Ericsson Q4 2025 Telefonaktiebolaget LM Ericsson Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Telefonaktiebolaget LM Ericsson Earnings Call
Hello everyone, and welcome to the presentation of Ericsson's Q4 2025 results. With me here in the studio today are Börje Ekholm, our President and CEO, and Lars Sandström, our Chief Financial Officer. As usual, we'll have a short presentation followed by Q&A, and in order to ask a question, you need to join the conference by phone. 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. These statements are based on our current expectations and certain planning assumptions, which are subject to risk and uncertainties. Actual results may differ materially due to factors mentioned in today's press release and discussed in the conference call.
Speaker #1: As usual, we'll have a short presentation followed by Q&A, and in order to ask a question, you need to join the conference by phone.
Speaker #1: 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 #1: 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.
Speaker #1: We encourage you to read about these risks and uncertainties in our earnings report, as well as in our annual report. I'll now hand the call over to Maria and to Lars for their introductory comments.
Operator: We encourage you to read about these risks and uncertainties in our earnings report as well as in our annual report. I'll now hand the call over to Börje and to Lars for their introductory comments. Thanks, Daniel. So, good morning, everyone, and thanks for joining us today. It was a strong end of the year as we executed with discipline and made solid progress against our strategic priorities. We are building a more resilient Ericsson. We expanded EBITDA margins year on year for the ninth consecutive quarter, and we're getting closer to our long-term target of 15% to 18% EBITDA margin. We ended the year with a net cash position of over SEK 61 billion.
We encourage you to read about these risks and uncertainties in our earnings report as well as in our annual report. I'll now hand the call over to Börje and to Lars for their introductory comments.
Speaker #2: Thanks, Daniel. So, good morning, everyone, and thanks for joining us today. It was a strong end to the year as we executed with discipline and made solid progress against our strategic priorities.
Q4 2025 Telefonaktiebolaget LM Ericsson Earnings Call
Börje Ekholm: Thanks, Daniel. So, good morning, everyone, and thanks for joining us today. It was a strong end of the year as we executed with discipline and made solid progress against our strategic priorities. We are building a more resilient Ericsson. We expanded EBITDA margins year on year for the ninth consecutive quarter, and we're getting closer to our long-term target of 15% to 18% EBITDA margin. We ended the year with a net cash position of over SEK 61 billion.
Speaker #2: We are building a more resilient Ericsson. We expanded EBITDA margins year-on-year for a ninth consecutive quarter, and we're getting closer to our long-term target of 15 to 18 percent EBITDA margin.
Speaker #2: And we ended the year with a net cash position of over 61 billion kronor. Our cost initiatives are just one component of our actions to structurally improve margins and cash flow.
Operator: Our cost initiatives are just one component of our actions to structurally improve margins and cash flow, and you have seen that we have reduced the headcount, for example, by 5,000 over the past year. We expect to continue reducing headcount going forward, and last week we announced some initiatives we're taking in Sweden as part of a global effort we do to keep cost efficiency in our business. With the operational improvements we've implemented over the past few years, they are now getting increasingly visible in the P&L, and we had another 48% gross margin quarter now in Q4. The EBITDA margin was 18% both for the quarter and the full year, and that means that we are tracking very close to our long-term financial targets after normalizing for the about 3 percentage point benefit from the Iconectiv gain.
Our cost initiatives are just one component of our actions to structurally improve margins and cash flow, and you have seen that we have reduced the headcount, for example, by 5,000 over the past year. We expect to continue reducing headcount going forward, and last week we announced some initiatives we're taking in Sweden as part of a global effort we do to keep cost efficiency in our business. With the operational improvements we've implemented over the past few years, they are now getting increasingly visible in the P&L, and we had another 48% gross margin quarter now in Q4. The EBITDA margin was 18% both for the quarter and the full year, and that means that we are tracking very close to our long-term financial targets after normalizing for the about 3 percentage point benefit from the Iconectiv gain.
Speaker #2: And you have seen that we have reduced the headcount, for example, by 5,000 over the past year. And we expect to continue reducing headcount going forward, and last week we announced some initiatives we're taking in Sweden, as part of our global effort we do to keep cost efficiency in our business.
Speaker #2: With the operational improvements we've implemented over the past few years, they are now getting increasingly visible in the P&L, and we had another 48 percent gross margin quarter now in Q4.
Speaker #2: The EBITDA margin was 18 percent both for the quarter and the full year, and that means that we are tracking very close to our long-term financial targets after normalizing for the about 3 percentage point benefit from the iConnective gain.
Speaker #2: And now, going forward, we expect to see improving operating leverage as our top line accelerates, which we could see in Q4. Now, the underlying demand environment for mobile networks remains actually flattish, but it is encouraging that we had organic growth of 6 percent during Q4.
Operator: Now, going forward, we expect to see improving operating leverage as our top line accelerates that we could see in Q4. Now that the underlying demand environment for mobile networks remains actually flattish, but it is encouraging that we had an organic growth of 6% during Q4. The reason for this is that over the past few years, we have invested in a number of growth opportunities and growth initiatives like 5G Core, Mission Critical Networks, and Enterprises, and I'll expand a bit more on these. In my view, we're actually entering a very exciting era of what we can call hyperconnectivity. Now we're starting to see everything being connected. I would say Ericsson is really well placed for this paradigm shift, and I believe we have the right strategy to win. To date, AI investments have been focused on models, semiconductors, data centers, etc.
Now, going forward, we expect to see improving operating leverage as our top line accelerates that we could see in Q4. Now that the underlying demand environment for mobile networks remains actually flattish, but it is encouraging that we had an organic growth of 6% during Q4. The reason for this is that over the past few years, we have invested in a number of growth opportunities and growth initiatives like 5G Core, Mission Critical Networks, and Enterprises, and I'll expand a bit more on these. In my view, we're actually entering a very exciting era of what we can call hyperconnectivity. Now we're starting to see everything being connected. I would say Ericsson is really well placed for this paradigm shift, and I believe we have the right strategy to win. To date, AI investments have been focused on models, semiconductors, data centers, etc.
Speaker #2: And the reason for this is that over the past few years, we have invested in a number of growth opportunities and growth initiatives like 5G Core, mission-critical networks, and enterprises.
Speaker #2: And I'll expand a bit more on this. In my view, we're actually entering a very exciting era of what we can call hyperconnectivity. So now we're starting to see everything being connected.
Speaker #2: I would vote for this paradigm shift. And I believe we have the right strategy to win. To date, AI investments have been focused on models, semiconductors, data centers, et cetera.
Speaker #2: For sure, these are really critical, but the real economic value will actually come in AI applications and devices. So, think about drones, humanoids, it could be connected glasses, XR glasses, it could be instantaneous or simultaneous translation services—you have a number of these things.
Operator: For sure, these are really critical, but the real economic value will actually come in AI applications and devices. So think about drones, humanoids, could be connected glasses, XR glasses, could be instantaneous or simultaneous translation services. You have a number of these things. All these new types of use cases, AI use cases, will really change the nature of traffic with much more demand for uplink and low latency, and it has to be resilient and trusted. So when you think about this new world with AIs going into the physical world, if you call it that kind of a physical AI, those applications and use cases will be distributed, but more importantly, they will also typically be mobile. So they will require advanced wireless connectivity. So best effort connectivity, Wi-Fi, 4G, and I would even say 5G non-standalone will simply not be enough.
For sure, these are really critical, but the real economic value will actually come in AI applications and devices. So think about drones, humanoids, could be connected glasses, XR glasses, could be instantaneous or simultaneous translation services. You have a number of these things. All these new types of use cases, AI use cases, will really change the nature of traffic with much more demand for uplink and low latency, and it has to be resilient and trusted. So when you think about this new world with AIs going into the physical world, if you call it that kind of a physical AI, those applications and use cases will be distributed, but more importantly, they will also typically be mobile. So they will require advanced wireless connectivity. So best effort connectivity, Wi-Fi, 4G, and I would even say 5G non-standalone will simply not be enough.
Speaker #2: All these new types of use cases—AI use cases—will really change the nature of traffic, with much more demand for uplink and low latency, and it has to be resilient and trusted.
Speaker #2: So when you think about these new worlds with AIs going into the physical world—if you call it that—kind of a physical AI, those applications and use cases will be distributed, but more importantly, they will also typically be mobile.
Speaker #2: So they will require advanced wireless connectivity. So best-effort connectivity, Wi-Fi, 4G, and I would even say 5G Non-Standalone, will simply not be enough.
Operator: Instead, we will require 5G Standalone today, and then later on we'll require 6G. But this new world will also require better mid-band coverage to get the right performance of the network. And I'll take just one example, and you see China having a 10x denser grid than the rest of the world. And I would say that's one of the reasons why many are saying China is a formidable competitor in AI today as they are moving into AI applications. So at this point in time, it's a very exciting time. Our strategy is to lead in mobile networks with high performance, autonomous, and programmable networks that are 5G native, and at the same time scale this mobile platform to new areas like mission-critical enterprise solutions, but also providing tools to developers.
Instead, we will require 5G Standalone today, and then later on we'll require 6G. But this new world will also require better mid-band coverage to get the right performance of the network. And I'll take just one example, and you see China having a 10x denser grid than the rest of the world. And I would say that's one of the reasons why many are saying China is a formidable competitor in AI today as they are moving into AI applications. So at this point in time, it's a very exciting time. Our strategy is to lead in mobile networks with high performance, autonomous, and programmable networks that are 5G native, and at the same time scale this mobile platform to new areas like mission-critical enterprise solutions, but also providing tools to developers.
Speaker #2: We require 5G standalone instead. We will today, and then later on we'll require 6G. But this new world will also require better mid-band coverage to get the right performance of the network.
Speaker #2: And I'll take just one example, and you see China having a 10x denser grid than the rest of the world. And I would say that's one of the reasons why many are saying China is a formidable competitor in AI today, as they are moving into AI applications.
Speaker #2: So at this point in time, it's a very exciting time. Our strategy is to lead in mobile networks with high-performance, autonomous, and programmable networks that are 5G native, and at the same time, scale these mobile platforms to new areas like mission-critical enterprise solutions, but also providing tools to developers.
Speaker #2: So now, let me go briefly through some of the progress we made against our strategic initiatives during the last year. Through our high-performing, programmable, and autonomous network, we're enabling our CSP customers to deliver differentiated performance and create new applications and use cases to monetize.
Operator: So now let me go briefly through some of the progress we made against our strategic initiatives during the last year. Through our high-performing, programmable, and autonomous network, we're enabling our CSP customers to deliver differentiated performance and create new applications and use cases to monetize. And when you think about differentiated performance, it's actually creating dedicated performance for the application you have at hand. And during the year, we actually signed several key agreements with frontrunner customers like Telstra and Vodafone, but we also made critical inroads in the important Japanese market with all leading operators. These advanced networks that we're building together with frontrunner customers will be key to monetize and scale the AI opportunity. In parallel, we focused on scaling the mobile platform to new use cases and sectors.
So now let me go briefly through some of the progress we made against our strategic initiatives during the last year. Through our high-performing, programmable, and autonomous network, we're enabling our CSP customers to deliver differentiated performance and create new applications and use cases to monetize. And when you think about differentiated performance, it's actually creating dedicated performance for the application you have at hand. And during the year, we actually signed several key agreements with frontrunner customers like Telstra and Vodafone, but we also made critical inroads in the important Japanese market with all leading operators. These advanced networks that we're building together with frontrunner customers will be key to monetize and scale the AI opportunity. In parallel, we focused on scaling the mobile platform to new use cases and sectors.
Speaker #2: And when you think about differentiated performance, it's actually creating dedicated performance for the application you have at hand. And during the year, we actually signed several key agreements with frontrunner customers like Telstra and Vodafone, but we also made critical inroads in the important Japanese market with all leading operators.
Speaker #2: These advanced networks that we're building together with frontrunner customers will be key to monetize and scale the AI opportunity. In parallel, we focused on scaling the mobile platform to new use cases and sectors, the most mature new use case is fixed wireless access, that during 2025 actually reached 150 million global subscribers.
Operator: The most mature new use case is fixed wireless access that during 2025 actually reached 150 million global subscribers. Typically, and most often, they have better customer satisfaction than other access technologies like fiber, for example. Now, as you've heard me say earlier, we're also starting to see traction within mission-critical applications. This, we think, is a key growth opportunity for us going forward. During 2025, we executed many new agreements in the public safety sector, and we're also targeting national security and defense operations. On the enterprise side, we're continuing to strengthen our position. The market for network APIs is actually starting to develop. In 2025, Vonage was first to offer aggregated access to network APIs across all three major US carriers. These advanced APIs included advanced fraud detection, and we have significant customer interest today.
The most mature new use case is fixed wireless access that during 2025 actually reached 150 million global subscribers. Typically, and most often, they have better customer satisfaction than other access technologies like fiber, for example. Now, as you've heard me say earlier, we're also starting to see traction within mission-critical applications. This, we think, is a key growth opportunity for us going forward. During 2025, we executed many new agreements in the public safety sector, and we're also targeting national security and defense operations. On the enterprise side, we're continuing to strengthen our position. The market for network APIs is actually starting to develop. In 2025, Vonage was first to offer aggregated access to network APIs across all three major US carriers. These advanced APIs included advanced fraud detection, and we have significant customer interest today.
Speaker #2: And typically, and most often, they have better customer satisfaction than other access technologies, like fiber, for example. And now, as you've heard me say earlier, we're also starting to see traction within mission-critical applications.
