Q3 2025 Telefonaktiebolaget LM Ericsson Earnings Call

Speaker #2: Hello everyone, and welcome to the presentation of Ericsson's third quarter 2025 results. Joining us by video today is Barry Ekholm, our President and CEO.

Speaker #2: And in the studio, I'm joined by Lars Sandström, our Chief Financial Officer. As usual, we'll have a short presentation followed by a Q&A. In order to ask a question, you'll need to join the conference by phone.

Speaker #2: Details can be found in today's earnings release and on the investor relations website. Please be advised that today's call is being recorded and that today's presentation may include forward-looking statements.

Speaker #2: These statements are based on our current expectations and certain planning assumptions, which are subject to risks and uncertainties. Actual results may differ materially due to factors mentioned in today's press release and discussed in the conference call.

Daniel Morris: We encourage you to read about these risks and uncertainties in our earnings report as well as in the annual report. I'll now hand the call over to Börje and Lars for their introductory comments.

Speaker #2: We encourage you to read about these risks and uncertainties in our earnings report, as well as in the annual report. I'll now hand the call over to Barry and Lars for their introductory comments.

Börje Ekholm: Thanks, Daniel, and good morning everyone, and a big thank you for joining us today. We delivered a strong Q3 with continued expansion in our EBITDA margin despite the FX headwinds. I would say that reflects our execution against both operational and strategic priorities over the last couple of years. We're optimistic about the growing demand for advanced mobile connectivity as AI is starting to be rolled out. By structurally improving our cost base, we have positioned Ericsson to deliver resilient margins also in the current market backdrop, which will give further benefits from improving operating leverage when growth comes back and actually comes in reality. Beyond operational improvements, of course, we focus on technology innovation, and that positions us well for the next key driver of our industry: the broader adoption of AI. As AI workloads move to the edge, demand on the network will increase significantly.

Speaker #3: Thanks, Daniel, and good morning, everyone. A big thank you for joining us today. We delivered a strong Q3, with continued expansion in our EBITDA margin, despite the FX headwinds.

Speaker #3: I would say that reflects our execution against both operational and strategic priorities over the last couple of years. We're optimistic about the growing demand for advanced mobile connectivity, as AI is starting to be rolled out.

Speaker #3: By structurally improving our cost base, we have positioned Ericsson to deliver resilient margins also in the current market backdrop. This will give further benefits from improving operating leverage when growth comes back and actually becomes a reality.

Speaker #3: Beyond operational improvements, of course, we focus on technology innovation, and that positions us well for the next key driver of our industry: the broader adoption of AI.

Speaker #3: As AI workloads move to the edge, demand on the network will increase significantly. These AI applications and AI devices will require wireless technology, which will place new demands on the connectivity.

Börje Ekholm: These AI applications and AI devices will require wireless technology, but it will also place new demands on the connectivity, such as ultra-low latency, high dependability, guaranteed uplink, and very high security demands. Best effort connectivity, think of that as Wi-Fi, 4G, and 5G non-standalone, will simply not be enough. To cater to these new types of demands, operators will need to invest in and migrate to 5G standalone networks, and later, of course, migrate into 6G. Their success here will depend on high-performing programmable networks, and here Ericsson is a leader. We're also seeing some frontrunner operators now starting to realize new monetization opportunities of network slices, as well as efforts to provide differentiated connectivity to different segments and different types of applications. Now let me move on to some key financial and strategic takeaways before Lars dives into the numbers.

Speaker #3: Such as ultra-low latency, high dependability, guaranteed uplink, and very high security demands. So, best-effort connectivity—think of that as Wi-Fi, 4G, and 5G non-standalone—will simply not be enough.

Speaker #3: To cater to these new types of demands, operators will need to invest in and migrate to 5G standalone networks, and later, of course, migrate to 6G.

Speaker #3: Their success here will depend on high-performing programmable networks, and here Ericsson is a leader. We're also seeing some frontrunner operators now starting to realize new monetization opportunities of network slices.

Speaker #3: As well as efforts to provide differentiated connectivity to different segments and different types of applications. So now let me move on to some key financial and strategic takeaways before Lars dives into the numbers.

Börje Ekholm: Organic sales declined by 2%, but we saw growth in three out of four market areas, with only the Americas reporting reduced sales following a particularly strong delivery in Q3 last year. FX continues to be a headwind, and we had a negative year-over-year impact of SEK 4.2 billion this quarter. As mentioned, we saw positive development in our margins. Gross margin came in at 48.1%, and we delivered another three-year high EBITDA margin of 14.7%, excluding the capital gain from the Iconectiv sale. This is now starting to approach our long-term target. The margin expansion reflects actions we've taken over the last years to increase operational excellence and efficiency, including the work we've done on our cost base. Over the last year, we've reduced our headcount by some 6,000, leveraging new ways of working, and that, of course, includes AI.

Speaker #3: Organic sales declined by 2%, but we saw growth in three out of four market areas, with only the Americas reporting reduced sales, following a particularly strong delivery in Q3 last year.

Speaker #3: FX continues to be a headwind, and we had a negative year-over-year impact of 4.2 billion kronor this quarter. As mentioned, we saw positive development in our margins: gross margin came in at 48.1%, and we delivered another three-year high EBITDA margin of 14.7%, excluding the capital gain from the iConnective side.

Speaker #3: And this is now starting to approach our long-term target. The margin expansion reflects actions we've taken over the last few years to increase operational excellence and efficiency.

Speaker #3: Including the work we've done on our cost base. Over the last year, we've reduced our headcount by approximately 6,000, leveraging new ways of working, and that of course includes AI.

Börje Ekholm: As we plan for a flattish market also going forward, we will continue our cost measures on levels similar to what we've done in the past years. The effect of actions that we have taken over the past years are now kind of flowing through the P&L and establishing the profitability at a new level. Our continued focus on cost management will provide incremental benefits going forward, but it will also give operating leverage should the market improve. We ended the quarter with an elevated cash position. That's driven by strong recurring cash flow, but also, of course, the iConnectiv sale. As a result, we see scope for increased shareholder returns through extra dividends and/or share buyback program. The board will revert with a proposal in time for the AGM, as you know is the practice or is the Swedish governance model.

Speaker #3: As we plan for a flattish market going forward, we will continue our cost measures on levels similar to what we've done in the past years.

Speaker #3: The effect of actions that we have taken over the past years is now kind of flowing through the P&L and establishing the profitability at a new level.

Speaker #3: Our continued focus on cost management will provide incremental benefits going forward, but it will also give us operating leverage should the market improve. We ended the quarter with an elevated cash position, driven by strong recurring cash flow and, of course, the iConnective sales.

Speaker #3: As a result, we see scope for increased shareholder returns through extra dividends and/or a share buyback program. The board will revert with a proposal in time for the AGM, as you know is the practice of the Swedish governance model.

Börje Ekholm: In parallel with strengthening the company operationally, we're continuing to execute on our strategy to capture a bigger share of the value created by connectivity. Let me expand that a bit further. In our core mobile infrastructure business, we signed new customer agreements in the strategically important Japanese market following our recent R&D investments. With Japan being one of the countries with a strong industrial base in such areas as automation and one of the densest networks that have still not built out 5G coverage, we see this as a key market going forward. We also increased our share in the UK with an eight-year partnership with Vodafone to supply a significant majority of the mobile networks and the entire core network. This morning, we announced a five-year strategic agreement with Vodafone in Europe for programmable networks, where we remain their primary vendor with more or less stable market share.

Speaker #3: In parallel with strengthening the company operationally, we're continuing to execute on our strategy to capture a bigger share of the value created by connectivity.

Speaker #3: So let me expand that a bit further. In our core mobile infrastructure business, we signed new customer agreements in the strategically important Japanese market following our recent R&D investments.

Speaker #3: With Japan being one of the countries with a strong industrial base in such areas as automation, and one of the densest networks that have still not built out 5G coverage, we see this as a key market going forward.

Speaker #3: We also increased our share in the UK with an eight-year partnership with Vodafone 3 to supply a significant majority of the mobile networks and the entire core network.

Speaker #3: And this morning, we announced a five-year strategic agreement with Vodafone in Europe for programmable networks, where we remain their primary vendor with more or less stable market share.

Börje Ekholm: Within the telco market, new monetization opportunities are needed to drive more network investments by our customers. We continue to execute on our strategy to create new use cases for mobile networks. For example, we're seeing good development in fixed wireless access, where customer satisfaction is typically higher than for fiber due to the ease of use of cellular or wireless technology. In the quarter, we announced a contract with Baltia Airtel to support their fixed wireless access rollout with Ericsson's core network portfolio. We're starting to see good traction in mission-critical, including, of course, defense. We're also taking important steps in our strategy to create a market by exposing the capabilities of the networks through APIs. This remains one of the key opportunities for us to capture more of the value created on top of the networks.

Speaker #3: Within the telco market, new monetization opportunities are needed to drive more network investments by our customers. So we continue to execute on our strategy to create new use cases for mobile networks.

Speaker #3: For example, we're seeing good development in fixed wireless access, where customer satisfaction is typically higher than for fiber, due to the ease of use of cellular or wireless technology.

Speaker #3: In the quarter, we announced a contract with Baltic Airtel to support their fixed wireless access rollout with Ericsson's core network portfolio. We're starting to see good traction in mission-critical areas, including, of course, defense. We're also taking important steps in our strategy to create a market by exposing the capabilities of the networks through APIs.

Speaker #3: This remains one of the key opportunities for us: to capture more of the value created on top of the networks. As you know, Aduna, our joint venture with a large operator, closed four network APIs this past quarter.

