expansion to ~18% indicates structural improvements in cost base and operational execution. Durable margin gains increase earnings resilience through industry cycles, fund R&D and shareholder returns, and reduce dependence on top-line swings for profitability.

Strong Net Cash and Cash Generation

A SEK ~61B net cash position and consistent positive free cash flow provide durable financial flexibility. This supports large shareholder returns, buffers cyclical downturns, funds strategic investments or M&A, and reduces refinancing risk—strengthening long-term capital allocation options.

Market Position & Product Traction

High-profile carrier wins, footholds in Japan and scale in fixed wireless access reflect leadership in 5G and differentiated product traction. Durable customer relationships and global scale reinforce Ericsson’s competitive moat and provide recurring revenue opportunities in mission‑critical and enterprise segments.

Negative Factors

Flattish RAN Market Outlook

A flat RAN market constrains core equipment demand and limits revenue growth opportunities over the next 12–24 months. Reliance on incremental share gains or diversification into software/services becomes essential, increasing execution risk and making topline recovery dependent on non‑RAN initiatives.

Elevated Restructuring Costs and Headcount Cuts

Planned elevated restructuring and further headcount reductions will pressure near‑term profitability and create execution risk. While intended to improve structural margins, such programs can disrupt operations, slow delivery on growth projects, and risk loss of critical talent needed for tech leadership.

Material Currency Headwinds

Large negative FX translation (~SEK 13.9B) injects volatility into reported revenue and margins, complicating performance assessment and planning. Persistent currency pressure can erode reported growth, compress margins and cash conversion, and reduce the predictability of capital allocation outcomes.

Telefonaktiebolaget LM Ericsson Business Overview & Revenue Model

Company Description

Telefonaktiebolaget LM Ericsson (publ), together with its subsidiaries, provides communication infrastructure, services, and software solutions to the telecom and other sectors. It operates through four segments: Networks, Digital Services, Managed Services, and Emerging Business and Other. The Networks segment offers radio access network solutions for various network spectrum bands, including integrated high-performing hardware and software. This segment also provides integrated antenna and transport solutions; and a range of service portfolio covering network deployment and support. The Digital Services segment offers software-based solutions for business support systems, operational support systems, communication services, core networks, and cloud infrastructure. The Managed Services segment provides networks and IT managed, network design and optimization, and application development and maintenance services to telecom operators. The Emerging Business and Other segment includes emerging businesses comprising Internet of Things; iconectiv; Cradlepoint that offers wireless edge WAN 4G and 5G enterprise solutions; and Red Bee Media, MediaKind, and other new businesses. It operates in North America, Europe and Latin America, the Middle East and Africa, South East Asia, Oceania, India, North East Asia, and internationally. Telefonaktiebolaget LM Ericsson (publ) was founded in 1876 and is headquartered in Stockholm, Sweden.

How the Company Makes Money

Ericsson generates revenue through several key streams, primarily focusing on network equipment sales, software, and services. The company's main revenue comes from selling telecommunications infrastructure, including radio access networks (RAN), core networks, and transport networks. Additionally, Ericsson provides managed services, allowing telecom operators to outsource network operations, and offers consulting services to help clients optimize their network performance. The company also earns revenue from software licenses and maintenance agreements. Strategic partnerships with major telecommunications companies worldwide further enhance its revenue potential, and Ericsson's investments in research and development keep it at the forefront of technological advancements, particularly in 5G and IoT, driving growth in new market segments.

Telefonaktiebolaget LM Ericsson Financial Statement Overview

Summary

Profitability rebounded strongly in 2025 with improved margins, leverage remains manageable, and free cash flow stayed positive with decent cash quality. Offsetting this is uneven performance and visibility: revenue contracted in 2025 and operating/FCF trends softened versus 2024, highlighting cyclicality and variability.

Income Statement

Profitability rebounded meaningfully in 2025 with strong operating and net margins after a very weak 2024 and a loss in 2023, showing the earnings profile can recover. Gross margin also improved versus 2024, supporting the better profit outcome. The key drawback is uneven performance and visibility: revenue contracted in 2025 after modest growth in 2024, and results have swung materially over the last few years, indicating demand and/or cost volatility.

Balance Sheet

Leverage looks manageable with debt running well below equity across the period, and equity has been relatively stable, which supports financial flexibility. Returns improved sharply in 2025 following a near-breakeven 2024 and negative 2023, signaling the balance sheet can translate into shareholder returns when operations normalize. The main weakness is earnings-driven variability in returns and some year-to-year movement in leverage, which can pressure perceived stability even if absolute debt levels remain reasonable.