Speaker #2: And this, we think, is a key growth opportunity for us going forward. During 2025, we executed many new agreements in the public safety sector, and we're also targeting national security and defense operations.
Speaker #2: On the enterprise side, we're continuing to strengthen our position. The market for network API is actually starting to develop. In 2025, Vonage was first to offer aggregated access to network APIs across all three major US carriers.
Speaker #2: And these advanced APIs included advanced fraud detection, which we have significant today. Our joint venture, customer interest Eduna, onboarded and achieved full coverage in five countries, including the US, Spain, Germany, Canada, and the Netherlands.
Operator: Our joint venture, Aduna, onboarded and achieved full coverage in five countries, including the US, Spain, Germany, Canada, and the Netherlands. In Enterprise Wireless Solutions, we're seeing the market for Private 5G starting to industrialize. It's still, though, early days, but we continue to see growth in our Wireless WAN solutions. But that was partly offset by lower sales in Private 5G. So it's still a developing market here. So, but before passing on to Lars to go through a bit more on the numbers, I'd like to take a moment to just go through our capital allocation strategy. Our top priority is to invest for technology leadership, and we expect this to be largely organic. We don't really see any need for large acquisitions going forward, as we believe we have the assets needed to execute on our strategy.
Our joint venture, Aduna, onboarded and achieved full coverage in five countries, including the US, Spain, Germany, Canada, and the Netherlands. In Enterprise Wireless Solutions, we're seeing the market for Private 5G starting to industrialize. It's still, though, early days, but we continue to see growth in our Wireless WAN solutions. But that was partly offset by lower sales in Private 5G. So it's still a developing market here. So, but before passing on to Lars to go through a bit more on the numbers, I'd like to take a moment to just go through our capital allocation strategy. Our top priority is to invest for technology leadership, and we expect this to be largely organic. We don't really see any need for large acquisitions going forward, as we believe we have the assets needed to execute on our strategy.
Speaker #2: We're seeing the market in enterprise wireless for private 5G starting to industrialize. It's still, though, early days. So we continue to see growth in our wireless WAN solutions.
Speaker #2: But that was partly offset by lower sales in private 5G. So it's still a developing market here. But before passing on to Lars to go through a bit more on the numbers, I'd like to take a moment to just go through our capital allocation strategy.
Speaker #2: Technology leadership. And our top priority is to invest for growth, and we expect this to be largely organic. We don't really see any need for large acquisitions going forward, as we believe we have the assets needed to execute on our strategy.
Speaker #2: However, we expect to see some smaller potential tuck-ins, but these will be smaller in nature. So, our current very strong financial position offers scope for increased shareholder distributions.
Operator: However, we expect to see some smaller potential tuck-ins, but that will be smaller in nature. Our current very strong financial position offers scope for increased shareholder distributions. As you have seen in this report, the board is proposing an increased dividend to SEK 3 per share and a buyback program of up to SEK 15 billion. That would be a total of SEK 25 billion to shareholders. This represents the largest shareholder distribution in our history and reflects our strong position and the board's confidence in our strategy. Lars will now go through this as well as our financials. Over to you, Lars. All right, thank you, Börje. I will begin with some additional comments on the group before moving on to the segments.
However, we expect to see some smaller potential tuck-ins, but that will be smaller in nature. Our current very strong financial position offers scope for increased shareholder distributions. As you have seen in this report, the board is proposing an increased dividend to SEK 3 per share and a buyback program of up to SEK 15 billion. That would be a total of SEK 25 billion to shareholders. This represents the largest shareholder distribution in our history and reflects our strong position and the board's confidence in our strategy. Lars will now go through this as well as our financials. Over to you, Lars.
Speaker #2: And as you have seen in this report, the Board is proposing an increased dividend to 3 kronor per share, and the buyback program of up to SEK 15 billion of SEK 25 billion to shareholders.
Speaker #2: This represents the largest shareholder distribution in our history and reflects our strong position and the board's confidence in our strategy. So, Lars will now go through this as well as our financials.
Speaker #2: So, over to you, Lars. All right, thank you. With some additional comments on the segments: net sales in Q4 totaled SEK 69.3 billion, with organic sales growing 6% year on year, and with growth in all segments.
Lars Sandström: All right, thank you, Börje. I will begin with some additional comments on the group before moving on to the segments.
Operator: Net sales in Q4 totaled 69.3 billion SEK, with organic sales growing 6% year on year and with growth in all segments. Sales grew in the market area Europe, Middle East, and Africa, and in market areas Southeast Asia, Oceania, and India. Market area Americas was broadly stable, impacted by intense competition in Latin America, offset by slight growth in North America, driven by higher software growth. Northeast Asia declined. Reported sales decreased by 5%, impacted by a negative currency effect of 6.8 billion. In Q4, adjusted gross income was 33.2 billion, including a currency headwind of 3.6 billion. Adjusted gross margin reached 48% as a result of our cost reduction measures and operational excellence in both networks and cloud and software and services. On the cost side, we made steady progress. Operating expenses, excluding restructuring charges, dropped 21.4 billion, around 2 billion lower year over year.
Net sales in Q4 totaled 69.3 billion SEK, with organic sales growing 6% year on year and with growth in all segments. Sales grew in the market area Europe, Middle East, and Africa, and in market areas Southeast Asia, Oceania, and India. Market area Americas was broadly stable, impacted by intense competition in Latin America, offset by slight growth in North America, driven by higher software growth. Northeast Asia declined. Reported sales decreased by 5%, impacted by a negative currency effect of 6.8 billion. In Q4, adjusted gross income was 33.2 billion, including a currency headwind of 3.6 billion. Adjusted gross margin reached 48% as a result of our cost reduction measures and operational excellence in both networks and cloud and software and services. On the cost side, we made steady progress. Operating expenses, excluding restructuring charges, dropped 21.4 billion, around 2 billion lower year over year.
Speaker #2: Sales grew in the market area Europe, Middle East, and Africa, and in market areas Southeast Asia, Oceania, and India. Market area Americas was broadly stable, impacted by intense competition in Latin America, offset by slight growth in North America.
Speaker #2: Software growth in the Northeast was driven by higher Asia, which declined. Reported sales decreased by 5%, impacted by a negative currency effect of $6.8 billion. In Q4, adjusted gross income was $33.2 billion, including a currency headwind of $3.6 billion.
Speaker #2: Adjusted gross margin reached 48% as a result of our cost reduction measures and operational excellence in both Networks and Cloud, and Software and Services.
Speaker #2: On the cost side, we made steady progress. Operating expenses, excluding restructuring charges, dropped to 22–21.4 billion—around $2 billion lower year over year. Of these, about half is currency, and the rest is cost initiatives.
Operator: Of these, about half is currency, and the rest is cost initiatives. Excluding FX, R&D remained broadly stable. Adjusted EBITDA was SEK 12.7 billion, up by SEK 2.4 billion, including a negative currency impact of SEK 2.5 billion. The EBITDA margin was up around 4 percentage points to 18.3%. Behind this improvement is the good progress we've seen in terms of optimizing our operations and lowering our operating expenses. Cash flow before M&A was SEK 14.9 billion, driven by earnings and reduced net operating assets. As Börje has already highlighted, the board will propose higher shareholder distributions following the good 2025 cash generation. Let's move on to the result for the full year. Net sales amounted to SEK 236.7 billion, and organic sales grew by 2%. Growth in Americas and in Europe, Middle East, and Africa was partly offset by declines in the other market areas.
Of these, about half is currency, and the rest is cost initiatives. Excluding FX, R&D remained broadly stable. Adjusted EBITDA was SEK 12.7 billion, up by SEK 2.4 billion, including a negative currency impact of SEK 2.5 billion. The EBITDA margin was up around 4 percentage points to 18.3%. Behind this improvement is the good progress we've seen in terms of optimizing our operations and lowering our operating expenses. Cash flow before M&A was SEK 14.9 billion, driven by earnings and reduced net operating assets. As Börje has already highlighted, the board will propose higher shareholder distributions following the good 2025 cash generation. Let's move on to the result for the full year. Net sales amounted to SEK 236.7 billion, and organic sales grew by 2%. Growth in Americas and in Europe, Middle East, and Africa was partly offset by declines in the other market areas.
Speaker #2: Excluding FX, R&D remained broadly stable. Adjusted EBITDA was $12.7 billion, up by $2.4 billion, including a negative currency impact of $2.5 billion. And the EBITDA margin was up around 4 percentage points to 18.3%.
Speaker #2: Behind this improvement is the good progress we've seen in terms of optimizing our operations and lowering our operating expenses. Cash flow before M&A was SEK 14.9 billion, driven by earnings and reduced net operating assets.
Speaker #2: As Maria has already highlighted, the Board will propose higher shareholder distributions following the good 2025 cash generation. Let's move on to the results for the full year.
Speaker #2: Net sales amounted to $236.7 billion, and organic sales grew by 2%. Growth in the Americas and in Europe, Middle East, and Africa was partly offset by declines in the other market areas.
Speaker #2: At the same time, reported sales decreased by 5%, impacted by a negative currency effect of $13.9 billion. The sales decline, which gives a significant volume impact on gross income, was smaller than offset by higher gross margins.
Operator: At the same time, reported sales decreased by 5%, impacted by a negative currency effect of SEK 13.9 billion. The sales decline, which gives a significant volume impact on gross income, was more than offset by higher gross margins. Adjusted gross margin was 48.1%, with support from cost reduction initiatives, and operational efficiency. The result on adjusted gross income was an increase of SEK 2.5 billion to SEK 113.9 billion, despite the negative currency impact of SEK 7.2 billion. Turning to operating costs, excluding restructuring charges and impairments, operating expenses dropped to SEK 81.2 billion, which is SEK 7.4 billion lower than the prior year. Of these, about 2/3 come from our cost initiatives, mainly from SG&A, and the rest is currency. Adjusted EBITDA increased to SEK 42.9 billion, and the margin was 18.1%, or 14.9% excluding the capital gain from Iconectiv.
At the same time, reported sales decreased by 5%, impacted by a negative currency effect of SEK 13.9 billion. The sales decline, which gives a significant volume impact on gross income, was more than offset by higher gross margins. Adjusted gross margin was 48.1%, with support from cost reduction initiatives, and operational efficiency. The result on adjusted gross income was an increase of SEK 2.5 billion to SEK 113.9 billion, despite the negative currency impact of SEK 7.2 billion. Turning to operating costs, excluding restructuring charges and impairments, operating expenses dropped to SEK 81.2 billion, which is SEK 7.4 billion lower than the prior year. Of these, about 2/3 come from our cost initiatives, mainly from SG&A, and the rest is currency. Adjusted EBITDA increased to SEK 42.9 billion, and the margin was 18.1%, or 14.9% excluding the capital gain from Iconectiv.
Speaker #2: Adjusted gross margin was 48.1%, with support from cost reduction initiatives and operational efficiency. The result on adjusted gross income was an increase of $2.5 billion to $113.9 billion.
Speaker #2: Despite the negative currency impact of $7.2 billion. Turning to operating costs, excluding restructuring charges and impairments, operating expenses dropped to $81.2 billion, which is $7.4 billion lower than the prior year.
Speaker #2: Of these, about two-thirds come from our cost initiatives, mainly from SG&A, and the rest is currency. Adjusted EBITDA increased to SEK 42.9 billion, and the margin was 18.1%, or 14.9% excluding the capital gain from iConnective.
Speaker #2: Net income for the full year was $28.7 billion, including the benefit from iConnective. The gain from iConnective. Cash flow before M&A was $26.8 billion, a reduction of around $13 billion compared to the prior year.
Operator: Net income for the full year was SEK 28.7 billion, including the benefit from Iconectiv and the gain from Iconectiv. Cash flow before M&A was SEK 26.8 billion, a reduction of around SEK 13 billion compared to the prior year. In 2024, a strong working capital reduction contributed to higher operating cash flow. I'll cover cash flow more in details here later. So let's move to the segments. In networks, sales decreased by 6% year over year to SEK 44.2 billion, with a negative currency impact of SEK 4.4 billion. So organic sales increased by 4%. We saw organic growth in market area Europe, Middle East, and Africa, driven by Middle East and Africa. Sales also grew in Southeast Asia, driven by Vietnam. Sales declined slightly in Americas due to continued price competition in Latin America. Sales were broadly stable in North America with continued healthy investment levels.
Net income for the full year was SEK 28.7 billion, including the benefit from Iconectiv and the gain from Iconectiv. Cash flow before M&A was SEK 26.8 billion, a reduction of around SEK 13 billion compared to the prior year. In 2024, a strong working capital reduction contributed to higher operating cash flow. I'll cover cash flow more in details here later. So let's move to the segments. In networks, sales decreased by 6% year over year to SEK 44.2 billion, with a negative currency impact of SEK 4.4 billion. So organic sales increased by 4%. We saw organic growth in market area Europe, Middle East, and Africa, driven by Middle East and Africa. Sales also grew in Southeast Asia, driven by Vietnam. Sales declined slightly in Americas due to continued price competition in Latin America. Sales were broadly stable in North America with continued healthy investment levels.
Speaker #2: In 2024, a strong working capital reduction contributed to higher operating cash flow. I'll cover cash flow in more detail here later. So let's move to the segments.
Speaker #2: In Networks, sales decreased by 6% year over year to SEK 44.2 billion, with a negative currency impact of SEK 4.4 billion. So, organic sales increased by 4%.
Speaker #2: We saw organic growth in the market area Europe, Middle East, and Africa, driven by the Middle East and Africa. Sales also grew in Southeast Asia, driven by Vietnam.