Börje Ekholm: As you know, ADUNA, our JV with the large operators for network APIs, closed this past quarter. Revenues are still small, but we see the uptake in Vonage API business is actually starting to come through. We see that in areas such as fraud protection as an early use case, but also in industrial applications. Today, we have already applications live in the market. Also in Vonage, we're expanding our ecosystem partnerships with AWS and added marketplace presence and product integration. Now, let me comment a bit further on the market development we saw in Q3. In market area Americas, sales declined by 8% year-over-year, with declines both in North and Latin America. This follows, of course, a very strong Q3 deliveries in 2024, where we had high deliveries to a number of large customers. Latin America continues to be a competitive market with overall low investment levels.

Speaker #3: Revenues are still small, but we see the uptake in Vonage API business actually starting to come through. We see that in areas such as fraud protection as an early use case, but also in industrial applications.

Speaker #3: And today, we already have applications live in the market. Also, in Vonage, we're expanding our ecosystem partnerships with AWS and have added marketplace presence and product integration.

Speaker #3: So now let me comment a bit further on the market development we saw in Q3. In the market area Americas, sales declined by 8% year-over-year, with declines both in North and Latin America.

Speaker #3: This follows, of course, a very strong Q3 deliveries in 2024, where we had high deliveries to a number of large customers. Latin America continues to be a competitive market, with overall low investment levels.

Börje Ekholm: Sales in Europe, Middle East, and Africa grew by 3% year-over-year, but if we look closer at the region, we saw very strong development in Africa, partly driven by new 5G launches in Egypt and Morocco. In both the Middle East and in Europe, sales declined, and we continue to see European customers being cautious with investments. In Southeast Asia, Oceania, and India, sales increased by 1% year-over-year, and India continues to have rather low investment levels, but it actually grew quarter over quarter. We saw a decline in networks, partly due to the low level of network investments in India, but also stiff competition in Southeast Asia. Cloud software and service, on the other hand, saw an increase in sales. Lastly, sales in Northeast Asia increased by 10%. That was due to higher network investments and deliveries in Japan.

Speaker #3: Sales in Europe, the Middle East, and Africa grew by 3% year-over-year. However, if we look closer at the region, we saw a very strong development in Africa, partly driven by new 5G launches in Egypt and Morocco.

Speaker #3: In both the Middle East and Europe, sales declined, and we continue to see European customers being cautious with investments. In Southeast Asia, Oceania, and India, sales increased by 1% year-over-year, and India continues to have rather low investment levels, but it actually grew quarter over quarter.

Speaker #3: We saw a decline in networks, partly due to the low level of network investments in India, but also stiff competition in Southeast Asia. Cloud software and services, on the other hand, saw an increase in sales.

Speaker #3: Lastly, sales in Northeast Asia increased by 10%. This was due to higher network investments and deliveries in Japan. In the quarter, we were awarded new agreements with customers in the Japanese market, including enhancements of SoftBank's 5G SA network, where we have clearly increased our market share.

Börje Ekholm: In the quarter, we were awarded new agreements with customers in the Japanese market, including enhancement of SoftBank's 5GSA network, where we have clearly increased our market share. Overall, I would say that we continue to have good discussions with all our customers in Japan. With that, I hand over to Lars to go through the financials in more detail. All right. Thank you. Net sales in Q3 totaled SEK 56.2 billion, with organic sales declining 2% year-on-year. Most regions grew, but North America declined, mainly reflecting tougher comparisons with a high period of customer investments last year. At the same time, reported sales decreased by 9%, impacted by a negative currency effect of SEK 4.2 billion. Taking a look at IPR performance, revenue declined by SEK 0.4 billion year-over-year, now standing at SEK 3.1 billion for Q3.

Speaker #3: Overall, I would say that we continue to have good discussions with all our customers in Japan. With that, I hand over to Lars to go through the financials in more detail.

Speaker #2: Alright, thank you.

Speaker #3: So, net sales in Q3 totaled $56.2 billion, with organic sales declining 2% year-on-year. Most regions grew, but North America declined, mainly reflecting tougher comparisons with a high period of customer investments last year.

Speaker #3: At the same time, reported sales decreased by 9%, impacted by a negative currency effect of $4.2 billion. Taking a look at IPR performance, revenue declined by $0.4 billion year-over-year, now standing at $3.1 billion for Q3.

Börje Ekholm: It's worth noting that last year's quarter included retroactive revenue, so that skews the comparison slightly. The run rate coming out of Q3 is still around SEK 13 billion. In Q3, adjusted gross income was SEK 27 billion, including a currency headwind of around SEK 2 billion. We saw an improvement in our adjusted gross margin reaching 48.1%, and this positive development is a result of our cost reduction measures and operational excellence in both networks and cloud software and services. Looking at gross margins sequentially, we held stable, even though we lost a temporary boost from the Q2 IPR settlement. Excluding IPR, the improvement was around two percentage points. In networks, this benefited from organizational effectiveness in the market areas with well-planned and executed service delivery. This helped also manage supply efficiently and further optimize inventory.

Speaker #3: It's worth noting that last year's quarter included retroactive revenue, which skews the comparisons slightly. The run rate coming out of Q3 is still around $13 billion.

Speaker #3: In Q3, adjusted gross income was $27 billion, including a currency headwind of around $2 billion. We saw an improvement in our adjusted gross margin, reaching 48.1%.

Speaker #3: And this positive development is a result of our cost reduction measures and operational excellence in both networks and cloud software and services. Looking at gross margin sequentially, we held stable, even though we lost a temporary boost from the Q2 IPR settlement.

Speaker #3: Excluding IPR, the improvement was around 2 percentage points. In networks, this benefited from organizational effectiveness in the market areas, with well-planned and executed service delivery.

Speaker #3: This helped also manage supply effectively and further optimize inventory. In cloud software and services, the improvement is mainly coming from services, where we are continuously improving our delivery performance.

Börje Ekholm: In cloud software and services, the improvement is mainly coming from services, where we are continuously improving our delivery performance. On the cost side, we made steady progress. Operating expenses, excluding restructuring charges, dropped to SEK 19.3 billion, around SEK 2 billion lower year-over-year. Of this, about half came from our cost initiatives, and the rest is mainly currency. Excluding the Iconectiv gain, adjusted EBITDA came in at SEK 8.2 billion, up by SEK 0.4 billion, including a negative currency impact of SEK 1.2 billion. The EBITDA margin was up around two percentage points to 14.7%. Behind this improvement is the good progress we have seen in terms of optimizing operations and lowering our operating expenses. Cash flow before M&A was SEK 6.6 billion, driven by earnings, with net operating assets broadly stable. Let's move to the segments.

Speaker #3: On the cost side, we made steady progress. Operating expenses, excluding restructuring charges, dropped to $19.3 billion, around $2 billion lower year-over-year. Of this, about half came from our cost initiatives, and the rest is mainly currency.

Speaker #3: Excluding the iConnective gain, adjusted EBITDA came in at $8.2 billion, up by $0.4 billion, including a negative currency impact of $1.2 billion. The EBITDA margin was up around 2 percentage points to 14.7.

Speaker #3: Behind this improvement is the good progress we have seen in terms of optimizing operations and lowering our operating expenses. Cash flow before M&A was $6.6 billion, driven by earnings, with net operating assets broadly stable.

Speaker #3: Let's move to the segments. In Networks, sales decreased by 11% year-over-year to $35.4 billion, with a negative currency impact of $2.8 billion. Organic sales decreased by 5%.

Börje Ekholm: In networks, sales decreased by 11% year-over-year to SEK 35.4 billion, with a negative currency impact of SEK 2.8 billion. Organic sales decreased by 5%. We saw organic growth in Market Area Northeast Asia, driven largely by Japan, which Börje already mentioned. Europe, Middle East, and Africa also grew, driven by Africa. Sales declined in Market Area Americas and in Southeast Asia and India. Networks' adjusted gross margin increased to 50.1%, benefiting from cost reduction actions and operational efficiencies despite the change in the market and product mix. Looking at the right-hand graph, the rolling four quarters' adjusted gross margin reached 49.9% and stabilized at the new level. Adjusted EBITDA in Networks decreased by $0.9 billion to $7.2 billion, including a negative currency impact of $1.1 billion. EBITDA margin of 20.3% remained stable compared to last year.

Speaker #3: We saw organic growth in the market area Northeast Asia, driven largely by Japan, which Barry already mentioned. Europe, the Middle East, and Africa also grew, driven by Africa.

Speaker #3: Sales declined in the market areas of the Americas, Southeast Asia, and India. Networks adjusted gross margin increased to 50.1%, benefiting from cost reduction actions and operational efficiencies, despite changes in the market and product mix.

Speaker #3: Looking at the right-hand graph, the rolling four quarters adjusted gross margin reached 49.9% and stabilized at a new level. Adjusted EBITDA in networks decreased by $0.9 billion to $7.2 billion, including a negative currency impact of $1.1 billion.

Speaker #3: The EBITDA margin of 20.3% remained stable compared to last year. Moving to cloud software and services, sales increased by 3% year-over-year to $15.3 billion, which includes a negative currency impact of $0.9 billion.

