Ericsson Quarterly Core Profit Misses Market Estimates; China Sales Fall

Ericsson on Friday reported Q2 core earnings below market estimates. The Swedish telecom vendor said that a decline in sales in China offset strong 5G equipment sales in most markets.

Ericsson Underperforms as China Sales Fall

The company reported that its adjusted operating earnings rose to 5.8 billion Swedish Crowns, from 4.5 billion a year ago. However, Ericsson just fell short of the mean forecast of 6.01 billion crowns, according to Refinitiv estimates.

Rivalling China's Huawei and Finland's Nokia, sales for the telecom gear maker fell to 54.9 billion crowns from 55.6 billion. Here as well, it missed the analysts-estimated 57.20 billion. Ericsson said that the primary cause for the decline remains falling sales in China, which declines by 2.5 billion crowns. Notably, Ericsson makes almost 10% of its total sales in China. However, in a positive, Ericsson signed a $8.3 billion five-year 5G contract Verizon, its single largest deal, on Friday.

However, this decline has not been entirely surprising. Sweden has also excluded Chinese companies from its market, so the company would have already anticipated a decline in sales. In another important news, China will soon announce the contract allotments for the second phase of 5G deployment.

CEO Borje Ekholm said in a statement, "it is prudent to forecast a materially lower market share in Mainland China for Networks and Digital Services as the earlier decision to exclude Chinese vendors from the Swedish 5G networks might influence market share awards". It is clear that the Swedish telecom vendor has anticipated a further decline in market share in mainland China.