Speaker #2: Sales declined slightly in the Americas due to continued price competition in Latin America. Sales were broadly stable in North America, with continued healthy investment levels.
Speaker #2: Sales also declined in Northeast Asia due to the timing of network investments. And Networks' adjusted gross margin increased to 49.6%, despite the higher share of service sales.
Operator: Sales also declined in Northeast Asia due to timing of network investments. Networks' adjusted gross margin increased to 49.6% despite the higher share of service sales. The margin benefited from cost reduction actions and operational efficiencies. Adjusted EBITDA in networks was stable at SEK 10.1 billion despite the currency headwind of SEK 1.8 billion. Adjusted EBITDA margin was 22.8%, an increase of 1.2 percentage points compared to last year. Looking at the right-hand graph, the full-year adjusted gross margin reached 50% and stabilized at a new level. Adjusted EBITDA margin reached 20.7%. Moving on to segment cloud software and services. Sales increased by 3% year over year to SEK 20 billion despite the negative currency impact of SEK 1.8 billion. Organically, sales grew by 12%, mostly driven by higher core sales across all market areas and timing of project deliveries.
Sales also declined in Northeast Asia due to timing of network investments. Networks' adjusted gross margin increased to 49.6% despite the higher share of service sales. The margin benefited from cost reduction actions and operational efficiencies. Adjusted EBITDA in networks was stable at SEK 10.1 billion despite the currency headwind of SEK 1.8 billion. Adjusted EBITDA margin was 22.8%, an increase of 1.2 percentage points compared to last year. Looking at the right-hand graph, the full-year adjusted gross margin reached 50% and stabilized at a new level. Adjusted EBITDA margin reached 20.7%. Moving on to segment cloud software and services. Sales increased by 3% year over year to SEK 20 billion despite the negative currency impact of SEK 1.8 billion. Organically, sales grew by 12%, mostly driven by higher core sales across all market areas and timing of project deliveries.
Speaker #2: And the margin benefited from cost reduction actions and operational efficiencies. Adjusted EBITDA in Networks was stable at $10.1 billion, despite the currency headwind of $1.8 billion.
Speaker #2: And adjusted EBITDA margin was 22.8%, an increase of 1.2 percentage points compared to last year. And looking at the right-hand graph, the full-year adjusted gross margin reached 50% and stabilized at the new level.
Speaker #2: And adjusted EBITDA margin reached 20.7%. Moving on to segment Cloud Software and Services. Sales increased by 3% year over year to $20 billion, despite the negative currency impact of $1.8 billion.
Speaker #2: Organically, sales grew by 12%, mostly driven by higher core sales across all market areas and the timing of project deliveries. Adjusted gross margin came in at 44.3%, an improvement of around 5 percentage points compared to last year, driven by a high share of software sales and continued delivery efficiency.
Operator: Adjusted gross margin came in at 44.3%, an improvement of around 5 percentage points compared to last year, driven by a high share of software sales and continued delivery efficiency. Adjusted EBITDA increased to SEK 3.7 billion with a margin of 18.6%, supported by the effective implementation of our strategic initiatives. Looking at the right-hand graph, the full-year adjusted gross margin was 43% and adjusted EBITDA margin 11.4%. These are both new high levels. Enterprise sales stabilized on an organic basis in Q4, growing 2%. Reported sales decreased by 25%, and that's an impact of the sale of iconectiv and currency. Global Communications Platform organically grew by 3%, driven by an expansion in CPaaS. Adjusted gross margin declined to 52.1%, driven by the iconectiv investment. Adjusted EBITDA landed at minus SEK 1.1 billion, improving by SEK 0.1 billion compared to last year despite the iconectiv impact.
Adjusted gross margin came in at 44.3%, an improvement of around 5 percentage points compared to last year, driven by a high share of software sales and continued delivery efficiency. Adjusted EBITDA increased to SEK 3.7 billion with a margin of 18.6%, supported by the effective implementation of our strategic initiatives. Looking at the right-hand graph, the full-year adjusted gross margin was 43% and adjusted EBITDA margin 11.4%. These are both new high levels. Enterprise sales stabilized on an organic basis in Q4, growing 2%. Reported sales decreased by 25%, and that's an impact of the sale of iconectiv and currency. Global Communications Platform organically grew by 3%, driven by an expansion in CPaaS. Adjusted gross margin declined to 52.1%, driven by the iconectiv investment. Adjusted EBITDA landed at minus SEK 1.1 billion, improving by SEK 0.1 billion compared to last year despite the iconectiv impact.
Speaker #2: Adjusted EBITDA increased to $3.7 billion, with a margin of 18.6%, supported by the effective implementation of our strategic initiatives. Looking at the right-hand graph, the full-year adjusted gross margin was 43%, and the adjusted EBITDA margin was 11.4%.
Speaker #2: These are both new high levels. Enterprise sales, stabilized on an organic basis in Q4, growing 2%. Reported sales decreased by 25%, and that's an impact of the sale of iConnective and currency.
Speaker #2: Global communications platform organically grew by 3%, driven by an expansion in CPaaS. Adjusted gross margin declined to 52.1%, driven by the iConnective investment.
Speaker #2: Adjusted EBITDA landed at minus $1.1 billion, improving by $0.1 billion compared to last year, despite the iConnective impact. Turning to free cash flow, which was $14.9 billion before M&A in the quarter, and $26.8 billion for the year.
Operator: Turning to free cash flow, which was SEK 14.9 billion before M&A in the quarter and SEK 26.8 billion for the year. We delivered a cash flow to net sales of 11% for the year within our 9 to 12% target. The decrease in cash flow year on year is due to very strong working capital reductions in 2024. Working capital in 2025 was broadly stable at historical low levels. Net cash increased sequentially by SEK 9.4 billion to SEK 61.2 billion. Return on capital employed in 2025 was 24.1%, including the iconectiv gain. While excluding it, it was around 19%. Turning to capital allocation. During 2025, the board has undertaken a review of the balance sheet and the capital allocation principles. On the balance sheet, we remain committed to an investment-grade credit rating and maintaining a solid net cash position. Turning next to the four capital allocation priorities.
Turning to free cash flow, which was SEK 14.9 billion before M&A in the quarter and SEK 26.8 billion for the year. We delivered a cash flow to net sales of 11% for the year within our 9 to 12% target. The decrease in cash flow year on year is due to very strong working capital reductions in 2024. Working capital in 2025 was broadly stable at historical low levels. Net cash increased sequentially by SEK 9.4 billion to SEK 61.2 billion. Return on capital employed in 2025 was 24.1%, including the iconectiv gain. While excluding it, it was around 19%. Turning to capital allocation. During 2025, the board has undertaken a review of the balance sheet and the capital allocation principles. On the balance sheet, we remain committed to an investment-grade credit rating and maintaining a solid net cash position. Turning next to the four capital allocation priorities.
Speaker #2: We delivered a cash flow to net sales of 11% for the year, within our 9% to 12% target. The decrease in cash flow year on year is due to very strong working capital reductions in 2024.
Speaker #2: Working capital in 2025 was broadly stable at historically low levels, and net cash increased sequentially by $9.4 billion to $61.2 billion. Return on capital employed in 2025 was 24.1%, including the iConnective gain; while excluding it, it was around 19%. And turning to capital...
Speaker #2: Allocation. During 2025, the board has undertaken a review of the balance sheet and the capital allocation principles. On the balance sheet, we remain committed to an investment-grade credit rating and to maintaining a solid net cash position.
Speaker #2: Turning next to the four capital allocation priorities. First, the top priority is to maintain technology leadership through continued R&D investment to ensure customer confidence at all times.
Operator: First, the top priority is to maintain a technology leadership for continued R&D investment to ensure customer confidence at all times. Second, we are committed to a stable, progressive ordinary dividend. Third, as already Börje mentioned, we remain selective with inorganic investments. Finally, any excess cash will be distributed to shareholders. For 2025, the board will propose an increased dividend of SEK 3 per share and a share buyback program of up to SEK 15 billion at the AGM. After adjusting for the total shareholder distribution of approximately SEK 25 billion, the 2025 net cash position is at a solid level, considering future investment needs and the business outlook. Next, I will cover the outlook. Global uncertainty remains with potential for further changes in tariffs, and broader macroeconomic factors. The outlook assumes stable exchange rates and no tariff changes here.
First, the top priority is to maintain a technology leadership for continued R&D investment to ensure customer confidence at all times. Second, we are committed to a stable, progressive ordinary dividend. Third, as already Börje mentioned, we remain selective with inorganic investments. Finally, any excess cash will be distributed to shareholders. For 2025, the board will propose an increased dividend of SEK 3 per share and a share buyback program of up to SEK 15 billion at the AGM. After adjusting for the total shareholder distribution of approximately SEK 25 billion, the 2025 net cash position is at a solid level, considering future investment needs and the business outlook. Next, I will cover the outlook. Global uncertainty remains with potential for further changes in tariffs, and broader macroeconomic factors. The outlook assumes stable exchange rates and no tariff changes here.
Speaker #2: Second, we are committed to a stable-to-progressive ordinary dividend. Third, as Barry already mentioned, we remain selective with inorganic investments. And finally, any excess cash will be distributed to shareholders.
Speaker #2: So for 2025, the board will propose an increased dividend of 3 kronor per share and a share buyback program of up to SEK 15 billion at the AGM.
Speaker #2: After adjusting for the total shareholder distribution of approximately SEK 25 billion, the 2025 net cash position is at a solid level, considering future investment needs and the business outlook.
Speaker #2: Next, I will cover the outlook. Global uncertainty remains, with the potential for further changes in tariffs and broader macroeconomic factors. The outlook assumes stable exchange rates and no tariff changes here.
Speaker #2: So for Networks, we expect Q1 sales growth to be broadly similar to the three-year average quarter-on-quarter seasonality. For Cloud Software and Services, we expect Q1 sales growth to be below the three-year average quarter-on-quarter seasonality.
Operator: So for Networks, we expect Q1 sales growth to be broadly similar to the three-year average quarter-on-quarter seasonality. For Cloud Software and Services, we expect Q1 sales growth to be below the three-year average quarter-on-quarter seasonality. We expect Networks' adjusted gross margin to be in the range of 49% to 51% for Q1. Restructuring charges for the full year 2026 are expected to be at an elevated level with proposed headcount reductions recently announced in Sweden and continued actions across other markets. With that, I hand back to you, Börje. Thanks, Lars. So today, we have a very strong position and a very competitive portfolio. In many markets, there will be a need to invest to keep network performance at a competitive level. As you've seen, we made critical inroads in many key markets during the year, for instance, in Japan.
So for Networks, we expect Q1 sales growth to be broadly similar to the three-year average quarter-on-quarter seasonality. For Cloud Software and Services, we expect Q1 sales growth to be below the three-year average quarter-on-quarter seasonality. We expect Networks' adjusted gross margin to be in the range of 49% to 51% for Q1. Restructuring charges for the full year 2026 are expected to be at an elevated level with proposed headcount reductions recently announced in Sweden and continued actions across other markets. With that, I hand back to you, Börje.
Speaker #2: And we expect Networks adjusted gross margin to be in the range of 49% to 51% for Q1. And restructuring charges for the full year '26 are expected to be at an elevated level, with proposed headcount reductions recently announced in Sweden and continued actions across other markets.
Speaker #2: With that, I hand back to you, Barry. Thanks, Lars. So, today we have a very strong position and a very competitive portfolio. In many markets, there will be a need to invest to keep network performance at a competitive level.
Börje Ekholm: Thanks, Lars. So today, we have a very strong position and a very competitive portfolio. In many markets, there will be a need to invest to keep network performance at a competitive level. As you've seen, we made critical inroads in many key markets during the year, for instance, in Japan.
Speaker #2: And as you've seen, we've made critical inroads in many key markets during the year. For instance, in Japan. In 2026, we're planning for a flattish RAN market, but expect growth to come from new areas.
Operator: In 2026, we're planning for a flattish RAN market, but expect growth to come from new areas. This means we will need to continue our efforts on operational efficiency. By doing so, we can strengthen our company for varying market conditions. This will enable us to continue with critical investments in technology leadership, including increased R&D investments in defense and mission-critical, while at the same time supporting our margins and cash flow generation. Overall, as I mentioned before, we're entering a very exciting time where AI will move from a focus on data centers and large models to devices and applications. This will require advanced wireless connectivity, putting Ericsson in the middle of the next phase in the AI era. Our strategy is focused on making sure we capture this opportunity.
In 2026, we're planning for a flattish RAN market, but expect growth to come from new areas. This means we will need to continue our efforts on operational efficiency. By doing so, we can strengthen our company for varying market conditions. This will enable us to continue with critical investments in technology leadership, including increased R&D investments in defense and mission-critical, while at the same time supporting our margins and cash flow generation. Overall, as I mentioned before, we're entering a very exciting time where AI will move from a focus on data centers and large models to devices and applications. This will require advanced wireless connectivity, putting Ericsson in the middle of the next phase in the AI era. Our strategy is focused on making sure we capture this opportunity.
Speaker #2: This means we will need to continue our efforts on operational efficiency. By doing so, we can strengthen our company for varying market conditions.
Speaker #2: This will enable us to continue with critical investments in technology leadership, including increased R&D investments in defense and mission-critical, while at the same time supporting our margins and cash flow generation.
Speaker #2: Overall, as I mentioned before, we're entering a very exciting time where AI will move from a focus on data centers and large models to devices and applications.
Speaker #2: This will require advanced wireless connectivity, putting Ericsson in the middle of the next phase in the AI era. Our strategy is focused on making sure we capture this opportunity.