Börje Ekholm: Moving to Cloud Software and Services, sales increased by 3% year-over-year to $15.3 billion, which includes a negative currency impact of $0.9 billion. Organically, sales grew by 9%, mostly driven by higher core sales across all market areas. Sales growth was helped sequentially by a softer Q2 as well. Adjusted gross margin came in very strong in the quarter at 43.6%, an improvement of five percentage points compared to last year. This was a result of the continued focus on automation, efficiency, commercial discipline, and delivery performance. Looking at the right-hand graph, the rolling four quarters' adjusted gross margin reached 41.3%, a new high level. Adjusted EBITDA increased to $1.9 billion with a margin of 12.5%, supported by higher gross income, lower operating expenses, and the effective implementation of our strategic initiatives, including AI and automation investments and our commercial discipline.

Speaker #3: So, organically, sales grew by 9%, mostly driven by higher core sales across all market areas. Sales score for us helped sequentially by a softer Q2 as well.

Speaker #3: Adjusted gross margin came in very strong in the quarter at 43.6%, an improvement of 5 percentage points compared to last year. This was a result of the continued focus on automation, efficiency, commercial discipline, and delivery performance.

Speaker #3: And looking at the right-hand graph, the rolling four quarters adjusted gross margin reached 41.3%, a new high level. Adjusted EBITDA increased to $1.9 billion, with a margin of 12.5%, supported by higher gross income, lower operating expenses, and the effective implementation of our strategic initiatives, including AI and automation investments, and our commercial discipline.

Börje Ekholm: In Enterprise, sales decreased by 20%, impacted by divestments and currency, so organic sales were down by 7%. Global Communications Platform declined by 9%, reflecting the decision to scale back activities in some countries last year. The financial impact of this is now largely behind us, and we expect Enterprise sales to stabilize on an organic basis in Q4. Adjusted gross margin declined to 51.6%, driven by the iConnectiv divestment. Margins improved in both Global Communications Platform and Enterprise Wireless Solutions. Taking out the contribution from ADUNA and iConnectiv, which were divested in the quarter, adjusted EBITDA landed at minus $1.1 billion. Turning to free cash flow, which was $6.6 billion before M&A, a decline from $12.9 billion in Q3 2024. Last year, our cash flow received a boost from a reduction of operating working capital, driven by the completion of large-scale rollout projects and lower inventories.

Speaker #3: In enterprise, sales decreased by 20%, impacted by divestments and currency. So organic sales were down by 7%. Global communications platform declined by 9%, reflecting the decision to scale back activities in some countries last year.

Speaker #3: The financial impact of this is now largely behind us, so we expect enterprise sales to stabilize on an organic basis in Q4. Adjusted gross margin declined to 51.6%, driven by the iConnective divestment.

Speaker #3: Margins improved in both Global Communication Platform and Enterprise Wireless Solutions. Excluding the contributions from Aduna and iConnective, which were divested in the quarter, adjusted EBITDA landed at -$1.1 billion.

Speaker #3: Turning to free cash flow, which was $6.6 billion before M&A, a decline from $12.9 billion in Q3 2024. Last year, our cash flow received a boost from a reduction of operating working capital, driven by the completion of large-scale rollout projects and lower inventories.

Börje Ekholm: Operating cash flow was SEK 7.9 billion in the third quarter this year, driven by earnings, with net operating fairly stable. Net cash increased by SEK 15.8 billion compared to last year, of which around SEK 10 billion was from M&A. Net cash has now reached SEK 51.9 billion. Next, I will cover the outlook. The outlook assumes stable exchange rates and no changes in tariffs. For networks and cloud software and services, we expect Q4 sales growth to be broadly similar to the three-year average quarter-on-quarter seasonality. As mentioned before, we expect enterprise sales to stabilize year-over-year on an organic basis. Next, networks' gross margin. We expect networks' adjusted gross margin to be in the range of 49% to 51% for Q4.

Speaker #3: Operating cash flow was $7.9 billion in the third quarter this year, driven by earnings, with net operating fairly stable. Net cash increased by $15.8 billion compared to last year, of which around $10 billion was from M&A.

Speaker #3: Net cash has now reached $51.9 billion. Next, I will cover the outlook. The outlook assumes stable exchange rates and no changes in tariffs. For networks and cloud software and services, we expect Q4 sales growth to be broadly similar to the three-year average quarter-on-quarter seasonality.

Speaker #3: And as mentioned before, we expect enterprise sales to stabilize year-over-year on an organic basis. Next, then gross networks, gross margin. We expect networks adjusted gross margin to be in the range of 49% to 51% for Q4.

Börje Ekholm: Restructuring charges for 2025 are expected to remain at an elevated level, and with a flat RAN market, cost out remains an important level also for next year. With that, I will hand back to you, Börje.

Speaker #3: Restructuring charges for 2025 are expected to remain at an elevated level. With a flat RAN market, cost reduction remains an important lever for next year.

Speaker #3: With that, I will hand back to you, Barry.

Daniel Morris: Okay. Thank you, Lars. Our Q3 report highlights our laser focus on both strategic and operating priorities. Our strong results are a reflection of the actions we've taken to structurally improve our business in the past few years. This year, of course, includes both the work we've done to improve our cost base and the way we run the business with greater operational efficiency and commercial discipline. The results of these efforts are now clearly visible in our P&L, and we expect them to continue supporting performance going forward. On the commercial side, we've continued to strengthen our competitive position in mobile networks, and we're seeing good traction in key markets. This is a reflection of our technology leadership and the strength of our portfolio, and that has most recently been reconfirmed by both Gartner as well as Omdia.

Speaker #2: Okay, thank you, Lars. So our Q3 report highlights our laser focus on both strategic and operating priorities. Our strong results are a reflection of the actions we've taken to structurally improve our business in the past few years.

Speaker #2: This, of course, includes both the work we've done to improve our cost base and the way we run the business with greater operational efficiency and commercial discipline.

Speaker #2: The results of these efforts are now clearly visible in our P&L, and we expect them to continue supporting performance going forward. On the commercial side, we've continued to strengthen our competitive position in mobile networks, and we're seeing good traction in key markets.

Speaker #2: This is a reflection of our technology leadership and the strength of our portfolio, and that has most recently been reconfirmed by both Gartner as well as Omdia.

Daniel Morris: With programmable high-performance networks, our customers are well prepared for the growth in AI applications by having the best network for AI traffic. Our Open RAN-ready portfolio includes over 130 radio models and our future-proof hardware-agnostic software architecture that is AI native. It supports both our own silicon, Ericsson silicon, and third-party CPUs and GPUs, and it's already integrated with more than 10 third-party radios. To put Ericsson on a growth trajectory, we're executing on our strategy to expand the monetization opportunities of the network. Here, we're taking some important steps, of course, including our work in fixed wireless access, mission-critical, as well as, maybe more importantly, we're exposing to developers the network features through network APIs to drive innovation.

Speaker #2: With programmable high-performance networks, our customers are well prepared for the growth in AI applications by having the best network for AI traffic. Our open RAN-ready portfolio includes over 130 radio models and our future-proof, hardware-agnostic software architecture that is AI-native supports both AI on our own silicon, Ericsson silicon, and third-party CPUs and GPUs.

Speaker #2: And it's already integrated with more than 10 third-party radios. To put Ericsson on a growth trajectory, we're executing on our strategy to expand the monetization opportunities of the network.

Speaker #2: Here, we're taking some important steps, of course including our work in fixed wireless access, which is mission-critical. More importantly, we're exposing developers to the network features through network APIs to drive innovation.

Daniel Morris: This will make it possible for Ericsson and our CSP customers to capture an increasing share of the value created from connectivity, which so far, as you all know, have been going to hyperscalers and over-the-top players. Creating new use cases and new markets takes time, but we're moving from proof of concept into commercial deployment. This is reflected in our enterprise segment, which we expect to stabilize in Q4. We will continue to invest in technology leadership to ensure that Ericsson is leading in both its core mobile infrastructure business by having the best network for AI and, of course, into 6G, but also leading the development of new use cases and new applications of wireless networks. Looking ahead, we expect AI applications, as well as AI devices, to be increasingly the key driver of further investments in the networks.

Speaker #2: This will make it possible for Ericsson and our CSP customers to capture an increasing share of the value created from connectivity, which so far, as you all know, has been going to hyperscalers and over-the-top players.

Speaker #2: Of course, creating new use cases and new markets takes time, but we're moving from proof of concept into commercial deployment. This is reflected in our enterprise segment, which we expect to stabilize in Q4.

Speaker #2: We will continue to invest in technology leadership to ensure that Ericsson is leading in both its core mobile infrastructure business, by having the best network for AI, and of course into 6G, but also leading the development of new use cases and new applications of wireless networks.

Speaker #2: Looking ahead, we expect AI applications, as well as AI devices, to be increasingly the key driver of further investments in the networks. At the same time, we're facing a dynamic external environment with geopolitical uncertainty and a RAN market that has been flat for the last couple of decades.

Daniel Morris: At the same time, we're facing a dynamic external environment with geopolitical uncertainty and the RAN market that has been flat for the last couple of decades. We continue to take actions to structurally improve our business through rigorous cost management, including, of course, leveraging AI to change ways of working internally. This way, we're ensuring that Ericsson will continue to succeed across varying market conditions. Before we turn to Q&A, I would like to say a big thank you to all my colleagues for all their hard work in making these results possible. With that, let's open up for Q&A, and back to you, Daniel.

Speaker #2: So we continue to take actions to structurally improve our business through rigorous cost management, including, of course, leveraging AI to change ways of working internally.

Speaker #2: This way, we're ensuring that Ericsson will continue to succeed across varying market conditions. Before we turn to Q&A, I would like to say a big thank you to all my colleagues for their hard work in making these results possible.

Speaker #2: With that, let's open up for Q&A. Back to you, Daniel. Thanks, Barry. We'll now move to the Q&A section of the presentation. As a reminder, to ask a question, you'll need to press *1 and 1 on your telephone and wait for your name to be announced.

