Telefonaktiebolaget LM Ericsson (ERIC) AI Stock Analysis

• Market Cap: $31.99B
• Dividend Yield: 2.56%
• Average Volume (3M): 13.99M
• Price to Earnings (P/E): 12.8
• Beta (1Y): 0.62
• Revenue Growth: 1.04%
• EPS Growth: N/A
• Country: US
• Employees: 92,866
• Sector: Technology
• Sector Strength: 88
• Industry: Communication Equipment
• EPS (TTM): 0.35
• Shares Outstanding: 3,071,530,800
• 10 Day Avg. Volume: 6,958,935
• 30 Day Avg. Volume: 13,994,143
• PEG Ratio: -142.01
• Price to Book (P/B): 3.15
• Price to Sales (P/S): 1.15
• P/FCF Ratio: 6.47
• Enterprise Value/Market Cap: 0.84
• Enterprise Value/Revenue: 0.11
• Enterprise Value/Gross Profit: 0.24
• Enterprise Value/Ebitda: 0.59
• 1Y Price Target: $9.33
• Price Target Upside: -1.79% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 4
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 74 Outperform
• Price Target: $10.50 ▲(10.53% Upside)

Ericsson's overall stock score reflects a stable financial position with strong profitability and positive technical momentum. The earnings call provided confidence in strategic growth and margin expansion, despite revenue and cash flow challenges. The valuation is reasonable, with a solid dividend yield adding to its attractiveness.

Positive Factors

Technological Leadership

Ericsson's leadership in 5G technology positions it strongly in the telecommunications sector, ensuring long-term competitiveness and growth potential as global demand for advanced networks increases.

Strategic Partnerships

The partnership with Canada enhances Ericsson's R&D and supply chain capabilities, supporting innovation and expanding its global market reach, crucial for sustaining growth in next-gen technologies.

Margin Expansion

Operational improvements and cost restructuring have led to margin expansion, indicating efficient management and the ability to sustain profitability despite market challenges.

Negative Factors

Revenue Decline

The decline in revenue suggests challenges in maintaining growth, which could impact long-term financial health if not addressed through strategic initiatives or market expansion.

Free Cash Flow Decline

A significant drop in free cash flow growth limits Ericsson's ability to reinvest in business operations and innovation, potentially affecting future growth and financial flexibility.

Enterprise Segment Challenges

Declining enterprise sales highlight challenges in this segment, which could hinder overall revenue growth and require strategic adjustments to regain momentum.

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

Ericsson's financial performance is stable with strong profitability metrics, such as a gross profit margin of 46.5% and an EBIT margin of 11.8%. However, challenges exist with a 1.84% decline in revenue and a 15.67% drop in free cash flow growth, indicating potential risks if not addressed.

Income Statement

Ericsson's income statement shows a mixed performance. The TTM data indicates a gross profit margin of 46.5%, which is strong, but the net profit margin is relatively low at 7.04%. Revenue has declined by 1.84% in the TTM period, indicating a challenge in maintaining growth. However, the EBIT margin of 11.8% suggests decent operational efficiency. Overall, while profitability is present, the declining revenue trend is a concern.

Balance Sheet

The balance sheet reflects a moderate financial position with a debt-to-equity ratio of 0.50, indicating manageable leverage. The return on equity (ROE) is 19.6%, which is a positive indicator of profitability relative to shareholder equity. However, the equity ratio is not explicitly provided, but the overall asset base seems stable. The balance sheet suggests a stable but not overly aggressive financial strategy.

Cash Flow

Cash flow analysis shows a decline in free cash flow growth by 15.67% in the TTM period, which is concerning. The operating cash flow to net income ratio is 0.33, indicating that operating cash flow is not significantly higher than net income, which could limit reinvestment capabilities. The free cash flow to net income ratio is 0.92, suggesting that most of the net income is converted into free cash flow, which is positive.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	236.84B	259.37B	249.80B	274.27B	244.54B	206.97B
Gross Profit	112.72B	116.57B	99.03B	114.63B	106.34B	84.12B
EBITDA	45.91B	17.15B	-9.44B	35.45B	40.38B	32.78B
Net Income	24.25B	20.93M	-25.08B	18.91B	23.89B	15.57B
Balance Sheet
Total Assets	281.27B	298.01B	309.89B	348.07B	306.94B	273.05B
Cash, Cash Equivalents and Short-Term Investments	50.82B	56.50B	44.74B	46.19B	66.85B	50.34B
Total Debt	43.75B	45.59B	54.28B	41.43B	41.05B	39.39B
Total Liabilities	179.22B	204.91B	212.56B	217.30B	200.05B	188.03B
Stockholders Equity	102.22B	94.40B	98.59B	132.25B	108.57B	86.52B
Cash Flow
Free Cash Flow	32.15B	45.96B	3.68B	26.65B	37.26B	21.77B
Operating Cash Flow	34.61B	48.40B	6.81B	31.17B	41.12B	25.77B
Investing Cash Flow	-14.96B	-16.69B	-8.26B	-34.74B	-20.93B	-13.54B
Financing Cash Flow	-11.07B	-24.97B	955.17M	-16.09B	-9.80B	-11.13B

Telefonaktiebolaget LM Ericsson Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 9.50
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ERIC, the sentiment is Neutral. The current price of 9.5 is below the 20-day moving average (MA) of 9.60, above the 50-day MA of 9.33, and above the 200-day MA of 8.28, indicating a neutral trend. The MACD of 0.03 indicates Positive momentum. The RSI at 49.35 is Neutral, neither overbought nor oversold. The STOCH value of 63.98 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ERIC.

Telefonaktiebolaget LM Ericsson Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CSCO	77 Outperform	$308.07B	29.40	23.01%	2.09%	8.91%	14.53%
ERIC	74 Outperform	$31.99B	12.79	25.45%	2.56%	1.04%	―
HPE	72 Outperform	$30.78B	―	0.23%	2.27%	14.00%	-102.25%
MSI	70 Outperform	$62.36B	30.04	115.80%	1.16%	6.17%	35.41%
NOK	66 Neutral	$33.97B	34.16	4.03%	2.43%	5.05%	115.92%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
UI	60 Neutral	$34.96B	44.19	155.78%	0.48%	36.77%	102.83%

Telefonaktiebolaget LM Ericsson Corporate Events

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.

Ericsson Reports Strong Q3 2025 Performance Amid Strategic Gains

On October 14, 2025, Ericsson announced its third quarter results, highlighting strategic achievements and financial performance. The company reported strong commercial momentum with significant agreements in India, Japan, and the UK, alongside operational excellence that improved gross margins. Despite a 2% decline in organic sales, Ericsson achieved a notable increase in adjusted EBITA and net income, driven by a capital gain from the divestment of iconectiv. The company’s 5G solutions were reaffirmed as industry-leading, and it anticipates stable enterprise sales and a strong cash position, potentially enhancing shareholder distributions.