Speaker #2: We're doing it by providing the industry's best network for AI that enables differentiated services and new monetization opportunities. This includes both new use cases, including by exposing networking capabilities through network APIs, but also new sectors such as mission-critical networks.
Operator: We're doing it by providing the industry's best network for AI that enables differentiated services and new monetization opportunities. This includes both new use cases, including by exposing networking capabilities through network APIs, but also new sectors such as mission-critical networks. This will allow us to capture a significant share of the value from connectivity and help drive growth for us as Ericsson. So if I draw this out a bit longer term, I believe we can have a model with a flattish mobile networks market, but with our investments in growth areas that we basically can see a modestly growing top line. So if you combine the operating leverage, actually improving profitability in the enterprise segments as well as share buybacks, we should see a healthy growth in profit per share.
We're doing it by providing the industry's best network for AI that enables differentiated services and new monetization opportunities. This includes both new use cases, including by exposing networking capabilities through network APIs, but also new sectors such as mission-critical networks. This will allow us to capture a significant share of the value from connectivity and help drive growth for us as Ericsson. So if I draw this out a bit longer term, I believe we can have a model with a flattish mobile networks market, but with our investments in growth areas that we basically can see a modestly growing top line. So if you combine the operating leverage, actually improving profitability in the enterprise segments as well as share buybacks, we should see a healthy growth in profit per share.
Speaker #2: This will allow us to capture a significant share of the value from connectivity and help drive growth for us as Ericsson. So if I draw this out a bit longer term, I believe we can have a model with a flattish mobile networks market, but with our investments in growth areas, we can basically see a modestly growing top line.
Speaker #2: So, if you combine the operating leverage actually improving profitability in the enterprise segments, as well as share buybacks, we should see a healthy growth in profit per share.
Speaker #2: So, to wrap up, in 2025 we were laser-focused on strategy execution and continued to take critical steps to position Ericsson for the future. We're unlikely to see growth in the RAN market this coming year, but our investments in mission-critical 5G Core and Enterprise will drive growth for the company.
Operator: So to wrap up, in 2025, we were laser-focused on strategy execution and continue to take critical steps to position Ericsson for the future. We're unlikely to see growth in the RAN market this coming year, but our investments in mission-critical 5G Core and enterprise will drive growth for the company. I would say it's exciting if you ask me. On that note, I also want to thank all my colleagues at Ericsson for a lot of great work. Thank you, team. With that, I think it's time for you, Daniel, to lead us through some Q&A. Thanks, Börje. We'll now move to the Q&A. 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 mute the webcast audio while asking a question to minimize any audio feedback.
So to wrap up, in 2025, we were laser-focused on strategy execution and continue to take critical steps to position Ericsson for the future. We're unlikely to see growth in the RAN market this coming year, but our investments in mission-critical 5G Core and enterprise will drive growth for the company. I would say it's exciting if you ask me. On that note, I also want to thank all my colleagues at Ericsson for a lot of great work. Thank you, team. With that, I think it's time for you, Daniel, to lead us through some Q&A.
Speaker #2: I would say it's exciting, if you ask me. On that note, I want to thank all my colleagues at Ericsson for a lot of great work.
Speaker #2: Thank you, team. With that, I think it's time for you, Daniel, to lead.
Speaker #2: us through some Q&A. Thanks,
Operator: Thanks, Börje. We'll now move to the Q&A. 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 mute the webcast audio while asking a question to minimize any audio feedback.
Speaker #3: Barry, we'll now move to the question. You'll need to press star one one on your telephone and wait for your name to be announced.
Speaker #3: If you're streaming the webcast, please mute the webcast audio while asking a question to minimize any audio feedback. And as usual, if I can request one question per participant, please, so we have time to hear from as many of you as possible.
Operator: As usual, if I can request one question per participant, please, so we have time to hear from as many of you as possible. Thanks. Okay, operator, we're ready to open the line for the first question. The first question today is going to come from the line of Simon Granath at ABG. Simon, please go ahead. Thank you, Daniel, and congrats team Ericsson for the solid results here. On OpEx, I'd like to push a bit on the medium-term trajectory and the R&D balance with RAN demand looking broadly flattish into 2026 and OpEx roughly reflecting salary inflation rather than volumes. If we assume a similar demand environment into 2027 with 6G still later in this decade, how do you think about the risk of managing R&D and where capability changes too early? So simply on the midterm OpEx trajectory, thanks. Great. Midterm.
As usual, if I can request one question per participant, please, so we have time to hear from as many of you as possible. Thanks. Okay, operator, we're ready to open the line for the first question. The first question today is going to come from the line of Simon Granath at ABG. Simon, please go ahead.
Speaker #3: Thanks. Okay, operator, we're ready to open the line for the first question. The first question today is going to come from the line of Simon Granath at ABG.
Speaker #3: Simon, please go
Speaker #3: Simon, please go ahead. Thank you, Daniel.
Simon Granath: Thank you, Daniel, and congrats team Ericsson for the solid results here. On OpEx, I'd like to push a bit on the medium-term trajectory and the R&D balance with RAN demand looking broadly flattish into 2026 and OpEx roughly reflecting salary inflation rather than volumes. If we assume a similar demand environment into 2027 with 6G still later in this decade, how do you think about the risk of managing R&D and where capability changes too early? So simply on the midterm OpEx trajectory, thanks.
Speaker #4: And congrats, team Ericsson, for the solid results here. On OPEX, I'd like to push a bit on the medium-term trajectory and the R&D balance, with RAN demand looking broadly flattish into 2026 and OPEX growth largely reflecting salary inflation rather than volumes.
Speaker #4: If we assume a similar demand environment into 2027, with 6G still later in this decade, how do you think about the risk of managing R&D and where capability changes too early?
Speaker #4: So, simply on trajectory, the midterm OPEX.
Speaker #4: thanks. Great.
Börje Ekholm: Great. Midterm. When you look at the OpEx levels that we have today and the structure we have, it's a question about working and investing, and we are already in 2025 and going into this year. There are key strategic areas where we are investing and some other areas where we are taking other decisions. So I think that will also be how we will work going into 2027. Then, of course, there is a continuous cost inflation that we need to drive through productivity to ensure that we keep the right level here going forward as well. So there will, and when this big investment comes, we will see. I think you will have to comment as well from your perspective. Yeah, I think given the flattish market we're in, we will have to work continuously on the, I call it R&D efficiency.
Speaker #3: Midterm. When you look at the OPEX levels that we have today, and the structure we have, it's a question about working and investing, and we are already in 2025, and back and going into this year.
Operator: When you look at the OpEx levels that we have today and the structure we have, it's a question about working and investing, and we are already in 2025 and going into this year. There are key strategic areas where we are investing and some other areas where we are taking other decisions. So I think that will also be how we will work going into 2027. Then, of course, there is a continuous cost inflation that we need to drive through productivity to ensure that we keep the right level here going forward as well. So there will, and when this big investment comes, we will see. I think you will have to comment as well from your perspective. Yeah, I think given the flattish market we're in, we will have to work continuously on the, I call it R&D efficiency.
Speaker #3: There are key strategic areas where we are investing, and some other areas where we are taking other decisions. So I'd say I think so, and that will also be how we will work going into 2027.
Speaker #3: Then, of course, there is a continuous cost inflation that we need to drive through productivity to ensure that we keep the right level here going forward as well.
Speaker #3: So there will, and when the big investments come, we will see. I think you will have to comment as well from your perspective.
Speaker #2: Yeah, I think that given the flattish market we're in, we will have to work continuously on the—I call it—R&D efficiency. But there is also a question of making sure we allocate to the right areas.
Operator: But there is also a question of making sure we allocate to the right areas. This is why new areas, like mission-critical, is actually critical to be part of, as well as defense applications. So we believe that we can, even in a flattish market, we can actually have the right R&D level with the program and with the efforts we have in place. But as you note, it requires us to really be at the forefront of R&D efficiency as well. But you should not expect us to put it this way. We are not going to trade off technology leadership, and we believe we can have technology leadership at this spend level even into 2027 and beyond. That makes a lot of sense. Thank you so much. Moving to the next question, please. The next question is going to come from the line of Eric Rosenstall at SEB.
But there is also a question of making sure we allocate to the right areas. This is why new areas, like mission-critical, is actually critical to be part of, as well as defense applications. So we believe that we can, even in a flattish market, we can actually have the right R&D level with the program and with the efforts we have in place. But as you note, it requires us to really be at the forefront of R&D efficiency as well. But you should not expect us to put it this way. We are not going to trade off technology leadership, and we believe we can have technology leadership at this spend level even into 2027 and beyond. That makes a lot of sense.
Speaker #2: This is why new areas like mission-critical are actually critical to be part of, as well as defense applications. So we believe that even in a flattish market, we can actually have the right R&D level with the program and with the efforts we have in place.
Speaker #2: But it's, as you note, it requires us to really be at the forefront of R&D efficiency as well. But you should not expect us, put it this way.
Speaker #2: We are not going to trade off technology leadership, and we believe we can have technology leadership at the spend level even into 2027 and beyond.
Speaker #4: That makes a lot of sense. Thank you so much.
Simon Granath: Thank you so much.
Operator: Moving to the next question, please. The next question is going to come from the line of Eric Rosenstall at SEB. Please go ahead, Eric.
Speaker #3: Moving to the next question, please. The next question is going to come from the line of Eric Rosenstahl at SEB. Please go ahead, Eric.
Operator: Please go ahead, Eric. Sure. Good morning. Congratulations on the results here. So just, Börje, you mentioned increasing investment in defense in 2026, and mission-critical was a key driver here in the quarter. I understand it's a good market for you right now, but can you please shed some light on how large the exposure is that you have currently in this area and what the size of the opportunities that you see out there? How large are they? Thank you. If we start at the end of discussing, first of all, what we want to say here is in reality, the investments we make in defense today is captured in the total R&D spend. And as we go forward, we see that we probably need to increase that a bit.
Speaker #5: Yes, sure. Good morning, congratulations on the results here. So just, Barry, you mentioned increasing investment in defense in 2026, and mission-critical was a key driver here in the quarter.
[Analyst] (SEB): Sure. Good morning. Congratulations on the results here. So just, Börje, you mentioned increasing investment in defense in 2026, and mission-critical was a key driver here in the quarter. I understand it's a good market for you right now, but can you please shed some light on how large the exposure is that you have currently in this area and what the size of the opportunities that you see out there? How large are they? Thank you.
Speaker #5: I understand it's a good market for you right now, but can you please shed some light on how large the exposure is that you have currently in this area, and what the size of the opportunities that you see out there—how large are they?
Speaker #5: Thank you. If we start at the end of discussing, first of all, what we want to say here is, in reality, the investments we make in defense today are captured in the total R&D spend.
Börje Ekholm: If we start at the end of discussing, first of all, what we want to say here is in reality, the investments we make in defense today is captured in the total R&D spend. And as we go forward, we see that we probably need to increase that a bit.
Speaker #5: And as we go forward, we see that we probably need to increase that a bit. And the reason for that is we actually see the potential for a very sizable market in defense, given what the spending is in the US, of course, but it's also the increased European spending on defense that will make this into a fairly sizable market.
Operator: And the reason for that is we actually see the potential for a very sizable market in defense, given what the spending in the US, of course, but it's also the increased European spending on defense, will make this into a fairly sizable market. And we see that market moving from what I would call dedicated solutions, kind of proprietary technology solutions, into much more of 3GPP-enabled solutions. And the reason for that is simply that it's more cost-effective, and it's going to be much better performance. So we see actually the communication market in defense to be a sizable opportunity that we want to make sure we're early on in. But there are also other applications. So think about defense from a broader perspective. The sensing capabilities of the solutions we have actually allows you to, for example, do drone detection. Think about the usefulness of that.
And the reason for that is we actually see the potential for a very sizable market in defense, given what the spending in the US, of course, but it's also the increased European spending on defense, will make this into a fairly sizable market. And we see that market moving from what I would call dedicated solutions, kind of proprietary technology solutions, into much more of 3GPP-enabled solutions. And the reason for that is simply that it's more cost-effective, and it's going to be much better performance. So we see actually the communication market in defense to be a sizable opportunity that we want to make sure we're early on in. But there are also other applications. So think about defense from a broader perspective. The sensing capabilities of the solutions we have actually allows you to, for example, do drone detection. Think about the usefulness of that.
Speaker #5: And we see that the market is moving from what I would call dedicated solutions—kind of proprietary technology solutions—into much more of 3GPP-enabled solutions. And the reason for that is simply that it is more cost-effective, and it's going to deliver much better performance.
Speaker #5: So we see, actually, the communication market in defense to be a sizable opportunity that we want to make sure we're early on in. But there are also other applications.
Speaker #5: So think about defense from a broader perspective. The sensing capabilities of the solutions we have actually allow you to, for example, do drone detection.
Speaker #5: Think about where the usefulness of that, and it can do detection of objects that are not connected. So it's basically—maybe popular wording would be called the radar.
Operator: And it can do detection of objects that are not connected. So it's basically, maybe popular wording would be called the radar. These are major opportunities that we would say are really large that we want to position ourselves to go after. So when you see us increasing spending, it's not. I think part of it will be offset with other efficiency gains, but we want to say that we actually go after an opportunity here that we think is rather sizable. Excellent. Thanks. Thanks, Eric. Moving to the next question, please. The next question is going to come from the line of Jakob Bluestone at BNP. Please go ahead, Jakob. Morning. Thanks for taking my question. I had a question around supply chain shortages. I'm wondering sort of broadly, are you seeing any issues that might hold back your ability to grow?