Lars Sandström: Thanks, Börje. We'll now move to the Q&A section of the presentation. As a reminder, to ask a question, you'll need to press star one and one on your telephone and wait for your name to be announced. If you're streaming the webcast, please could you mute the webcast audio while asking a question so that minimizes the audio feedback. As usual, can I just request one question per participant, please, so we have time to hear from as many of you as possible. Operator, we're ready to open the line for the first question. The first question this morning will come from Andrew Gardner at CITI. Please go ahead, Andrew. The line's open.

Speaker #2: If you're streaming the webcast, please mute the webcast audio while asking a question to minimize audio feedback. And as usual, can I just request one question per participant, please?

Speaker #2: So we have time to hear from as many of you as possible. Operator, we're ready to open the line for the first question. The first question this morning will come from Andrew Gardner at Citi.

Speaker #2: Please go ahead, Andrew. The line's open.

[Analyst 1]: Thank you, Daniel. Good morning all. I wanted to follow up, Börje, on the point you were making about the sort of level of sustainable margins that you're achieving at the moment. Another quarter where you're at the top end of the guidance range that you provided back at Q2. I was just thinking historically, oftentimes when Ericsson would talk about gross margins and in particular talking to us in the financial market about what we could expect into the future, it was all about mix and in particular regional mix. You've seen over the last year or so that regional mix has been dynamic, as you suggest, and yet you're still delivering pretty consistent gross margins quarter after quarter. Should we be looking less at the regional dynamics as we look into 2026 and beyond?

Speaker #4: Thank you, Daniel. Good morning, all. So, one of the follow-up points on the point you were making about the sort of level of sustainable margins that you're achieving at the moment: another quarter where you're at the top end of the guidance range that you've provided back at Q2.

Speaker #4: And I suppose, just thinking historically, oftentimes when Ericsson would talk about gross margins, and in particular, talking to us in the financial market about what we could expect into the future, it was all about mix, and in particular, regional mix.

Speaker #4: But you've seen, over the last year or so, that, you know, regional mix has been dynamic, as you suggest, and yet you're still delivering pretty consistent gross margins quarter after quarter.

Speaker #4: You know, should we be looking less at the regional dynamics as we look into 2026 and beyond? And if so, can you just help us understand what within the business, particularly around the cost-cutting and the product cost, that you've now been able to get to sort of this sustainable level of gross margins regardless of whether, you know, the U.S. is up or down or India is up or down?

[Analyst 1]: If so, can you just help us understand what, within the business, particularly around the cost cutting and the product cost, that you've now been able to get to sort of this sustainable level of gross margins regardless of whether U.S. is up or down or India is up or down? A bit more detail there would be really helpful in terms of thinking to next year. Thank you.

Speaker #4: A bit more detail there would be really helpful in terms of thinking to next year. Thank you.

Börje Ekholm: Thanks, Andrew. Great question. I would, if just I start, maybe Lars fill in, but the reality is we've been working over a number of years to structurally improve a couple of things in the business. One is the way we operate our supply chain, clearly. That's been, you know, of course, COVID disturbed it a bit, but those improvements we've been working on for a couple of years. In the last, I would say, year we've had more COVID-free supply chain, and that has, of course, helped. That's what you see now coming through. I would say that's one of the key parts. The other is on service delivery, where we have improved the way we operate internally by structurally taking out costs. All of these improvements we've done, in a way, actually take out a bit of the mix dependency.

Speaker #2: Thanks, Andrew. Great question. I would, if just I start, maybe Lars can fill in. But the reality is we've been working over a number of years to structurally improve a couple of things in the business.

Speaker #2: One is the way we operate our supply chain clearly. That's been, of course, COVID disturbed it a bit, but those improvements we've been working on for a couple of years. In the last, I would say, year, we've had a more COVID-free supply chain, and that has, of course, helped. That's what you see now coming through.

Speaker #2: I would say that's one of the key parts. The other is on service delivery, where we have improved the way we operate internally by structurally taking out costs.

Speaker #2: All of these improvements we've done, in a way, actually take out a bit of the mixed dependency. We still have a mixed dependency on software services and hardware, in reality.

Börje Ekholm: We still have a mix dependency on software services and hardware in reality, but it's less so of a geographic exposure. When you look going forward, you know, there is still a mix dependency for sure, geographic, but the underlying improvements are coming through in other areas where we still have a bit more to do. I think we can be even better on service delivery and actually leverage automation much more. We can for sure be better on OPEX, but that you've seen come through already, but I think we have more to do there, primarily by leveraging AI and changing our ways of working. I don't know what you want to add, Lars.

Speaker #2: But it's less so of a geographic exposure. So that's why, you know, when you look going forward, you know, there is still a mixed dependency for sure, geographic.

Speaker #2: But the underlying improvements are coming through in other areas. Where we still have a bit more to do, I think we can be even better on service delivery.

Speaker #2: And actually leverage automation much more. We can, for sure, be better on OPEX. You've seen this come through already, but I think we have more to do there.

Speaker #2: Primarily by leveraging AI and changing our ways of working. I don't know what you want to add, Lars.

Börje Ekholm: I think you covered the full P&L pretty well, and I think, as you highlighted there, it is really the product mix in the market that can vary between quarters depending on share of software, hardware, et cetera, and that is driving customers moving more and more into our advanced products with the margins that will come. That is also making it more even between different regions.

Speaker #3: I think you covered the full P&L pretty well, and I think, as you highlighted there, it is really the product mix in the market that can vary between quarters, depending on the share of software, hardware, etc.

Speaker #3: And that is driving customers to move more and more into our advanced products, with the margins that will come. That is also making it more even between different regions.

[Analyst 1]: Thanks for the question, Andrew.

Speaker #2: Thanks for the question, Andrew.

Lars Sandström: Thank you. Moving to the next question, please. The next question today will come from Erik Lindholm-Rostdal from SEB. Erik, please go ahead. The line's open.

Speaker #4: Thank you.

Speaker #2: Moving to the next question, please. The next question today will come from Erik Lindholm Rostow from SEB. Erik, please go ahead, the line's open.

[Analyst 2]: Yes. Good morning, guys. One question from me. Börje, you mentioned Edge AI being a key driver to future network investments. I just wanted to hear your thoughts here. I mean, is this something you are seeing in discussions with operators already today and that operators are sort of acting on, or is this more of something you see in the coming years? Thank you.

Speaker #5: Yes, good morning, guys. I have one question. So, Barry, you mentioned edge AI being a key driver for future network investments.

Speaker #5: And I just wanted to hear your thoughts here. I mean, is this something you're seeing in discussions with operators already today? And that operators are sort of acting on, or is this more of a something you see in the coming years?

Speaker #5: Thank you.

Börje Ekholm: Yeah. You know, if you look at so far, most of the AI investments have in reality been in the data center part for developing and training models, right? We see the market increasingly moving towards inference, and that, I would say, is going to be much more latency sensitive, and therefore, it will start to move out towards the edge. Here, I wouldn't point to an operator that has done investments, but we're starting to see certain applications demanding edge compute and edge AI or whatever you want to call it. I'm actually relatively hopeful that this will come through. It's not going to be next quarter. It's not going to be Q1, Q2. The amount of capital going into the big data centers, you know, that's going to continue. As applications start to pick up, I think the need for edge compute will be clear.

Speaker #2: Yeah, you know, if you look at, so far, most of the AI investments have, in reality, been in the data center part for developing and training models, right?

Speaker #2: We see the market increasingly moving towards inference, and that, I would say, is going to be much more latency-sensitive. Therefore, it will start to move out towards the edge.

Speaker #2: And here we are. I wouldn't point to an operator that has done investments, but we're starting to see certain applications demanding edge compute and edge AI, or whatever you want to call it.

Speaker #2: So, I am actually relatively hopeful that this will come through. It's not going to be next quarter. It's not going to be Q1 or Q2. The amount of capital going into the big data centers, you know, that's going to continue. But as applications start to pick up, I think the need for edge compute will be clear.

Börje Ekholm: If you start to think about it, the next step is, you know, where we've been smartphone-centric in the past, we may well move into other types of form factors. Think about AI glasses that will require much more low latency performance to be really usable. As we start to see that coming through, and there have been some launches of devices that actually will, you know, require a new form factor and will require new capabilities in the network. I do think this is starting to happen, but I would still say, you know, we take a bit of a prudent look at the market, adjust our cost structure to that prudent outlook, and then when the demand comes, then we'll be well positioned to capture that through our technology leadership.

Speaker #2: So, if you start to think about it, the next step is, you know, where we've been smartphone-centric in the past, we may well move into other types of form factors.

Speaker #2: So think about AI glasses that will require much more low-latency performance to be really usable. As we start to see that coming through, and there have been some launches of devices, that actually will require a new form factor and will require new capabilities in the network.

Speaker #2: So, I do think this is starting to happen. But I would still say, you know, we take a bit of a prudent look at the market, adjust our cost structure to that prudent outlook, and then when the demand comes, then we’ll be well positioned to capture that.

Speaker #2: Through our technology leadership.

[Analyst 2]: Excellent. Thank you.

Speaker #4: Excellent, thank you.

Lars Sandström: Thanks for the question, Erik. Moving to the next question, please. The next question will come from the line of Sebastian Stabovitz at Kepler Cheuvreux. Please go ahead, Sebastian. The line's open.

Speaker #2: Thanks for the question, Erik. Moving to the next question, please. The next question will come from the line of Sebastian Staberwitz at Kepler Giro.