Cash Flow

Cash generation is generally solid, with free cash flow consistently positive and typically close to reported earnings, suggesting decent cash quality. However, operating cash flow fell in 2025 versus 2024 and free cash flow declined year over year, pointing to a softer near-term cash trend. Cash flow has also been uneven (notably weak in 2023 versus other years), which adds execution and working-capital risk through the cycle.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	222.48B	259.37B	249.80B	274.27B	244.54B
Gross Profit	107.11B	116.57B	99.03B	114.63B	106.34B
EBITDA	45.82B	17.15B	-9.44B	35.45B	40.38B
Net Income	26.72B	20.93M	-25.08B	18.91B	23.89B
Balance Sheet
Total Assets	279.23B	298.01B	309.89B	348.07B	306.94B
Cash, Cash Equivalents and Short-Term Investments	56.64B	56.50B	44.74B	46.19B	66.85B
Total Debt	46.04B	45.59B	54.28B	41.43B	41.05B
Total Liabilities	168.96B	204.91B	212.56B	217.30B	200.05B
Stockholders Equity	109.54B	94.40B	98.59B	132.25B	108.57B
Cash Flow
Free Cash Flow	28.50B	45.96B	3.68B	26.65B	37.26B
Operating Cash Flow	30.98B	48.40B	6.81B	31.17B	41.12B
Investing Cash Flow	-10.75B	-16.69B	-8.26B	-34.74B	-20.93B
Financing Cash Flow	-13.37B	-24.97B	955.17M	-16.09B	-9.80B

Telefonaktiebolaget LM Ericsson Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 11.16
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ERIC, the sentiment is Positive. The current price of 11.16 is above the 20-day moving average (MA) of 10.60, above the 50-day MA of 9.99, and above the 200-day MA of 8.78, indicating a bullish trend. The MACD of 0.38 indicates Negative momentum. The RSI at 61.64 is Neutral, neither overbought nor oversold. The STOCH value of 55.71 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ERIC.

Telefonaktiebolaget LM Ericsson Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSI	75 Outperform	$75.52B	35.58	104.74%	1.18%	6.17%	35.41%
CSCO	74 Outperform	$337.98B	30.06	24.34%	2.09%	8.91%	14.53%
UI	74 Outperform	$42.73B	48.11	136.08%	0.49%	36.77%	102.83%
ERIC	70 Outperform	$36.34B	12.64	―	2.51%	1.04%	―
HPE	67 Neutral	$31.78B	―	0.23%	2.17%	14.17%	-102.25%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
NOK	59 Neutral	$38.64B	53.17	3.20%	2.26%	5.05%	115.92%

Telefonaktiebolaget LM Ericsson Corporate Events

Ericsson Lifts Profitability and Payouts on Strong 2025, Flags Flat RAN Market for 2026

On January 23, 2026, Ericsson reported its fourth-quarter and full-year 2025 results, highlighting broad-based organic sales growth in all segments in Q4, including 12% growth in Cloud Software and Services, and improved profitability driven by operational efficiencies, especially in Mobile Networks. Q4 sales rose 6% organically with stronger performance in EMEA and South East Asia/Oceania/India, while reported sales declined year-on-year to SEK 69.3 billion due to currency effects; adjusted gross margin expanded to 48.0%, adjusted EBITA margin climbed to 18.3%, net income nearly doubled to SEK 8.6 billion, and free cash flow before M&A remained strong at SEK 14.9 billion. For the full year 2025, Ericsson delivered 2% organic sales growth and higher profitability, with adjusted gross income up to SEK 113.9 billion, adjusted EBITA rising to SEK 42.9 billion (including a gain from the iconectiv divestment), net income surging to SEK 28.7 billion, and an 11.3% cash-flow-to-sales ratio, leaving net cash at SEK 61.2 billion and return on capital employed at 24.1%. Reflecting confidence in its balance sheet and cash generation, the board plans to propose a higher dividend of SEK 3.00 per share for 2025 and a SEK 15 billion share buyback, while management signaled that in a flat 2026 RAN market the group will lean on growth in mission-critical and enterprise markets and increase investments in defense, while continuing cost optimization to protect margins and cash flow.

The most recent analyst rating on (ERIC) stock is a Buy with a $11.50 price target. To see the full list of analyst forecasts on Telefonaktiebolaget LM Ericsson stock, see the ERIC Stock Forecast page.

Ericsson Announces Executive Team Change Amid Strategic Transition

On November 11, 2025, Ericsson announced that Moti Gyamlani will step down from his role as Senior Vice President and Head of Group Function Global Operations on January 12, 2026. Gyamlani, who joined Ericsson in 2019 and became part of the Executive Team in 2022, has been instrumental in digitally transforming the company and streamlining its processes. His departure marks a transition period aimed at simplifying the Group structure and aligning functions closer to the business, which could impact Ericsson’s operational efficiency and market positioning.

The most recent analyst rating on (ERIC) stock is a Buy with a $10.50 price target. To see the full list of analyst forecasts on Telefonaktiebolaget LM Ericsson stock, see the ERIC Stock Forecast page.