And it can do detection of objects that are not connected. So it's basically, maybe popular wording would be called the radar. These are major opportunities that we would say are really large that we want to position ourselves to go after. So when you see us increasing spending, it's not. I think part of it will be offset with other efficiency gains, but we want to say that we actually go after an opportunity here that we think is rather sizable.
Speaker #5: These are major opportunities that we would say are really large, that we want to position ourselves to go after. So when you see us increasing spending, it's not—I think part of it will be offset with other efficiency gains.
Speaker #5: But we want to say that we actually go after an opportunity here that we think is rather
Speaker #5: sizable. Excellent.
[Analyst] (SEB): Excellent. Thanks.
Speaker #3: Thanks. Thanks, Eric. Moving to the next question, please. The next question is going to come from the line of Jacob Bluestone at BNP. Please go ahead.
Börje Ekholm: Thanks, Eric.
Operator: Moving to the next question, please. The next question is going to come from the line of Jakob Bluestone at BNP. Please go ahead, Jakob.
Speaker #3: Jacob. Morning.
Jakob Bluestone: Morning. Thanks for taking my question. I had a question around supply chain shortages. I'm wondering sort of broadly, are you seeing any issues that might hold back your ability to grow?
Speaker #6: Thanks for taking my question. I had a question around supply chain shortages and was wondering, sort of broadly, are you seeing any issues that might hold back your ability to grow?
Speaker #6: And specifically, can you comment on the impact of memory price increases? So, what share of your bill of materials relates to memory chips? Do you hedge these?
Operator: And specifically, can you comment on the impact of memory price increases? So what share of your bill of materials relates to memory chips, to your headspiece? Can you pass on any price increases to customers? Thank you. When it comes to the supply chain, I think we have worked for quite some time on resiliency. And when it comes, that is including then supply chain, so to say, deliveries. So that is continuous work that we do. But of course, when it comes to the memory side, it has been quite a bit of noise around that. But I think we are in a good position of handling that as it looks for this year here. And on the pricing side, it is a mix.
And specifically, can you comment on the impact of memory price increases? So what share of your bill of materials relates to memory chips, to your headspiece? Can you pass on any price increases to customers?
Speaker #6: Can you pass on any price increases to customers? Thank you.
Speaker #6: you. Now, when it comes to the
Börje Ekholm: Thank you. When it comes to the supply chain, I think we have worked for quite some time on resiliency. And when it comes, that is including then supply chain, so to say, deliveries. So that is continuous work that we do. But of course, when it comes to the memory side, it has been quite a bit of noise around that. But I think we are in a good position of handling that as it looks for this year here. And on the pricing side, it is a mix.
Speaker #5: Supply chain—I think we have worked for quite some time on resiliency. And when it comes to that, it is including then supply chain, so to say, deliveries. So that is continuous work that we do.
Speaker #5: So, but of course, when it comes to the memory side, there has been quite a bit of noise around that. But I think we are in a good position of handling that as it looks for this year here.
Speaker #5: And on the pricing side, it is a mix, of course. There is some impact, but also here, it's really working closely with our suppliers, and also together with our customers, to make sure that we are not squeezed in the middle here.
Operator: Of course, there is some impact, but also here, it's really working close with our suppliers, also together with our customers to make sure that we are not squeezed in the middle here. So it's both ends here to work with. Can you maybe just expand how have you avoided shortages? Is this just by building inventories? Just given sort of widespread shortages. It's part of how we work, but also to have a good relation and long-term relationship with the different suppliers that we work with. Understood. Thanks. Thanks, Jakob. Moving to the next question, please. The next question is going to come from the line of Andreas Joelsson at DNB. Please go ahead, Andreas. Good morning, everyone. Moving from the splendid operations to the buybacks, perhaps.
Of course, there is some impact, but also here, it's really working close with our suppliers, also together with our customers to make sure that we are not squeezed in the middle here.
Jakob Bluestone: So it's both ends here to work with. Can you maybe just expand how have you avoided shortages? Is this just by building inventories? Just given sort of widespread shortages.
Speaker #5: So, it's both ends here to work with.
Speaker #6: Can you expand on how you have avoided shortages? Is this just by building inventories, just given the sort of widespread shortages?
Speaker #5: It's part of how we work, but also to have good relations and long-term relationships with the different suppliers that we work with.
Börje Ekholm: It's part of how we work, but also to have a good relation and long-term relationship with the different suppliers that we work with.
Speaker #5: with. Understood.
Speaker #5: with. Understood.
Jakob Bluestone: Understood. Thanks. Thanks, Jakob. Moving to the next question, please.
Speaker #3: Thanks, thanks, Jacob. Moving to the next question, please. The next question is going to come from the line of Andreas Jelson at DNB. Please go ahead, Andreas.
Operator: The next question is going to come from the line of Andreas Joelsson at DNB. Please go ahead, Andreas.
[Analyst] (DNB): Good morning, everyone. Moving from the splendid operations to the buybacks, perhaps.
Speaker #7: Good morning, everyone. Moving from the splendid operations to the buybacks, perhaps. And if we assume that you make $25 billion in free cash flow on a sustainable level, that is equal to the total remuneration to shareholders.
Operator: If we assume that you make SEK 25 billion in free cash flow on a sustainable level, that is equal to the total remuneration to shareholders. So should we say that around SEK 45 billion is a net cash that you feel, that you and the board feel is needed to run the operations? I think, as we mentioned there, the view is that it's important to have a solid net cash position. We're coming out here with SEK 61.2 billion in net cash and a total distribution of around SEK 25 billion. Adjusting for that, we have, given the business outlook that we see now, we see that it is a solid net cash position coming out of 2025. When we come to next year, we will have a look again, of course, but the capital allocation principles are there and that are guiding us also going forward.
If we assume that you make SEK 25 billion in free cash flow on a sustainable level, that is equal to the total remuneration to shareholders. So should we say that around SEK 45 billion is a net cash that you feel, that you and the board feel is needed to run the operations?
Speaker #7: So should we say that around 45 billion is a net cash that you feel that you and the board feel is needed for the run of the—
Speaker #7: operations? I
Speaker #5: I think, as we mentioned there, the view is that it's important to have a solid net cash position. Given that, we're coming out here with $61.2 billion in net cash and a total distribution of around $25 billion.
Lars Sandström: I think, as we mentioned there, the view is that it's important to have a solid net cash position. We're coming out here with SEK 61.2 billion in net cash and a total distribution of around SEK 25 billion. Adjusting for that, we have, given the business outlook that we see now, we see that it is a solid net cash position coming out of 2025. When we come to next year, we will have a look again, of course, but the capital allocation principles are there and that are guiding us also going forward.
Speaker #5: And, adjusting for that, given the business outlook that we see now, we see that it is a solid net cash position coming out of 2025.
Speaker #5: Then when we come to next year, we will have a look again, of course, but the capital allocation principles are there, and they are guiding us also going forward.
Speaker #5: forward. And when you think
Operator: When you think about the business outlook, of course, you need to think about geopolitics, you think about whether it's the question before, tight supply chain, for example, and all of these factors reaches the conclusion that that was the right level now. Just as a follow-up, is there any thinking from the board and from the management, given what you said before about growing EPS, that you would like to have a more long-term buyback program and making sure that you can achieve that? I think this is the first time Ericsson now announces a buyback program. It is clearly a part of the toolbox for the board, the AGM, and for the shareholders to decide upon.
When you think about the business outlook, of course, you need to think about geopolitics, you think about whether it's the question before, tight supply chain, for example, and all of these factors reaches the conclusion that that was the right level now.
Speaker #3: About the business outlook, you, of course, need to think about geopolitics. You think about whether it's the question before—tight supply chain, for example—and all of these factors reach the conclusion that that was the right level now.
[Analyst] (DNB): Just as a follow-up, is there any thinking from the board and from the management, given what you said before about growing EPS, that you would like to have a more long-term buyback program and making sure that you can achieve that? I think this is the first time Ericsson now announces a buyback program. It is clearly a part of the toolbox for the board, the AGM, and for the shareholders to decide upon.
Speaker #7: And just as a follow-up, is there any thinking from the Board and from management, given what you said before about growing EPS, that you could, that you would like to have a more long-term buyback program, and making sure that you can achieve—
Speaker #7: that? I
Speaker #5: I think this is the first time Ericsson now announces a buyback program. So it is clearly a part of the toolbox for the Board and the ADM, and for the—
Speaker #5: shareholders to decide upon. Yeah.
Operator: Yeah, I think you would also say, Andreas, that it's intentional that it's launched as a buyback program, and you also know the mandate for those are reviewed annually by the AGM. So this will be our hope and ambition and thought is that this will be a recurring thing. Then the size will vary, of course, depending on how the outlook looks like. Thanks, Andreas. Thank you so much. Moving to the next question, please. The next question is going to come from the line of Sandeep Deshpande at JP Morgan. Go ahead, Sandeep. Yeah, hi. My question is on the market in mobile networks overall. Has the market changed at all? I mean, we've heard about the EU restricting some of the high-risk vendors, but at the same time, you're seeing greater price competition in Latin America.
Lars Sandström: Yeah, I think you would also say, Andreas, that it's intentional that it's launched as a buyback program, and you also know the mandate for those are reviewed annually by the AGM. So this will be our hope and ambition and thought is that this will be a recurring thing. Then the size will vary, of course, depending on how the outlook looks like. Thanks, Andreas.
Speaker #3: I think you would also say, Andreas, that it's intentional that it's launched as a buyback program, and you also know the mandate for those, which are reviewed annually by the AGM.
Speaker #3: So, this will be our hope and ambition, and the thought is that this will be a recurring thing. Then, the size will vary, of course, depending on how the outlook looks like.
Speaker #3: Thanks, Andreas.
Operator: Thank you so much. Moving to the next question, please. The next question is going to come from the line of Sandeep Deshpande at JP Morgan. Go ahead, Sandeep.
Speaker #7: Thank you so much.
Speaker #3: Moving to the next question, please. The next question is going to come from the line of Sandeep Deshpandi at JP Morgan. Go ahead.
Speaker #3: Sandeep. Yeah.
[Analyst] (JPMorgan): Yeah, hi. My question is on the market in mobile networks overall. Has the market changed at all? I mean, we've heard about the EU restricting some of the high-risk vendors, but at the same time, you're seeing greater price competition in Latin America.
Speaker #8: Hi. My question is on the market in mobile networks overall. Has the market changed at all? I mean, we've heard about the EU restricting some of the high-risk vendors, but at the same time, you're seeing greater price competition in Latin America.
Speaker #8: Maybe you can make some comments on how this market overall is playing out in the world, given the geopolitical situation.
Operator: Maybe, Börje, you can make some comments on how this market overall is playing out in the world, given the geopolitical situation. Yeah. If there's a way to think about it, Sandeep, is we look at this market for the last two decades, right? And it's been flattish. So we like to think or plan for that type of market outlook. If it gets better, then we have a strong cost competitiveness, we get operating leverage. If it gets worse, we need to review that assumption, right? But that's kind of the way we think about the business. Then, of course, it varies what happens. So over the last few years, and I think we spoke about this a couple of quarters ago, that we saw increased competition in Latin America. We see it from time to time in other parts of the world, Southeast Asia, Africa, etc.
Maybe, Börje, you can make some comments on how this market overall is playing out in the world, given the geopolitical situation.
Speaker #8: situation.
Börje Ekholm: Yeah. If there's a way to think about it, Sandeep, is we look at this market for the last two decades, right? And it's been flattish. So we like to think or plan for that type of market outlook. If it gets better, then we have a strong cost competitiveness, we get operating leverage. If it gets worse, we need to review that assumption, right? But that's kind of the way we think about the business. Then, of course, it varies what happens. So over the last few years, and I think we spoke about this a couple of quarters ago, that we saw increased competition in Latin America. We see it from time to time in other parts of the world, Southeast Asia, Africa, etc.
Speaker #5: Yeah. If
Speaker #5: You wait to think about it, Sandeep, as we look at this market over the last two decades, right? And it's been flattish. So we like to think or plan for that type of market outlook.
Speaker #5: If it gets better, then we have a strong cost competitiveness. We get operating leverage. If it gets worse, we need to review that assumption, right?
Speaker #5: But that's kind of the way we think about the business. Then, of course, it varies what happens. So over the last few years—and I think we spoke about this a couple of quarters ago—we saw increased competition in Latin America.
Speaker #5: We see it from time to time in other parts of the world—Southeast Asia, Africa, etc.—so that kind of comes and goes a bit.
Operator: So that kind of comes and goes a bit. The thing that could be a positive is, of course, the high-risk vendor discussion in the EU. That's a sizable opportunity. If you think about the, I mean, we don't know exactly, but call the high-risk vendor market presence in Europe to be 1/3 to maybe up to 40%, but around that as a guideline, that would be a sizable revenue opportunity for trusted vendors. So that could change. At the same time, now it's a proposal. It has to go through the process. So this is something that's probably going to take 12, 18 months before we really know the impact. So we're not factoring that in, but of course, it is an upside opportunity.
So that kind of comes and goes a bit. The thing that could be a positive is, of course, the high-risk vendor discussion in the EU. That's a sizable opportunity. If you think about the, I mean, we don't know exactly, but call the high-risk vendor market presence in Europe to be 1/3 to maybe up to 40%, but around that as a guideline, that would be a sizable revenue opportunity for trusted vendors. So that could change. At the same time, now it's a proposal. It has to go through the process. So this is something that's probably going to take 12, 18 months before we really know the impact. So we're not factoring that in, but of course, it is an upside opportunity.