Speaker #2: Please go ahead, Sebastian. The line's open.

[Analyst 3]: Hello, everyone. Thank you for taking my question. On cloud software and services, your business has accelerated quite substantially in the third quarter with a ramp of 5G core deployments in many areas. Do you still see 5G core picking up again in the fourth quarter and moving into Q2 2026, and is it something that could trigger some upgrades to 5G Advanced in the coming quarters, and could it have some positive implications to your mix and gross margin in the coming quarters? Thank you.

Speaker #6: Yeah, hello, everyone, and thank you for taking my question. On close of trend services, your business has accelerated quite substantially in the third quarter, with a ramp of 5G core deployments in many areas.

Speaker #6: You still see 5G core picking up again in the fourth quarter and moving into 2026. Is it something that could trigger some upgrades to 5G Advanced in the coming quarters?

Speaker #6: And could it have some positive implications for your mix and gross margin in the coming quarters? Thank you.

Lars Sandström: Do you want to take this one, Lars?

Speaker #2: Do you want to say this one, Lars?

Börje Ekholm: Yeah. No. On the financials, then, Bo, you can fill in on the 5G connection there. I think when it comes to core, we see a good development there and have seen for quite some time, and that is coming through now when other parts of the portfolio are stabilizing here when it comes to managed service, et cetera. As I mentioned before, also Q2 versus Q3, Q2 was a bit slow, so we got a bit of a boost in the growth rate here in the third quarter. Having said that, we still see a good development going forward also in managed services or in cloud software and services, including then, of course, core that we highlight here, where we are seeing good position, good reception in the market, and the focus on stable, resilient network is very high among our customers.

Speaker #3: No, on the financials then, Barry, you can fill in on the 5G connection there. But I think when it comes to core, we see a good development there and have seen for quite some time.

Speaker #3: And that is coming through now when other parts of the portfolio are stabilizing here, when it comes to managed services, etc. So then, as I mentioned before, Q2 versus Q3, Q2 was a bit slow.

Speaker #3: So, we got a bit of a boost in the growth rate here in the third quarter. But having said that, we still see good development going forward, also in managed services or in cloud software and services, including then, of course, core that we highlight here.

Speaker #3: We are seeing good position, good reception in the market, and the focus on a stable, resilient network is very high among our customers. I think we see that we have a good position there.

Börje Ekholm: I think we see that we have a good position there. I don't know if you want to add more on top of that, Bo. Yeah. I can add. The one thing which is important is, of course, that the operators need to migrate to 5G standalone. That is something that's going to be required in order to deliver the capabilities of 5G. When we have spoken in the past of low latency, very high bandwidth, network slices, et cetera, it's all depending on being on 5GSA. So far, it's, I would say, one in five operators or one in five networks maybe are upgraded. There are a couple of big operators that have really solid 5GSA networks now, and they are also starting to realize extra revenues from network slices, from differentiated offerings.

Speaker #3: I don't know if you want to add more on top of that, Barry.

Speaker #2: Yeah, I can add. The one thing that is important is, of course, that the operators need to migrate to 5G standalone. That is something that’s going to be required in order to deliver the capabilities of 5G.

Speaker #2: So when we have spoken in the past of low latency, very high bandwidth, network slices, etc., it's all depending on being on 5G SA.

Speaker #2: And so far, I would say one in five operators, or one in five networks, maybe are upgraded. There are a couple of big operators that have really solid 5G SA networks now.

Speaker #2: And they are also starting to realize extra revenues from network slices from differentiated offerings. So we're seeing that, you know, they need to do that migration.

Börje Ekholm: We're seeing that they need to do that migration, and when it happens, it will help our business both in mid-band coverage, but it will also, of course, be in 5G core. The position we have in 5G core is clearly today the world-leading, and I would say we stand to benefit from that migration that's going to happen over the next few years. I actually think in that sense, we can be, you know, we should be optimistic about the prospect. Still, you know, we run the business based on more flat assumptions, so we run the right cost structure and get the full operating leverage when growth comes. A little bit of the explanation of the better margins in Q3 is actually the operating leverage we get from growth as well.

Speaker #2: And when it happens, it will help our business, both in mid-band coverage, but it will also, of course, be in 5G core. So the position we have in 5G core is clearly, today, the world-leading.

Speaker #2: And I would say we stand to benefit from that migration. That's going to happen over the next few years. So, I actually think in that sense we can be, you know, we should be optimistic about the prospects.

Speaker #2: Still, you know, we run the business based on more flat assumptions, so we run the right cost structure and get the full operating leverage when growth comes.

Speaker #2: So a little bit of the explanation for the better margins in Q3 is actually the operating leverage we get from growth as well.

Lars Sandström: Thank you. Thanks for the question, Sebastian. Moving to the next question, please. Next question is coming from the line of Andreas Jolfen at DNB Carnegie. Please go ahead, Andreas.

Speaker #6: Thank you.

Speaker #2: Thanks for the question, Sebastian. Moving to the next question, please. The next question is coming from the line of Andreas Jolsen at DMB Carnegie. Please go ahead, Andreas.

[Analyst 2]: Thanks a lot, and good morning, everyone. I have a question on the cash flow. Börje, in the CEO statement, you mentioned that it's a recurring cash flow, which is a phrase at least I have not seen before when it comes to Ericsson. Can you explain a little bit what you mean with recurring cash flow? Is it because of a better cost base that makes the cash flow less volatile, or how should we see that recurring cash flow? Thank you.

Speaker #4: Thanks a lot, and good morning everyone. I have a question on the cash flow. Barry, in the CEO statement, you mentioned that it's recurring cash flow, which is a phrase at least I have not seen before when it comes to Ericsson.

Speaker #4: Can you explain a little bit about what you mean by recurring cash flow? Is it due to a better cost base that makes the cash flow less volatile, or how should we understand that recurring cash flow?

Speaker #4: Thank you.

Börje Ekholm: I could start maybe. The key is that we are a project business, right, and have been. I think we have put more efforts into a couple of things here. One is to improve the cost base, so we have less exposure to that. We're also gradually changing the way we sell our products, and that will increase the portion of software revenues coming in different models and kind of advanced services also coming in different models. When you put all of that together, we feel more comfortable about the stability of our cash flow generation going forward. Therefore, we start to talk about the recurring underlying ability to generate cash flow. It comes out of a couple of changes to cost structure and business model.

Speaker #2: I could start, maybe. So, that is, you know, the key is that we are a project business, right? And have been. I think we have put more effort into a couple of things here.

Speaker #2: One is to improve the cost base, so we have less exposure to that. We're also gradually changing the way we sell our products, which will increase the portion of software revenues coming in different models and kind of advanced services also coming in different models.

Speaker #2: When you put all of that together, we feel more comfortable about the stability of our cash flow generation going forward. Therefore, we start to talk about the recurring underlying ability to generate cash flow.

Speaker #2: But it comes out of a couple of changes to cost structure and business model. Thanks for the question, Andreas. Lars, anything to add?

Lars Sandström: Thanks for the question, Andreas. Lars, anything to add?

Börje Ekholm: Yeah. No, I think that comment is, of course, we will have, there can be swings within one or two quarters. That is normal in the project business that we have. As Börje said there, we are working actively to sort out so we have more the terms and conditions in a way that also support more solid cash flow and reduce volatility. That is what we have been working with for quite some time, and I think we can see the result coming out of that.

Speaker #3: No, I think that comment is of course we will have swings within one or two quarters. That is normal in the project business that we have.

Speaker #3: But as Barry said there, we are working actively to sort out, so we have a more the terms and conditions in a way that also support more solid cash flow and reduce volatility.

Speaker #3: So, that is what we have been working with for quite some time, and I think we can see the result coming out of that.

Lars Sandström: Thank you. Moving on to the next question, please. Next question is coming from Sandeep Deshpande at JPMorgan. Sandeep, please go ahead.

Speaker #2: Thank you. Moving on to the next question, please. The next question is coming from Sandeep Deshpandie at JP Morgan. Sandeep, please go ahead.

[Analyst 4]: Hi. Can you hear me?

Speaker #4: Yeah, hi. Can you hear me?

Lars Sandström: We do well. Thank you.

Speaker #2: We do well, thank you.

[Analyst 4]: Hi. Thank you for letting me on. My question is, you're guiding to seasonal growth in both networks and the CNS business into the next quarter, but also flagging increased uncertainty. Does this mean that if there was increased uncertainty, that there will be a change to this growth in the fourth quarter? Which are the areas in which this increased uncertainty is coming from? If there is incremental increased uncertainty that you're pointing to, or it is just ongoing uncertainty?

Speaker #4: Yeah, hi. Thank you for letting me on. My question is, you're guiding to seasonal growth in both networks and the CNS business into the next quarter.

Speaker #4: But also flagging increased uncertainty. Does this mean that if there was increased uncertainty, there will be a change to this growth in the fourth quarter?

Speaker #4: Or and which is the areas in which this increased uncertainty is coming from if there is incremental increased uncertainty that you're pointing to, or it is just ongoing uncertainty?

Börje Ekholm: Lars, when it comes to the guidance for the fourth quarter, this is what we see now coming into the fourth quarter. As you know, for us, our business is very back-end heavy in the quarter, but this is still what we see now. When it comes to increased uncertainty, it's not so much maybe in the quarter per se, but really a little bit long-term. There is an ongoing discussion on tariffs, as we all follow, that could impact us or our customers, etc. I think that is more what we are pointing to, that area.

Speaker #3: Lars, when it comes to the guidance for the fourth quarter, this is what we see now coming into the fourth quarter. As you know, for us, our business is very back-end heavy in the quarter.