Speaker #5: The thing that could be a positive is, of course, the high-risk vendor discussion in the EU. That's a sizable opportunity. If you think about the—I mean, we don't know exactly, but call the high-risk vendor market presence in Europe to be a third to maybe up to 40%.
Speaker #5: But around that, as a guideline, that would be a sizable revenue opportunity for trusted vendors. So that could change. At the same time, now it's a proposal.
Speaker #5: It has to go through the process, so this is something that's probably going to take 12 to 18 months before we really know the impact.
Speaker #5: So we're not factoring that in. But of course, it is an upside opportunity. And of course, it is, I would say, the toolbox the EU discussed or implemented quite some time ago.
Operator: Of course, it is, I would say, the toolbox the EU discussed or implemented quite some time ago, which five, six years ago, has not been widely adopted. So it is a change in stance with the current proposal. Thank you, Bohen. Thanks for the question, Sandeep. Moving to the next question, please. The next question is coming from the line of Sebastien Sztabowicz at Kepler Cheuvreux. Please go ahead, Sebastian. Yeah, hello, everyone, and thank you for taking my question. On networks, how do you see the mix trending in the coming quarters? We are now seeing some stronger growth in Africa, Southeast Asia, and slower developments in the US and maybe also in Japan and Korea. So just curious about the mix trend in networks and also at a broad level, what will be the push and pull to your gross margin in the coming quarters?
Of course, it is, I would say, the toolbox the EU discussed or implemented quite some time ago, which five, six years ago, has not been widely adopted. So it is a change in stance with the current proposal.
Speaker #5: It's five, six years ago, has not been widely adopted. So it is a change in stance with the current...
Speaker #5: proposal. Thank
[Analyst] (JPMorgan): Thank you, Bohen.
Speaker #8: you.
Speaker #3: Thanks for the question, Sandeep. Moving to the next question, please. The next question is coming from the line of Sebastian Stabovitz at Keplesher Room.
Börje Ekholm: Thanks for the question, Sandeep. Moving to the next question, please
Operator: The next question is coming from the line of Sebastien Sztabowicz at Kepler Cheuvreux. Please go ahead, Sebastian.
Speaker #3: Please go ahead, Sebastian.
Sebastian Sztabowicz: Yeah, hello, everyone, and thank you for taking my question. On networks, how do you see the mix trending in the coming quarters? We are now seeing some stronger growth in Africa, Southeast Asia, and slower developments in the US and maybe also in Japan and Korea. So just curious about the mix trend in networks and also at a broad level, what will be the push and pull to your gross margin in the coming quarters?
Speaker #5: Yeah. Hello, everyone, and thank you for taking my question. On networks, how do you see the mix trending in the coming quarters? We are now seeing some stronger growth in Africa and Southeast Asia, and lower developments in the US and maybe also in Japan and Korea.
Speaker #5: So, just curious about the mix trend in networks, and also at a broad level, what will be the puts and takes to your gross margin in the coming quarters?
Speaker #5: Where do you see some upside or downward pressure? Thank you. Well, I think a single quarter will vary, but if you look a little bit on the underlying for '26, North America, unhealthy investment levels in the market.
Operator: Where do you see some upside or downward pressure? Thank you. Well, I think single quarters will vary, but if you look a little bit on the underlying for 2026, North America on healthy investment levels in the market, and that we expect to continue during the year. And then when it comes to growth opportunities, there is an investment need in India and also in Japan, where we have also in both these markets ensured that we have a good solid market position. So when the customers decide to invest, we should be able to capture on that. Europe rather stable. And then there are, we will see what happens in Latin America. There are opportunities there, but still quite tough competition for sure. Parts of Southeast Asia as well. So I think that's a little bit the balancing act.
Where do you see some upside or downward pressure? Thank you.
Börje Ekholm: Well, I think single quarters will vary, but if you look a little bit on the underlying for 2026, North America on healthy investment levels in the market, and that we expect to continue during the year. And then when it comes to growth opportunities, there is an investment need in India and also in Japan, where we have also in both these markets ensured that we have a good solid market position. So when the customers decide to invest, we should be able to capture on that. Europe rather stable. And then there are, we will see what happens in Latin America. There are opportunities there, but still quite tough competition for sure. Parts of Southeast Asia as well. So I think that's a little bit the balancing act.
Speaker #5: So, and that we expect to continue during the year. And then, when it comes to growth opportunities, there is an investment need in India.
Speaker #5: And also in Japan, where we have also in both these markets ensured that we have a good, solid market position. So when the customers decide to invest, we should be able to capture on.
Speaker #1: Europe is rather stable. That, and then there are—we will see what happens in Latin America. We will see what happens.
Speaker #1: Opportunities there, but they're still quite tough, sure. Parts of competition for Asia as I think as well. So that's a little bit the balancing act.
Operator: In Africa, we have had a couple of good quarters now with 4G and 5G rollouts and modernization activities. Hopefully, we can see that continue also going into this year. So that's a little bit the balance act on the market mix. Then the puts and takes: there is a cost pressure in the group in the flat rent market and continuous cost pressure on us both in the people part, but also in material cost. So that we need to continuously work with. That's why we talk about then somewhat higher elevated levels on restructuring, both that will impact both, so to say, OpEx, but also in the cost of goods sold. So that is necessary to offset this upward pressure on cost. So that is some of the puts and takes. Then you have the normal product mix, but that will vary between quarters, as always.
In Africa, we have had a couple of good quarters now with 4G and 5G rollouts and modernization activities. Hopefully, we can see that continue also going into this year. So that's a little bit the balance act on the market mix. Then the puts and takes: there is a cost pressure in the group in the flat rent market and continuous cost pressure on us both in the people part, but also in material cost. So that we need to continuously work with. That's why we talk about then somewhat higher elevated levels on restructuring, both that will impact both, so to say, OpEx, but also in the cost of goods sold. So that is necessary to offset this upward pressure on cost. So that is some of the puts and takes. Then you have the normal product mix, but that will vary between quarters, as always.
Speaker #1: In Africa, we have had a couple of good quarters now with 4G and 5G rollouts, as well as modernization activities. Hopefully, we can see that continue.
Speaker #1: Also going into to this year . So that's a little bit the balance the on market act mix . And then the puts and takes , there is a cost pressure or in the group in the flat market and continuous cost us both pressure on in the people part , but also in material costs , so that we need to continuously work with .
Speaker #1: we talk That's why about then elevated levels on somewhat higher restructuring , both that will impact both . So to say , opex , but also in the cost cost sold .
Speaker #1: So that of goods is to necessary to offset this upward pressure on cost. So that is some of the puts and takes.
Speaker #1: Then you have the normal product mix . But that will vary between quarters . As . Okay .
Operator: Okay, thank you. Thanks, Sebastien. Moving to the next question, please. Next question is going to come from the line of Felix Henriksson at Nordea. Please go ahead, Felix. Hi, thanks for taking my question. It's relating to IPR. I think in the report you called out that you had a contract expiring with the Chinese smartphone vendor at the end of 2025. So I just wanted to ensure whether or not there are other significant contract cliffs in 2026 that we should be aware of. And as a quick follow-up to that, what is your level of conviction in being able to grow the SEK 13 billion annual run rate in IPR going forward? Thank you. Yeah, normally we try to give you that guiding point around the run rate coming out of the year, around 13.
Sebastian Sztabowicz: Okay, thank you.
Börje Ekholm: Thanks, Sebastien. Moving to the next question, please.
Speaker #2: Thank you .
Speaker #3: Thanks, Sebastian. Moving to the next question, please. The next question is going to come from the line of Felix Hendrickson at Nordea.
Operator: Next question is going to come from the line of Felix Henriksson at Nordea. Please go ahead, Felix.
Felix Henriksson: Hi, thanks for taking my question. It's relating to IPR. I think in the report you called out that you had a contract expiring with the Chinese smartphone vendor at the end of 2025. So I just wanted to ensure whether or not there are other significant contract cliffs in 2026 that we should be aware of. And as a quick follow-up to that, what is your level of conviction in being able to grow the SEK 13 billion annual run rate in IPR going forward? Thank you.
Speaker #3: Please go ahead, Felix.
Speaker #4: Thanks for Hi . taking . My question . It's relating to IPR . I think in the report you called out that you had an contract expiring with the Chinese smartphone at the end vendor of 2025 .
Speaker #4: So, I wanted to just ensure whether or not there are other, you know, significant contract cliffs in 2026 that we should be aware of.
Speaker #4: as a quick follow And up to that , what is your level of conviction in being able to grow the 13 billion Swedish kronor annual run rate in IPR going forward ?
Börje Ekholm: Yeah, normally we try to give you that guiding point around the run rate coming out of the year, around 13.
Speaker #4: you Thank .
Speaker #1: Yeah. Normally, when we are guiding, we try to give you a point around the run rate coming out of the year, around 13. When it comes to the contract, this is not a major impact.
Operator: When it comes to the contract, this is not a major impact. And we always, when we negotiate renew contracts, we are targeting the best economic outcome. And that we will do as well this time. So that could be some impact here, but that is then normally coming back with the renewals. So it should not impact the full year, so to say. And then potential upsides are there. We are in settlement negotiations with one of our licensees. So that is hopefully coming into place this year. And then there are the underlying opportunities around the pure smartphones when it comes to IoT, automotive, etc., that should support growth coming into this year as well. So that's a little bit the pieces that will drive some opportunities. Thank you. Thanks, Felix. Moving to the next question, please.
When it comes to the contract, this is not a major impact. And we always, when we negotiate renew contracts, we are targeting the best economic outcome. And that we will do as well this time. So that could be some impact here, but that is then normally coming back with the renewals. So it should not impact the full year, so to say. And then potential upsides are there. We are in settlement negotiations with one of our licensees. So that is hopefully coming into place this year. And then there are the underlying opportunities around the pure smartphones when it comes to IoT, automotive, etc., that should support growth coming into this year as well. So that's a little bit the pieces that will drive some opportunities.
Speaker #1: And we always, when we negotiate, we renew contracts. We are targeting the best economic outcome, and that we will do as well this time.
Speaker #1: That some could be impact here. But that is then normally coming back with the renewal. So impact the year. So to full.
Speaker #1: And then potential upsides are we are there in settlement negotiations with one of our licensees. So, that is hopefully coming into place this year.
Speaker #1: And then there is the underlying opportunities around the pure smartphones when it comes to automotive, etc. IoT support growth coming into this year as well.
Speaker #1: So that's a little bit the balance. The pieces that will drive some opportunities.
Felix Henriksson: Thank you. Thanks, Felix. Moving to the next question, please.
Speaker #4: Thank you .
Speaker #3: Thanks, Felix. Moving to the next question, please. The next question is going to come from the line of Ulrich Rath at Bernstein.
Operator: Next question is going to come from the line of Ulrich Rathe at Bernstein. Please go ahead, Ulrich. Thanks very much. My question is on the bigger picture of the revenue outlook. So you're guiding for a flattish market that highlights the growth opportunities in mission critical and other areas. And now in the Q4, you've delivered mid-single digit organic growth, which is taken with some excitement in the market today. Would you go as far as saying that something like mid-single digit revenue growth is possible in a flattish RAN market with the growth opportunities in these new opportunity areas that you're highlighting, or is this maybe a bit of a phasing effect here? I think you highlighted in particular in CSS the delivery phase. Just wondering what your bigger picture here is. Thank you.
Operator: Next question is going to come from the line of Ulrich Rathe at Bernstein. Please go ahead, Ulrich.
Speaker #3: Please
Speaker #3: go ahead . Ulrich .
Ulrich Rathe: Thanks very much. My question is on the bigger picture of the revenue outlook. So you're guiding for a flattish market that highlights the growth opportunities in mission critical and other areas. And now in the Q4, you've delivered mid-single digit organic growth, which is taken with some excitement in the market today. Would you go as far as saying that something like mid-single digit revenue growth is possible in a flattish RAN market with the growth opportunities in these new opportunity areas that you're highlighting, or is this maybe a bit of a phasing effect here? I think you highlighted in particular in CSS the delivery phase. Just wondering what your bigger picture here is. Thank you.
Speaker #5: much Thanks very .
Speaker #5: It's on the bigger question of the revenue outlook. So you're guiding for a flattish market and highlight the growth opportunities in mission-critical and other areas.
Speaker #5: And now, in the fourth quarter, you delivered mid-single-digit organic growth, which is taken with some excitement in the market today.
Speaker #5: Would you go as far as saying that something like mid-single digit revenue growth is possible a in flattish run market , with the growth opportunities in these new opportunities , new opportunity areas highlighting ?
Speaker #5: that you're this maybe a bit of a effect here ? I think you phasing highlighted in particular in CSS , the deliveries , the delivery phase , just wondering what your picture big here is .
Operator: I think if you think about it from a little bit longer-term perspective, and it's going to fluctuate, right? But the size of the Mission Critical market and the enterprise opportunity, as well as 5G Core, that contributes here. 5G Core, by the way, you should remember it's only about 1/4 of all networks that are upgraded to Standalone today. So there is a rather sizable opportunity there. So when you look at those outlooks, those individual pieces, they are large enough to drive a pretty nice long-term growth. It's not going to be double digits, as you say. So take that out. But it may be low to mid-single digits. And I think that's what makes me a bit excited is actually to think about it from that kind of at least some basic growth. And you add on operating leverage on that.