Speaker #3: So, this is still what we see now. When it comes to increased uncertainty, it's not so much maybe in the quarter per se, but really a little bit long-term.

Speaker #3: There is an ongoing discussion on tariffs, as we all follow, that could impact us or our customers, etc. So I think that is more what we are pointing to in that area.

[Analyst 4]: Do you mean that if the increased uncertainty diminishes, you should do better than normal seasonality in the fourth quarter?

Speaker #4: So, do you mean that if the increased uncertainty diminishes, you should do better than normal seasonality in the fourth quarter?

Börje Ekholm: No, that is not what we are saying. We are pointing to the reality that we live in.

Speaker #3: No, that is not what we are saying. We are pointing to the reality that we live in.

[Analyst 4]: Okay, thank you.

Speaker #4: Okay, thank you.

Lars Sandström: Thanks, Sandeep. Moving to the next question, please. Next question is coming from Daniel Djerberg at Handelsbanken. Daniel, please go ahead.

Speaker #2: Thanks, Sandeep. Moving to the next question, please. The next question is coming from Daniel Gureberg at Handelsbanken. Daniel, please go ahead.

[Analyst 2]: Thank you, Daniel, and good morning, and congrats to the stable report. Coming back to recurring changed business model on cloud software and services, can you share with us ballpark the percentage of revenue that you consider being of recurring nature or at least a large part of the 5G core revenues that is recurring? Thanks.

Speaker #5: Thank you, Daniel. And good morning, and congrats on the stable report. Coming back to the recurring change in the business model on cloud software and services, can you share with us, ballpark, the percentage of revenue that you consider to be of a recurrent nature, or at least have a large part of the 5G core revenues that is recurring?

Speaker #5: Thanks.

Börje Ekholm: No, we don't go into those kind of agreements, but what we can say, or shares, so to say, but what we can see evolving here going forward continuously, what we are doing is moving into more and more recurring, but also a model based on more connected to the utilization, which, as utilization of networks increase, also has an impact on our revenues. That is maybe a little bit shift from what we have had historically, where we had more kind of fixed price models. I think that is also supporting our revenue going forward.

Speaker #3: No, we don't go into those kinds of agreements, but what we can share, so to say, is that what we see evolving here going forward continuously is that we are moving into more and more recurring models, but also a model based on being more connected to the utilization.

Speaker #3: Which, as utilization of networks increase, also has an impact on our revenues. And that is maybe a little bit shift from what we have had historically, where we had more kind of fixed price models.

Speaker #3: So, I think that is also supporting our revenue going forward.

[Analyst 2]: Thank you.

Speaker #2: Thank you. Thanks, Daniel. Moving to the next question, please. The next question is coming from Jacob Bluestone at BNP Paribas. Please go ahead, Jacob.

Lars Sandström: Thanks, Daniel. Moving to the next question, please. The next question is coming from Jacob Bluestone at BNP Paribas. Please go ahead, Jacob.

[Analyst 3]: Thanks, Daniel. I had a question on your OPEX. I was wondering if you could maybe give us a little bit of an update on what your sort of current thinking is in terms of OPEX evolution, I guess second half or Q4. I think you previously said you expected better than normal sort of H on H for the second half, but up to about Q3 now, which is pretty good. Just kind of any thoughts around OPEX next quarter and also how you see that perhaps evolving a little bit longer term as well?

Speaker #4: Thanks, Daniel. I had a question on your OPEX. I was wondering if you could maybe give us a little bit of an update on what your current thinking is in terms of OPEX evolution, I guess second half or Q4. I think you previously said you expected better than normal.

Speaker #4: Sort of H on H for the second half, but up to that Q3 now, which was pretty good. So just kind of any thoughts around OPEX next quarter and also how you see that perhaps evolving a little bit longer term as well.

Börje Ekholm: Yeah. Sure. When it comes to Q4, I think what we say, we had quite a big impact last year connected to incentives and provisioning there. That was, so to say, hurting or impacting the numbers there. Otherwise, it's rather normal seasonal. There is normally a bit of an uptick from Q3 going into Q4. That is what we expect there as well this year. When it comes going forward, as we talk about, we live in a flat RAN market. That is our, so to say, planning assumption. That means that we need to continuously fight with inflation coming through, including salary increases. Just to keep flat will require further activities on the cost side. We will do that also going forward. That I think is also part of the outlook that we say that remaining elevated levels and that work will need to continue.

Speaker #3: Yeah, when it comes to Q4, I think we can say we had quite a big impact last year, connected to incentives provisioning there. And that was, so to say, hurting or impacting the numbers.

Speaker #3: But otherwise, it's rather normal seasonal. There is normally a bit of an uptick from Q3 going into Q4. So that is what we expect there as well.

Speaker #3: This year, as we look forward, we acknowledge that we are operating in a flat RAN market. That is our, so to say, planning assumption.

Speaker #3: And that means that we need to continuously fight with inflation coming through, including salary increases. And just to keep flat, will require further activities on the cost side.

Speaker #3: And we will do that also going forward. I think that is also part of the outlook that we say will remain at elevated levels.

Speaker #3: And that work will need to continue. As Barry mentioned there, we have just compared to a year ago, and we are some 6,000 people less in the group.

Börje Ekholm: As Börje mentioned there, we have just compared to a year ago, we are some 6,000 people less in the group. That work will need to continue also going into next year.

Speaker #3: And that work will need to continue, also going into next year.

Lars Sandström: Excellent. Thank you. Thanks for the question, Jacob. Moving to the next question, please. Next question is coming from the line of Felix Hendriksen from Nordea. Please go ahead, Felix.

Speaker #4: Thanks there. Thank you.

Speaker #2: Thanks for the question, Jacob. Moving to the next question, please. The next question is coming from the line of Felix Hendriksen from Nordea. Please go ahead, Felix.

[Analyst 3]: Hi. Thanks for taking my question. It's on the North American markets. We see some increased appetite for mobile spectrum, as witnessed by, for example, AT&T's spectrum acquisition from EchoStar recently. When you discuss with your local clients in North America, how do you expect this sort of to translate into RAN equipment demand for you guys in the coming years? Thank you.

Speaker #6: Hi, thanks for taking my question. It's on the North American markets. We see some increased appetite for mobile spectrum, as witnessed by, for example, AT&T's spectrum acquisition from EcoStar recently.

Speaker #6: When you discuss with your local clients in North America, how do you expect this sort of demand to translate into RAN equipment demand for you guys in the coming years?

Speaker #6: Thank you.

Börje Ekholm: Thanks for the question. As you note, the spectrum is the lifeline of our industry and what keeps it ticking. It's the scarcest resource in the industry. You know what the strategies are of our customers, how to deploy that spectrum, I think they should answer. I'll keep an answer more on a generic level. This is clearly something that, of course, spectrum and spectrum free up is important for an industry. What we've seen in other markets, typically, it depends on your spectrum portfolio. How does it fit into your spectrum portfolio? Is it adjacent to some existing spectrum? If it is, you can most likely use some of existing equipment. If it's actually other spectrum, you will need more hardware. You will need software upgrades.

Speaker #2: Thank you for the question. As you noted, spectrum is the lifeline of our industry and what keeps it ticking. And it's the scarcest resource in the industry.

Speaker #2: You know, what the strategies are of our customers, how to deploy that spectrum, I think they should answer. So I'll keep an answer more on the generic level.

Speaker #2: But this is clearly something that, of course, spectrum and spectrum free-up is important for an industry. What we've seen in other markets typically, it depends on your spectrum portfolio.

Speaker #2: So how does it fit into your spectrum portfolio? Is it adjacent to some existing spectrum? If it is, you can most likely use some of the existing equipment.

Speaker #2: If it's actually other spectrum, you will need more hardware. You will need software upgrades. And what we have typically seen in other markets is that it actually drives CAPEX in the total market.

Börje Ekholm: What we have typically seen in other markets is it actually drives CapEx in the total market because clearly, you're going to have more capacity, better performance of the network as you use more spectrum. Therefore, other operators to match that typically need also to invest a bit more. Overall, getting into a market where spectrum kind of is actually increasing deployed will typically help the total market and will actually help the customer experience at the end of the day. In this case, let AT&T comment on their strategy, but I think it is worthwhile also to say that we had, as you may know, no market share with DISH. Let's see where this pans out, but AT&T talks about their own plans. Thanks.

Speaker #2: Because, clearly, you're going to have more capacity and better performance of the network as you use more spectrum. Therefore, other operators, to match that, typically need to invest a bit more.

Speaker #2: So overall, getting into a market where spectrum is actually increasing deployed will typically help the total market and will actually help the customer experience at the end of the day.

Speaker #2: So, in this case, let AT&T comment on their strategy. But I think it is worthwhile also to say that we had, as you may know, no market share with DISH.

Speaker #2: So, let's see where this pans out, but AT&T talks about their own plan.

Operator: for the question, Felix. Moving to the next question, please. Next question is coming from the line of Ulrik Rata from Bernstein. Go ahead, Ulrik, please.

Speaker #1: Thanks for the question, Felix.

Speaker #2: Thank you.

Speaker #1: Moving to the next question, please. The next question is coming from the line of Ulrik Raethe from Bernstein. Go ahead, Ulrik, please.

Daniel Morris: Yeah, thanks very much. I wanted to latch on to an earlier question on OPEX development. In the R&D spending, that's down 12% year on year. You're highlighting the report 3% from that aspect. That's still a very material cut on the R&D spend. Could you comment on what measures you use to make sure that you're not underinvesting? Because there is, of course, in the history, in the industry, in the equipment industry, of underinvestment and sort of resulting competitive issues. How do you make sure that the R&D cutbacks don't lead you into that future? Thank you.