Börje Ekholm: I think if you think about it from a little bit longer-term perspective, and it's going to fluctuate, right? But the size of the Mission Critical market and the enterprise opportunity, as well as 5G Core, that contributes here. 5G Core, by the way, you should remember it's only about 1/4 of all networks that are upgraded to Standalone today. So there is a rather sizable opportunity there. So when you look at those outlooks, those individual pieces, they are large enough to drive a pretty nice long-term growth. It's not going to be double digits, as you say. So take that out. But it may be low to mid-single digits. And I think that's what makes me a bit excited is actually to think about it from that kind of at least some basic growth. And you add on operating leverage on that.
Speaker #5: Thank you. Thank you.
Speaker #1: I think .
Speaker #6: To to if you think about it from a little bit longer term perspective and it's going to fluctuate right . But the size of the mission critical market and the enterprise opportunity .
Speaker #6: As well as 5G core that that contributes here , 5G core , by the way , you should remember it's only about a quarter of all networks that are upgraded to standalone today .
Speaker #6: So that there is a rather sizable opportunity there . So when you look at those outlooks , those individual pieces , they are large enough to drive a pretty nice long term growth .
Speaker #6: going to be It's not it's not going to be double digits , as you say . So that take that out . But it may be low to mid single digits .
Speaker #6: And I think that's what makes me a bit, well, excited is actually to think about it from, from that kind of at least some basic growth.
Speaker #6: And you add on operating leverage on that. You add on what we're seeing on Enterprise, that we're going to get that to profitability.
Operator: You add on what we're seeing on enterprise that we're going to get that to profitability. And you combine that with share buyback, you actually get a very healthy growth profile. So I think there is something here that I think from a little bit longer-term perspective is rather exciting. Very clear. Thank you very much. Thanks, Ulrich. Moving to the next question, please. Next question is coming from the line of Sami Sarkamies at Danske Bank. Please go ahead, Sami. Thanks. I have a question on your silicon strategy. Your competitor recently announced that they will start building products based on NVIDIA chips. You have also done some R&D work related to the use of GPUs. What is your take on the situation, and do you see a role for NVIDIA in future RAN products?
You add on what we're seeing on enterprise that we're going to get that to profitability. And you combine that with share buyback, you actually get a very healthy growth profile. So I think there is something here that I think from a little bit longer-term perspective is rather exciting. Very clear. Thank you very much. Thanks, Ulrich. Moving to the next question, please.
Speaker #6: And you combine that with with share buybacks , you actually get a very healthy growth profile . So I think there is something here that I think from a little bit longer term that perspective is rather exciting .
Speaker #5: Very clear. Thank you very much.
Speaker #3: Thanks , Ulrik . Moving to the next question , please . Next question is coming from the line of Sami at Danske Bank .
Operator: Next question is coming from the line of Sami Sarkamies at Danske Bank. Please go ahead, Sami. Thanks.
Speaker #3: Please go ahead, Sami. Thanks.
Sami Sarkamies: I have a question on your silicon strategy. Your competitor recently announced that they will start building products based on NVIDIA chips. You have also done some R&D work related to the use of GPUs. What is your take on the situation, and do you see a role for NVIDIA in future RAN products?
Speaker #7: I have a question on your silicon strategy. Your competitor recently announced that they will start building products based on Nvidia chips. You have also done some work on GPUs.
Speaker #7: R&D related to your take on the use of, and do you see a situation—what is the role for future products? And Nvidia, what is your view on that?
Operator: We selected a strategy several years ago to basically disaggregate the software and hardware and actually allow our software to run on pretty much any architecture. And of course, here we can run on, of course, the x86, but it can run on GPUs. It can run on our proprietary silicon as well. And by the way, you could well see the TPU from Google. You could see what Qualcomm is coming with, AMD, etc. So we wanted to be a bit independent of the selection of the hardware layer. The reason for doing that was that we felt it was the right strategy to give the customers the opportunity to choose what hardware layer they want to run on. And today, there are operators rolling out Cloud RAN. That's on x86. In the future, it may be different. So I think I cannot comment on Nokia's decision.
Börje Ekholm: We selected a strategy several years ago to basically disaggregate the software and hardware and actually allow our software to run on pretty much any architecture. And of course, here we can run on, of course, the x86, but it can run on GPUs. It can run on our proprietary silicon as well. And by the way, you could well see the TPU from Google. You could see what Qualcomm is coming with, AMD, etc. So we wanted to be a bit independent of the selection of the hardware layer. The reason for doing that was that we felt it was the right strategy to give the customers the opportunity to choose what hardware layer they want to run on. And today, there are operators rolling out Cloud RAN. That's on x86. In the future, it may be different. So I think I cannot comment on Nokia's decision.
Speaker #7: ?
Speaker #6: we we selected a strategy You know , several ago years to basically disaggregate software and hardware and the actually our run software to on much pretty allow any .
Speaker #6: And of here , you know , can run we architecture course , course , the , of but it on can run GPUs x86 , , it can run on our proprietary silicon as .
Speaker #6: Well, and could you see, well, the way it could—the TPU from Google, you could see. You see what Qualcomm is coming with, AMD with, etc.
Speaker #6: we wanted to be a bit . independent of the selection hardware of the layer . The reason for doing that was we we felt right strategy to the give the customers the it was opportunity to what choose layer they want to run on .
Speaker #6: And , you know , today there are there are operators rolling out cloud . That's on x86 in the future , it may be different .
Speaker #6: So I think the I cannot comment on on Nokia's decision for that that's them to to comment on . But from my point of view , I we wanted a very different strategy not to select the infrastructure layer today , but rather do that as we come closer towards AI run realization and six G .
Operator: That's for them to comment on. But from my point of view, we wanted a very different strategy, not to select the infrastructure layer today, but rather do that as we come closer towards AI RAN realization and 6G. Then we can make an intelligent choice together with our customers. And we feel good about that strategy, but that also means that we're going to continue to work with the x86 ecosystem and the GPU ecosystem. Thank you. Thanks for the question, Sami. Moving on to the next question, please. The next question is going to come from the line of Didier Scemama at Bank of America. Please go ahead, Didier. Yes, thanks, Daniel. Good morning, everyone. Sorry to come back to the point on memory and cost inflation. So I'm looking at your inventories, which are seasonally lower in Q4.
That's for them to comment on. But from my point of view, we wanted a very different strategy, not to select the infrastructure layer today, but rather do that as we come closer towards AI RAN realization and 6G. Then we can make an intelligent choice together with our customers. And we feel good about that strategy, but that also means that we're going to continue to work with the x86 ecosystem and the GPU ecosystem. Thank you. Thanks for the question, Sami.
Speaker #6: Then we can make an intelligent choice together with our customers, and we feel good about that strategy. But that also means that we're going to continue to work with the x86 ecosystem and the GPU ecosystem.
Operator: Moving on to the next question, please. The next question is going to come from the line of Didier Scemama at Bank of America. Please go ahead, Didier.
Speaker #7: Thank you .
Speaker #3: for the question , Thanks Sami . Moving on to the next question . Please . The next question come is going to from the line of Didier Sementa at Bank of America .
Didier Scemama: Yes, thanks, Daniel. Good morning, everyone. Sorry to come back to the point on memory and cost inflation. So I'm looking at your inventories, which are seasonally lower in Q4.
Speaker #3: Please go ahead, Didier.
Speaker #8: Yeah . Thanks , Daniel . Good morning everyone . Sorry to come back to the point on memory and cost inflation . So I'm looking at your inventories , which are , you know , seasonally lower in Q4 .
Operator: So you seem to suggest that you have adequate supply from your suppliers. Can you elaborate a little bit? Have you signed a 12-month supply agreement that makes sure that the pricing is not going to be a headwind to your gross margin? And put it in a different way, what have you assumed in your gross margin in terms of cost inflation from memory over the course of 2026? Thank you. So I think inventory levels are coming down in Q4 following the seasonality that we have, and that includes all inventories. So when it comes to that part, I think we are well positioned coming into the year when it comes to inventory levels on these kind of areas. Then, of course, there are cost increases coming that we need to work with. But we don't share exactly how much that is, of course.
So you seem to suggest that you have adequate supply from your suppliers. Can you elaborate a little bit? Have you signed a 12-month supply agreement that makes sure that the pricing is not going to be a headwind to your gross margin? And put it in a different way, what have you assumed in your gross margin in terms of cost inflation from memory over the course of 2026? Thank you.
Speaker #8: So you seem to suggest that you have adequate supply from the suppliers. Can you just elaborate on that a little bit?
Speaker #8: Have you signed like a 12 month supply agreement that makes sure that the pricing is not going to be a headwind for your gross margins and or put it different in a way , what have you assumed your gross margin in terms of cost inflation from memory over the course of 2016 ?
Börje Ekholm: So I think inventory levels are coming down in Q4 following the seasonality that we have, and that includes all inventories. So when it comes to that part, I think we are well positioned coming into the year when it comes to inventory levels on these kind of areas. Then, of course, there are cost increases coming that we need to work with. But we don't share exactly how much that is, of course.
Speaker #8: Thank you .
Speaker #9: Yeah , I think .
Speaker #1: Margin inventory levels are coming down in the fourth quarter, following the seasonality that we have, and that includes all inventories. So, when it comes to that part, I think we are well positioned coming into the year when it comes to inventory levels in these kinds of areas.
Speaker #1: Then, of course, there are cost increases coming that we need to work with. But we don't share exactly how much that is.
Operator: But it will have some impact, but we will work together with our customers to ensure that we are, so to say, not stuck in the middle here. But there is an understanding that there is some sharing to be done here. Yeah, thank you for that. And sorry again, to go back to the defense point, I think you sort of said, "Look, we've got opportunities." Can you give us a sense of the size of your business today in defense? What sort of costs you're thinking about? Does that require any CapEx? Just elaborate a little bit so we've got something to work with. Thank you. Yeah, I think you can assume we're not going into details exactly what our business is because we're working with a number of defense organizations.
But it will have some impact, but we will work together with our customers to ensure that we are, so to say, not stuck in the middle here. But there is an understanding that there is some sharing to be done here.
Speaker #1: Of course. But it will have some impact. But we will work together with our customers to ensure that we are not stuck in the middle here, but there is an understanding that there is here some sharing to be done.
Didier Scemama: Yeah, thank you for that. And sorry again, to go back to the defense point, I think you sort of said, "Look, we've got opportunities." Can you give us a sense of the size of your business today in defense? What sort of costs you're thinking about? Does that require any CapEx? Just elaborate a little bit so we've got something to work with. Thank you.
Speaker #8: you for Yeah , thank And sorry again to go back to the that . defense point . I think you sort of said , look , we've got Can you opportunities .
Speaker #8: Can you give us a sense of the size of your business today in defense? What sort of costs are you thinking about? Does that require any CapEx?
Speaker #8: Just elaborate a little bit, so we've got something to work with. Thank you.
Börje Ekholm: Yeah, I think you can assume we're not going into details exactly what our business is because we're working with a number of defense organizations.
Speaker #6: Yeah I think you can you can assume , you know , we're not going into details exactly what our business is because we we're working with a number of defense organizations .
Operator: As you know, Ericsson exited all defense several years ago, so we haven't really had a presence. Today, we're working in partnerships as well as with defense organizations. We're not going into details there. I think when you look at the overall sizing, the revenue opportunity, there are a number of consultants out there talking about the size of that opportunity. Some are very big numbers. I'm not sure it's going to be that, but we think, compared to the rest of the opportunity we have, it's sizable. When we talk about it from an investment point of view, this is more saying that we will ramp up our presence in here and actually increase our investments. It's not going to be material compared to our overall SEK 50 billion we spend on R&D.
As you know, Ericsson exited all defense several years ago, so we haven't really had a presence. Today, we're working in partnerships as well as with defense organizations. We're not going into details there. I think when you look at the overall sizing, the revenue opportunity, there are a number of consultants out there talking about the size of that opportunity. Some are very big numbers. I'm not sure it's going to be that, but we think, compared to the rest of the opportunity we have, it's sizable. When we talk about it from an investment point of view, this is more saying that we will ramp up our presence in here and actually increase our investments. It's not going to be material compared to our overall SEK 50 billion we spend on R&D.
Speaker #6: And , you know , Ericsson exited all defense several years ago . So we haven't really had a presence . So today we're working in partnerships as well as as with defense organizations .
Speaker #6: So we're not going into details there . But and I think when you look at the overall sizing . You know , the revenue opportunity , there are a number of consultants out there talking about the size of that opportunity .
Speaker #6: We we , you know , and it's some some are very big numbers . I , I'm not sure it's going to be that .
Speaker #6: We think, but it's compared to the rest of the opportunity we have, it's sizable. When we talk about it, from an investment point of view.
Speaker #6: You know, this is more saying that we will ramp up our presence in here, and actually increase our investments. It's not going to be compared to our overall 50 billion kroner.
Speaker #6: We spend on R&D . So that's why we also say that it's part , you know , it can be a well be offset .
Operator: So that's why we also say that it's part; it can well be offset, maybe not fully, but by the efficiency gains that we're going to do. So when you look at it from a total point of view, think about it as there is a big opportunity. We will try to invest to get that. We're not going to materially impact our outlook with that. That's not the case. But we want to single it out as a growth opportunity. Yeah. And I think on your questionnaire on CapEx, it's very, very limited. Yeah, that's fair. You will not see that as a CapEx need. Okay. Thank you so much for the details. Thanks, Didier. Moving to the next question, please. The next question is going to come from the line of Daniel Djurberg at Handelsbanken. Please go ahead, Daniel. Thank you. And good morning, Börje, Lars, Daniel.
So that's why we also say that it's part; it can well be offset, maybe not fully, but by the efficiency gains that we're going to do. So when you look at it from a total point of view, think about it as there is a big opportunity. We will try to invest to get that. We're not going to materially impact our outlook with that. That's not the case. But we want to single it out as a growth opportunity.
Speaker #6: Maybe not fully, but by the efficiency gains that we're going to do. So when you look at it from a total point of view, I think about it as there is a big opportunity we will try to invest to get that.
Speaker #6: We're not going to materially impact our outlook with that. That's not the case, but we want to single it out as a growth.
Yeah. And I think on your questionnaire on CapEx, it's very, very limited. Yeah, that's fair. You will not see that as a CapEx need.
Speaker #6: opportunity
Speaker #1: Yeah, and I think on your questionnaire on CapEx, it's very, very limited.
Speaker #6: Yeah, that’s fair. That’s it—will be, you will not see that CapEx as a need.
Börje Ekholm: Okay. Thank you so much for the details. Thanks, Didier.
Speaker #8: Okay. Thank you so much for the details.
Moving to the next question, please. The next question is going to come from the line of Daniel Djurberg at Handelsbanken. Please go ahead, Daniel. Thank you.
Speaker #3: Thanks , Didier . Moving to the next question , please . The next question is going to come from the line of Daniel Djurberg at Handelsbanken .
Speaker #3: Please go ahead, Daniel.
Daniel Djurberg: And good morning, Börje, Lars, Daniel. I have a question. If you could give any more color on the visibility into the North American RAN market in 2026, is it fair to assume a more back-end loaded year, given some of your larger customers, AT&T, for example, that could, I expect, build out in the latter part of the year? Thanks.
Speaker #1: Thank you and good morning . Daniel , I have a question . If you could give any more color on the visibility into North American road market in 26 , is it fair to assume a more back end loaded year , given some of your larger customers back to asset holdings , for example ?
Operator: I have a question. If you could give any more color on the visibility into the North American RAN market in 2026, is it fair to assume a more back-end loaded year, given some of your larger customers, AT&T, for example, that could, I expect, build out in the latter part of the year? Thanks. I think we say that when it comes to the full year, we are coming out with healthy investment levels, and we expect that to continue. Then how it will pan out between quarters, it's actually rather, I think, difficult to say. It depends on what the capital investment needs that they have and different rollout phases, etc. So I don't think it's too easy to say what will be the difference between the first and the second half. No, I think that we don't guide that way.
Speaker #1: Could I expect to build upon that in the latter part of the year? Thanks.
Börje Ekholm: I think we say that when it comes to the full year, we are coming out with healthy investment levels, and we expect that to continue. Then how it will pan out between quarters, it's actually rather, I think, difficult to say. It depends on what the capital investment needs that they have and different rollout phases, etc. So I don't think it's too easy to say what will be the difference between the first and the second half. No, I think that we don't guide that way.
Speaker #9: I think we don't, I think we say that when it comes to the full year, we are.
Speaker #1: Coming out with a healthy investment levels and we expect that to continue . Then how it will pan out between quarters . It's actually rather , I think , difficult to say .
Speaker #1: It depends on what the capital investment needs that they have, and different rollout phases, etc. So I think it's, today, not easy to say what will be the difference between the first and the second half.
Speaker #6: So I think that , you know , we don't guide that We have way . elected to do it quarterly . And I think that's why we do it quarterly .
Operator: We've elected to do it quarterly, and I think that's why we do it quarterly. What I do think is fair to say that when we look at the North American market, and by the way, this is actually a global phenomenon, but when you will hear, I think, our customers talk a bit about being cautious on CapEx, the interesting thing is we also see a change in mix in our customers. So we believe the active components are going to be needed because that's driven by the traffic growth and the need to go 5G Standalone, as well as new use cases like Fixed Wireless Access. So when you see that, you actually see a quarter-to-healthy investment level, even though our customers most likely will guide for a bit lower CapEx. Without knowing, they need to guide on their own, but it's given signals that you can hear.
We've elected to do it quarterly, and I think that's why we do it quarterly. What I do think is fair to say that when we look at the North American market, and by the way, this is actually a global phenomenon, but when you will hear, I think, our customers talk a bit about being cautious on CapEx, the interesting thing is we also see a change in mix in our customers. So we believe the active components are going to be needed because that's driven by the traffic growth and the need to go 5G Standalone, as well as new use cases like Fixed Wireless Access. So when you see that, you actually see a quarter-to-healthy investment level, even though our customers most likely will guide for a bit lower CapEx. Without knowing, they need to guide on their own, but it's given signals that you can hear.
Speaker #6: What I , I do think is to say fair that when we look at the North American market , I and way , this is by the actually a global phenomena .
Speaker #6: But but when you will hear , I think our customers talk a about being cautious on CapEx . The interesting thing is we also see a change in mix in our customers .
Speaker #6: So we believe we're, you know, the active components are going to be needed because that's driven by the traffic growth and the need to go 5G standalone, as well as new use cases like fixed wireless access.
Speaker #6: When you so see that, you see, according to health level, even though our customers most likely will guide for a bit lower CapEx.
Speaker #6: Without you knowing , they need to guide on their own . But but it's given signals that you can hear it . It's pretty clear , you know , will they be a cautious on CapEx .
Operator: It's pretty clear they will be cautious on CapEx. Perfect. Thank you very much, and good luck here in Q1. Thank you. Thanks for the question. Moving on to the next question, please. The next question is going to come from the line of Andrew Gardiner at Citi. Please go ahead, Andrew. Thank you, Daniel. Morning, Börje. Morning, Lars. Just coming back to a point you made early in your presentation regarding the performance that you've had over the course of 2025, your profitability has improved noticeably last year. You've had two good years of operational cash generation, and so that is putting Ericsson, as you point out, in touch and distance of the long-term financial target. That being said, these targets are some years old at this point.
Operator: It's pretty clear they will be cautious on CapEx. Perfect. Thank you very much, and good luck here in Q1.
Speaker #1: Perfect .
Börje Ekholm: Thank you. Thanks for the question. Moving on to the next question, please.
Speaker #10: Thank you very much, and good luck. Thank you.
Speaker #6: you . Thank
Speaker #3: Thanks for the question. Moving on to the next question, please. The next question is going to come from the line of Andrew Gardner at Citi.
Operator: The next question is going to come from the line of Andrew Gardiner at Citi. Please go ahead, Andrew.
[Analyst] (Citi): Thank you, Daniel. Morning, Börje. Morning, Lars. Just coming back to a point you made early in your presentation regarding the performance that you've had over the course of 2025, your profitability has improved noticeably last year. You've had two good years of operational cash generation, and so that is putting Ericsson, as you point out, in touch and distance of the long-term financial target. That being said, these targets are some years old at this point.
Speaker #3: Andrew, please go ahead.
Speaker #5: Thank you . Daniel .
Speaker #7: Morning. Morning, Lars.
Speaker #11: I was just coming back to a point you made earlier in your presentation regarding the performance that you'd had over the course of 2025.
Speaker #11: Your profitability has improved noticeably . Last year , you've had operational cash generation . And so two good years of that is putting Ericsson , as you point out , in touch distance of the long term financial targets .
Speaker #11: That being said , these targets are some years old at this point . Are they still relevant and accurate targets for us to use in the market or given the changing your end state of markets and your your execution strong , is there possibility the to do better ?
Operator: Are they still relevant and accurate targets for us to use in the market, or given the changing state of your end markets and your strong execution, is there the possibility to do better? Do you have the ambition to perhaps outperform those somewhat old targets at this point? I think it's right that they're old. We have not succeeded at reaching them, so that's a fair comment. But I think we should remember we also set the targets in a different environment, geopolitically, as well as business mix, to be honest. So we set them when Iconectiv was part of our portfolio. We set them in a very different political environment. I think I'm not a fan of changing targets easily. So we want to make sure that we reach that 15 to 18 first.
Are they still relevant and accurate targets for us to use in the market, or given the changing state of your end markets and your strong execution, is there the possibility to do better? Do you have the ambition to perhaps outperform those somewhat old targets at this point?
Speaker #11: Right. Do you have the ambition to perhaps outperform those somewhat old targets at this point?
Börje Ekholm: I think it's right that they're old. We have not succeeded at reaching them, so that's a fair comment. But I think we should remember we also set the targets in a different environment, geopolitically, as well as business mix, to be honest. So we set them when Iconectiv was part of our portfolio. We set them in a very different political environment. I think I'm not a fan of changing targets easily. So we want to make sure that we reach that 15 to 18 first.
Speaker #6: I think there it's that they're right, old. We have not succeeded at reaching them. So that's a fair, fair comment.
Speaker #6: But I , I think the we should the set remember we targets in a different environment geopolitically as well as business mix . To be honest .
Speaker #6: So we set them when I connected was part of our portfolio , we set them in a in a very different political environment .
Speaker #6: I think . I think we , you know , I'm not a fan of of changing targets easily . So we want to make sure that we reach that 15 to 18 first .
Operator: Once we're solidly there, then I think we can start to talk about is that the right target after that. But right now, I think it's a good measure on what we should achieve with the current type of business we have. Thank you. Thanks for the question, Andrew. We just have time for a brief follow-up question from one of the analysts before we close. So if we can bring Daniel back in. Daniel Djurberg at Handelsbanken. Daniel, your line is open for a brief follow-up. Thank you. Oh, thanks. Thank you so much. Then I would like to ask you a little bit on the cloud software and services. Sorry if I missed the answer before. But could you help us to understand a little bit more on the impact of this large contract being invoiced in the quarter?
Once we're solidly there, then I think we can start to talk about is that the right target after that. But right now, I think it's a good measure on what we should achieve with the current type of business we have. Thank you. Thanks for the question, Andrew.
Speaker #6: Once we're we're solidly there , then I think we can start to talk about is that the right target after that ? But right now I think it's a it's a good measure of what we should achieve with the with the current type of have business .
Speaker #6: We .
Speaker #11: Thank you .
Börje Ekholm: We just have time for a brief follow-up question from one of the analysts before we close. So if we can bring Daniel back in. Daniel Djurberg at Handelsbanken. Daniel, your line is open for a brief follow-up.
Speaker #3: Thanks for the question, Andrew. We just have time for a brief follow-up question from one of the analysts before we see if we can bring things to a close.
Speaker #3: Daniel back in , So Daniel Djurberg Handelsbanken . your line is open for a brief Daniel , follow up . Thank you .
[Analyst] (Citi): Thank you. Oh, thanks. Thank you so much. Then I would like to ask you a little bit on the cloud software and services. Sorry if I missed the answer before. But could you help us to understand a little bit more on the impact of this large contract being invoiced in the quarter?
Speaker #10: Oh, thanks. Thank you so much.
Speaker #1: Then I would like to ask a little bit on the cloud software services . Sorry if I missed the onset before , but could you help us to understand a little bit more on this impact of this large contracting invoiced in the quarter , i.e. , would the outlook comment on Q1 seasonality have changed to more of a similar view if the contract has been excluded in Q4 ?
Operator: I.e., would the outlook comment on Q1 seasonality have changed to more of a similar view if the contract has been excluded in Q4? Well, that's a good question. As we said, we're coming out strong in Q4 here. As you know, we have lumpiness when it comes to project deliveries, which are, if you look at the full year, we are up around some 6% organically in cloud software and services. I think that has been a good underlying growth that we have seen, supported by the core business. That is what we see as a healthy level coming into 2026. Then, of course, if that single comment would bring us back to normal, I think that's a little bit it would, of course, bring us closer, for sure. That is true.
I.e., would the outlook comment on Q1 seasonality have changed to more of a similar view if the contract has been excluded in Q4?
Lars Sandström: Well, that's a good question. As we said, we're coming out strong in Q4 here. As you know, we have lumpiness when it comes to project deliveries, which are, if you look at the full year, we are up around some 6% organically in cloud software and services. I think that has been a good underlying growth that we have seen, supported by the core business. That is what we see as a healthy level coming into 2026. Then, of course, if that single comment would bring us back to normal, I think that's a little bit it would, of course, bring us closer, for sure. That is true.
Speaker #1: Is good question you as we said , we're coming out strong . As in in Q4 here with and as you know , we have lumpiness when it comes to project deliveries , which are if you look at the full year , we are up around some 6% or organically in cloud software and services .
Speaker #1: And I think that we have seen underlying growth that we see as good, supported by the core business. And that is what we see as a healthy level coming into '26.
Speaker #1: Then , of course , if that single comment would bring us back to normal , I think that's that's a little bit . It would of course , bring us closer for sure .
Operator: Then we should remember, I think you have all seen that we have a significant currency headwind coming in Q1 year over year as a comparison. That you will see, currency rates peaked somewhat in Q1 2025. So that headwind we also are facing here. Thank you very much. Look forward to see you in Barcelona. Thank you. See you. Thanks, everyone, for joining. That concludes the call. Thank you.
Then we should remember, I think you have all seen that we have a significant currency headwind coming in Q1 year over year as a comparison. That you will see, currency rates peaked somewhat in Q1 2025. So that headwind we also are facing here. Thank you very much. Look forward to see you in Barcelona. Thank you. See you. Thanks, everyone, for joining. That concludes the call. Thank you.
Speaker #1: That that is true . And then we should remember , I think you have all seen that , that we have a significant currency headwind coming in in Q1 year over year as a comparison , that that you will see currency rates peaked somewhat in in Q1 25 .
Speaker #1: So that that headwind , we also are facing here . Thank you very much . Look see you in Barcelona forward to . Thank you .
Speaker #1: Thank you .
Speaker #3: Thanks, everyone, for joining. That concludes the call.