Speaker #2: Yeah, thanks very much. I wanted to latch on to, an earlier question on OPEX development. in the R&D spending, that's down 12% year to year, to, sorry, year on year.

Speaker #2: You're highlighting the report of 3% from under that spec, so that's still a very material cut on the R&D spend. Could you comment on what measures you used to ensure that you're not under-investing?

Speaker #2: Because there is, of course, in the history, in the industry, in the equipment industry, under-investment that sort of results in competitive issues. How do you make sure that the R&D cutbacks don't lead you into that future?

Speaker #2: Thank you.

Börje Ekholm: I can just give you a comment on the financials first before you answer as well, Börje. I think you need to remember the currency impact on the OPEX that we have. As I mentioned there in the beginning, we have around $1 billion in currency impact, and that is, of course, also in R&D. If you look at networks, R&D spending, taking out the FX, is actually rather stable. Whereas in cloud software service, we have done work last year to reduce in some areas in the R&D and made prioritization in the product portfolio. We had some extra cost on the transition that we did within R&D in cloud software and service last year, so they were a little bit elevated. You should not see this as a big reduction in R&D spend, actually.

Speaker #3: I can just give you a comment on, on the financials first before you answer. as well, but I think we, you need to remember the current impact, on, o-on the OPEX that we have.

Speaker #3: And as I mentioned there in the beginning, we have around $1 billion in currency impact, and that is, of course, also in R&D. So if you look at networks, R&D spending, taking out FX, is actually rather stable.

Speaker #3: Whereas in cloud software services, we have done work last year to reduce in some areas in R&D and made prioritization in the product portfolio. We had some extra costs due to the transition that we did within R&D in cloud software and services last year.

Speaker #3: So they were a little bit elevated, so you should not see this as a big reduction in R&D spend, actually. Having said that, we continuously evaluate the different parts of the portfolio where we spend our R&D.

Börje Ekholm: Having said that, we continuously evaluate the different parts of the portfolio where we spend our R&D and make decisions in that. Anything you would like to add as well on that, Börje?

Speaker #3: and make decisions in that. Anything you would like to add as well on that by?

Lars Sandström: Yeah, just to be clear on a couple of things. Yes, we have, to actually turn around BCSS, we needed to focus the portfolio a bit. We actually said in a couple of areas we're not going to compete, so those we have actually exited. That helps the R&D spend. It doesn't impact necessarily the output where you need to win, right? That we've done. Then, as Lars Sandström said in a bit of cryptic, but you know the geopolitical situation has required us to shift resources a bit politically. That led to, as we went through that whole transition, that we duplicated a large part of R&D spend. That we don't need to have anymore as we have relocated R&D, so rebalanced R&D. That actually is another part. Yes, your question is well taken.

Speaker #2: Yeah, just to be clear on a couple of things. So, yes, we have, we needed to focus the portfolio a bit to actually turn around BCSS.

Speaker #2: So we actually said, in a couple of areas, we're not gonna compete. So those we have actually exited. That helps. The R&D spend, it doesn't impact necessarily the output where you need to win, right?

Speaker #2: so, so that, that we've done. Then as Lars said in a, in a bit of cryptic, but, you know, the geopolitical situation has, has required us to, to shift resources a bit.

Speaker #2: Politically, that led to us, we went through that whole transition. That we duplicated the large part of, of R&D spend. that, have now, we don't need to have that anymore as we have relocated R&D.

Speaker #2: So, rebalanced R&D. So, that actually is another part. Yes, your question is well taken. We should always worry that to be competitive.

Lars Sandström: We should always worry that to be competitive, we need to spend enough to do that, and we need to really be competitive with the Chinese. Our ambition is clearly to benchmark ourselves there. It's going to be their ambitions that drive our scaling of R&D. That's been the case for the last several years, at least during my tenure, and it will continue to be the case going forward. We are not going to jeopardize technology leadership. If we feel that there is any risk, you know, and that's a risk I don't see today, then we would, of course, need to reassess. As I see it, this is a natural, yeah, the FX part you can take out. The other one, actually, of removing duplication, that's been the key driver and something that was in the plans to do.

Speaker #2: We need to spend enough to do that, and we need to really be competitive with the Chinese. So, our ambition is clearly to benchmark ourselves there.

Speaker #2: So it's their ambitions that drive our scaling of R&D. That's been the case for the last several years, at least during my tenure.

Speaker #2: And it will continue to be the case going forward. So we are not going to jeopardize technology leadership. And if we feel that there is any risk, you know, and that's a risk I don't see today.

Speaker #2: Then we would, of course, need to reassess. But as I see it, this is natural. Yeah, the FX part you can take out.

Speaker #2: But the other one, actually, of removing duplication. That's been the key driver and something that was in the plans to do. We just didn't want to talk about it until it was done.

Lars Sandström: Just didn't want to talk about it until it was done.

Operator: Thanks, Ulrik. Thanks for the question.

Speaker #1: Thanks, Ulrik. Thanks for the question.

Daniel Morris: Thank you. Thank you very much.

Speaker #2: Thank you.

Speaker #2: Thank you very much.

Operator: Thanks. Moving to the next question, please. Next question is going to come from the line of Simon Granath at ABG. Please go ahead, Simon.

Speaker #1: Thanks. Moving to the next question, please. The next question is going to come from the line of Simon Granath, ABG. Please go ahead, Simon.

[Analyst 1]: Thanks, Daniel. On CSS, it once again delivers a quarter with year-on-year growth and strengthening margins. The rolling 12-month margin is at some 8%. I'm curious to hear on what sort of ballpark levels we could expect in the medium term. A question connecting to this: you continue to emphasize that 5G standalone is needed for the operators to fully leverage the networks. With 5G, there has clearly been a mismatch between deployment of 5G standalone and non-standalone. As we look into entering 6G in a couple of years, do you think that the matching will be better and thus the leverage of the networks? Thank you.

Speaker #4: Thanks, Daniel. So on CN, CSS, it once again delivers a quarter with year-on-year growth and strengthening margins. Now the rolling 12-month margin is set at some 8%.

Speaker #4: So, I'm curious to hear what sort of ballpark levels we could expect in the medium term. And then, a question connecting to this.

Speaker #4: You continue to emphasize that five-year spend alone is needed for the operators to fully leverage the networks. And with 5G, there has clearly been a mismatch between the deployment of 5G standalone and non-standalone.

Speaker #4: But as we look into entering 6G in a couple of years, do you think that the matching will be better? And will there be better leverage of the networks?

Speaker #4: Thank you.

Operator: Maybe Lars, briefly first on the margin.

Speaker #1: Maybe Lars briefly first on the margin there.

Börje Ekholm: Yeah, in the medium term, we have said to ourselves to work towards a solid double-digit margin in Cloud Software and Services. That is the first step that we're working on. You can see here in this quarter, you really see the impact on having a bit of growth on top and the leverage impact that gives, together with continued tight ship on the cost side. It really pays off. That is continued work on that end. On the 5GSA and 6G question there, Börje.

Speaker #3: Yes, we have said to ourselves to work towards a solid double-digit margin in cloud software and services. That is the first step that we're working on.

Speaker #3: And you can see here, in this quarter, you really see the impact of having a bit of growth on top, and the leverage impact that gives, together with continuous tight ship on the cost side.

Speaker #3: It really pays off. So that is a continued work on that end. And then, on the 5G SA and 6G question there, by?

Lars Sandström: Yeah. You know, 6G will most likely be defined in the next few years, right, with the first commercial sales. Everybody talks about 2030. I think it will be a bit earlier than that. Having said that, I think it's important to keep in mind. What I do think is that the big change between 5G NSA and 5GSA is that with 5G NSA or non-standalone, the market kind of continued to sell 4G plus. It was the established business model of most operators around the world. It became very natural to take that step. That didn't give, you know, and then use 5G almost as a marketing icon on the phone. In reality, it didn't give the extra capabilities. To get the extra capabilities, the operators would have needed or need to go to 5GSA.

Speaker #2: Yeah, you know, 6G will most likely be defined in the next few years, right? With first commercial sales, everybody talks about 2030.

Speaker #2: I think it will be a bit earlier than that. So, having said that, I think it's important to keep in mind what I do think is that the big change between 5G and SA, and 5G SA, is that with 5G and SA, or non-standalone, the market kind of continued to sell 4G Plus.

Speaker #2: It was the established business model of most operators around the world, so it became very natural to take that step. That didn't give, you know, and then use 5G almost as a marketing icon on the phone.

Speaker #2: But in reality, it didn't provide the extra capabilities. To gain those additional capabilities, the operators would have needed to transition to 5G SA.

Lars Sandström: I have no doubt that the new capabilities, call it network slicing, call it low latency, call it improved security, will be critical in applications over the next two, three years. That will require the operators to build out 5GSA. By the way, when they have built out 5GSA, they will put themselves on the journey to upgrade to 6G when that happens. 6G will be much more AI cloud-dependent. What you do in 5GSA paves the way into that world. What's more important, by being in 5GSA, you create the monetization models that will be needed in 6G as well. You go through what I will call the business development portion and the changes in your go-to-market capabilities that you're doing during 5G, and then you leverage that into 6G that will again provide better and stronger capabilities. It will depend on new types of monetization.

Speaker #2: And I have no doubt that the new capabilities—call it network slicing, call it low latency, call it improved security—will be critical in applications over the next two to three years.

Speaker #2: That will require the operators to build out 5G SA. And by the way, when they have built out 5G SA, they will put themselves on the journey to upgrade to 6G.

Speaker #2: When that happens, 6G will be much more AI cloud-dependent. But actually, what you do in 5G SA paves the way into that world. And what's more important, by being in 5G SA, you create the monetization models that will be needed in 6G as well.

Speaker #2: So then, you go through the, what I will call the business development portion, and the changes in your go-to-market capabilities.

Speaker #2: That you're doing during 5G, and then you leverage that into 6G. That will again provide better and stronger capabilities. But it will depend on a new type of monetization.

Lars Sandström: That needs to happen.

Speaker #2: So that needs to happen.

Operator: Thanks for the question, Simon. Moving to the next question, please. Next question is coming from the line of Sami Sarkamides at Danske Bank. Please go ahead, Sami.

Speaker #1: Thanks for the question, Simon. Moving to the next question, please. The next question is coming from the line of Sammy Sarcomedes at Danske Bank.

Speaker #1: Please go ahead, Sammy.

[Analyst 2]: Hi. I still wanted to go back to the strong performance at cloud software services. I guess you didn't call out any large deals, but were there any positive one-time factors impacting third quarter? Thinking forward, can we assume that the 8% run rate you've been able to achieve during the past four quarters is something that you've been able to attain on a permanent basis?

Speaker #5: Hi. I still wanted to go back to the strong performance in cloud software and services. I guess you didn't call out any large deals, but were there any positive one-time factors impacting the third quarter?

Speaker #5: And then, thinking forward, can we assume that, sort of the 8% run rate you’ve been able to achieve during the past four quarters?

Speaker #5: Is that something that you've been able to attain on a permanent basis?

Börje Ekholm: Yeah. In the quarter in Cloud Software and Services, on the question around, let's say, one-time items, I think it was actually quite a straightforward quarter. There's always a bit of product mix, etc. It was, I would say, a normal quarter to a large extent. That is on that. The run rate, I think what we're trying to say is that we see that we have managed to increase our gross margins and kept keeping costs stable here and continue to work on that. That gives us a good foundation going forward. We don't give guidance on run rate margins per se, per segments, etc. I think we are coming out here in the quarter, and as you have seen the step-up of the last quarters, we have come to a new level that I think is good going forward as well.

Speaker #3: Yeah, in the quarter, in cloud software and services, on the question around, let's say, one-time items, I think it was actually a norm quite straightforward quarter.

Speaker #3: There's always a bit of product mix, etc. But it was, I would say, a normal quarter, to a large extent. So that is on that.

Speaker #3: And then the run rate, I think what we're trying to say is that we see that we have managed to increase our gross margins and kept costs stable here, and we continue to work on that.

Speaker #3: That gives us a good foundation going forward. Then we don't give guidance on run rate margins per se, per segments, etc. So, but I think we are coming out here in the quarter, and as you have seen the step up over the last quarters, we have come to a new level that I think is good going forward as well.

[Analyst 1]: Okay. Thanks.

Speaker #1: Okay. Thanks.

Lars Sandström: The only thing I would add there, Daniel, is the one big effect normally on the margins tends to be our APR agreements, right? That is nothing that impacts this quarter.

Speaker #2: The only thing I would add there, Daniel, is that the one big effect normally on the margins tends to be our IPR agreements, right?

Speaker #2: And that is, nothing that impacts this quarter.

[Analyst 1]: No.

Speaker #5: No. No.

Operator: Thank you, Sami. We'll move to the next question, please. Next question is coming from Richard Kramer at Aretei. Please go ahead, Richard.

Speaker #1: Yeah. Thanks, Sammy. We'll move to the next question, please. The next question is coming from Richard Kramer at Arite. Please go ahead, Richard.

[Analyst 3]: Thanks very much, guys. I don't know if you can flesh this out at all, but you mentioned that you want to keep a solid net cash position. While you're considering what to do with the SEK 52 billion you've piled up on the balance sheet, can you talk through what the parameters of a solid net cash position are? Is it a portion or percentage of your OPEX? Is it something to do with the working capital demands? Can investors assume that Ericsson will not be deploying some of that SEK 52 billion to M&A after your experience with Vonage? Thanks.

Speaker #6: Thank you very much, everyone. I don't know if you can elaborate on this, but you mentioned that you want to maintain a solid net cash position.

Speaker #6: And while you're considering what to do with the 52 billion kronor you've piled up on the balance sheet, can you talk through what the parameters of a solid net cash position are?

Speaker #6: Is it a portion of your percentage of your OPEX? Is it something to do with the working capital demands? And can investors assume that Ericsson will not be deploying some of that $52 billion to M&A after your experience with Vonage?

Speaker #6: Thanks.

Börje Ekholm: Yeah. When it comes to our net cash position, I think the message is that we want to have a solid net cash position. That is foundational to ensure that we can maintain our R&D and our technology leadership, make sure that we have the trust of the customers. That is important, that we, as a partner with our customers, have a financial strength to deliver long-term over the contracts and commitments we have together. I think that is foundational for us. If there are volatilities happening in the market, we should also handle those kind of movements. That is not a change in that sense. Also, we are coming to a position where we talk now about excess cash and that we need to manage also here after now the divestment of iConnectiv coming into our net cash position.

Speaker #3: Yeah, when it comes to our net cash position, I think the message is that we want to have a solid net cash position.

Speaker #3: And that is foundational to ensure that we can maintain our R&D and our technology leadership, and make sure that we have the trust of our customers. That is important.

Speaker #3: That we, as a partner with our customers, have the financial strength to deliver long-term on the contracts and commitments we have together. So I think that is foundational for us.

Speaker #3: And then, of course, if there are volatilities happening in the market, we should also handle those kinds of movements. So that is, so to say, not the change in that sense.

Speaker #3: And then also, when it comes to, we are coming to a position where we talk now about excess cash. And that we need to manage, also here after now the divestment of iConnective coming into our net cash position.

Börje Ekholm: That is the signal that, and the comment we do here in the report now, that this is a work that has been ongoing by the board since that was announced at the last AGM. That work continues. I think there is a good work progressing. We give the highlight here now in the quarterly report that we're looking at it. We're looking at the options of extra dividend and/or buybacks. In Sweden, as we are a listed company here, the decision is made at the annual general meeting, which is taking place at spring. Normally, there is a proposal from the board coming in connection with the fourth quarter report on that topic. That's why it's coming at that stage. When it comes to your question around M&A as well, that has also not changed. We see we have the product portfolio we need to a large extent.

Speaker #3: And that is the signal that, and the comment we do here in the report now that this is a work that has been ongoing by the board since that was announced at the last AGM.

Speaker #3: And that work continues. I think there is good progress being made. We highlight that here in the quarterly report that we're looking at.

Speaker #3: We're looking at the options of extra dividends and/or buybacks. However, in Sweden, as we are a listed company here, the decision is made at the annual general meeting, which is taking place in the spring.

Speaker #3: And normally, there is a proposal from the board coming in connection with the fourth quarter report on that topic. So that's why it's coming at that stage.

Speaker #3: And when it comes to your question around M&A as well, that has also not changed. We see we have the product portfolio we need to a large extent.

Börje Ekholm: There could be some bolt-on acquisitions coming into the product portfolio or when it comes to geographical spread, but no major ones. That is also unchanged.

Speaker #3: That could be some bolt-on acquisitions coming, but, too, into the product portfolio or, when it comes to geographical spread, but no major ones. So that is also unchanged.

[Analyst 4]: Okay. Thanks.

Speaker #6: Okay. Thanks.

Operator: Thanks, Richard. We have time for one brief final question. One more question, please, into the queue. Final question today is coming from Rob Sanders at Deutsche Bank. Please go ahead, Rob.

Speaker #1: Thanks, Richard. We have time for one brief final question. So, one more question, please, into the queue. Final question today is coming from Rob Sanders at Deutsche Bank.

Speaker #1: Please go ahead, Rob.

[Analyst 5]: Yeah. Hi. Thanks for squeezing me in. I was just interested in an update on Germany. Given there has been some push to swap out Huawei and ZTE, there is this 2029 shut-off date, but it seems to be some resistance amongst the German telcos to actually go through with a full cleaning out of Chinese vendors. I was just interested in an update on that region where clearly your share is below what it is globally. Thanks.

Speaker #7: Yeah. Hi. Thanks for squeezing me in. I was just interested in an update on Germany, given there has been some push to swap out Huawei and ZTE.

Speaker #7: There is this 2029 shut-off date, but it seems there is some resistance among the German telcos to actually go through with a full cleaning out of Chinese vendors.

Speaker #7: So, I was just interested in an update on that region where clearly your share is below what it is globally. Thanks.

Operator: Börje, anything you'd add?

Speaker #1: Very anything you'd add?

Lars Sandström: Yeah, no, you're right. I would first say that there is a need to swap out Chinese vendors by 2029. You should keep that in mind. That's why it's slow-moving, and I would say there is no real progress on that. The legislation is rather clear that it allows high-risk vendors in the 5G network beyond 2029.

Speaker #2: Yeah, no, you're right. I would first say that there is a certain need to swap out Chinese vendors by 2029, so that you should keep that in mind.

Speaker #2: that's why it's, it's a slow, moving. And I would say there is no, no real progress on that. but, but the legislation is, is rather clear that it allows high-risk vendors in the 5G network beyond 2029.

Operator: Got it. Thank you. Thanks, Rob. Thanks for everyone for joining us. That concludes the conference call today.