Q1 2026 Telefonaktiebolaget LM Ericsson Earnings Call

April 17, 2026

Speaker #1: Hello everyone, and welcome to the presentation of Ericsson's first quarter 2026 results. Joining us by video today is Berit Ekholm.

Daniel Morris: Hello everyone, and welcome to the presentation of Ericsson's Q1 2026 results. Joining us by video today is Börje Ekholm, our President and CEO. In the studio, I'm joined by Lars Sandström, our Chief Financial Officer. As usual, we'll have a short presentation followed by Q&A. In order to ask a question, you'll need to join the conference by phone. Details can be found in today's earnings release and on the investor relations website as well. 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 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: Our president and CEO. And in the studio, I'm joined by Lars Sandstrom, our chief financial officer. As usual, we'll have a short presentation followed by Q&A.

Speaker #1: And in order to ask a question, you'll need to join the conference by phone. Details can be found in today's earnings release and on the Investor Relations website as well.

Daniel Morris: Details can be found in today's earnings release and on the investor relations website as well. 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 risks and uncertainties.

Speaker #1: 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 risks and uncertainties. Actual results may differ materially due to factors mentioned in today's press release and discussed in the conference call.

Daniel Morris: Actual results may differ materially due to factors mentioned in today's press release and discussed in the conference call. We encourage you to read about these risks and uncertainties in our earnings reports as well as in our annual report. I'll now hand the call over to Börje and Lars for their introductory comments.

Speaker #1: We encourage you to read about these risks and uncertainties in our earnings reports, as well as in our annual report. I'll now hand the call over to Berit and Lars for their introductory comments.

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

Speaker #2: Thanks , Daniel , and good morning , everyone , and thanks for joining us today Q1 was a solid start of the year , and with the results that reflects our continued execution against our operational and strategic priorities .

Börje Ekholm: Thanks, Daniel, and good morning everyone, and thanks for joining us today. Q1 was a solid start of the year and with the results that reflects our continued execution against our operational and strategic priorities. We saw a very large currency headwind during the quarter, probably one of the toughest quarters from a comp ratio as the Swedish krona strengthened towards almost all currencies compared to last year. This of course materially impacted every line of our financial statements with reporting sales falling 10%. At the same time, we've performed well operationally, realizing strong organic growth of 6% with all segments contributing. Our results are a testament to our leading portfolio and the investments we've been making in furthering our technology leadership. Over the last few years, we've actively managed to reduce dependence on geographic mix.

Speaker #2: We saw a very large currency headwind during the quarter, probably one of the toughest quarters from a comp ratio, as the Swedish krona strengthened towards almost all currencies compared to last year.

Speaker #2: So this , of course , materially impacted every line of our financial statements , with reporting sales falling 10% at the same time , we performed well operationally Realizing strong organic growth of 6% with all segments contributing our results are testament to our leading portfolio and the investments we've been making in furthering our technology leadership Over the last few years , we've actively managed to reduce dependence on geographic mix .

Börje Ekholm: This of course materially impacted every line of our financial statements with reporting sales falling 10%. At the same time, we've performed well operationally, realizing strong organic growth of 6% with all segments contributing. Our results are a testament to our leading portfolio and the investments we've been making in furthering our technology leadership. Over the last few years, we've actively managed to reduce dependence on geographic mix.

Speaker #2: Of course , we realized that North America often received a disproportionate interest from , from , from . I guess you the the analyst community , but also around the world .

Börje Ekholm: Of course, we realize that North America often receive a disproportionate interest from, I guess, the analyst community, but also around the world. That's of course natural because it is a front runner market. This quarter, we saw sales reduced by mid-single digits in North America. We could still deliver a gross margin of 48.1% for the group and 50.4% for segment networks, indicating that the work we've done to balance out the geographic mix is coming through in the results and giving us less sensitivity to geographic mix. Cloud Software Services continue to execute well. We reached a gross margin of 43.2%. That's up more than 300 basis points year over year. Revenue seasonality was in line with the guidance we had for the quarter, and we saw some deals being pushed into Q2. We expect to see, therefore, stronger seasonality than normal next quarter.

Speaker #2: And that's, of course, natural because it is a front-runner market. And this quarter, we saw sales reduced by mid-single digits in North America.

Speaker #2: But we could still deliver a gross margin of 48.1% for the group, and 50.4% for Segment Networks, indicating that the work we've done to balance out the geographic mix is coming through in the results.

Speaker #2: And giving us less sensitivity to geographic mix. Cloud software services continue to execute well. We reached a gross margin of 43.2%.

Börje Ekholm: Cloud Software Services continue to execute well. We reached a gross margin of 43.2%. That's up more than 300 basis points year over year. Revenue seasonality was in line with the guidance we had for the quarter, and we saw some deals being pushed into Q2. We expect to see, therefore, stronger seasonality than normal next quarter.

Speaker #2: That's up more than 300 basis points year over year. And revenue seasonality was in line with the guidance we had for the quarter.

Speaker #2: And we saw some deals being pushed into Q2, and we expect to see that. Therefore, stronger seasonality than normal next quarter.

Speaker #2: EBITDA came in at 5.6 billion kroner, with a margin of 11.3%. And the strengthening of the Swedish krona affected EBITDA by 2.2 billion kroner.

Börje Ekholm: EBITDA came in at SEK 5.6 billion with a margin of 11.3%, and the strengthening of the Swedish krona affected EBITDA by SEK 2.2 billion. You've also seen we had the revaluation of the long-term stock-based programs. All of those are, of course, included in the results. Cash flow during Q1 is seasonally lower typically. Despite this, cash flow came in at a healthy SEK 5.9 billion with a net cash position of SEK 68.1 billion. As you've seen, just a couple of weeks ago, the AGM approved the board's proposal on increased dividend and our first share buyback program. We will start to execute on the share buyback program next week, with a target to buy back SEK 15 billion. In the next phase of AI, we see that high performance mobile connectivity will become increasingly important.

Speaker #2: And you've also seen we had the revaluation of the long term stock based programs and all of those are , of course , included in the results .

Speaker #2: Cash flow during the first quarter is seasonally, seasonably lower. Typically, despite this, cash flow came in at a healthy SEK 5.9 billion, with a net cash position of SEK 68.1 billion.

Börje Ekholm: Despite this, cash flow came in at a healthy SEK 5.9 billion with a net cash position of SEK 68.1 billion. As you've seen, just a couple of weeks ago, the AGM approved the board's proposal on increased dividend and our first share buyback program. We will start to execute on the share buyback program next week, with a target to buy back SEK 15 billion. In the next phase of AI, we see that high performance mobile connectivity will become increasingly important.

Speaker #2: And as you've seen, just a couple of weeks ago, the AGM approved the board's proposal on increased dividend and our first share buyback program.

Speaker #2: We will start to execute on the share buyback program next week, with the target to buy back 15 billion kroner in the next phase of AI.

Speaker #2: We see that high performance mobile connectivity will become increasingly important . Even so , our planning assumptions for the rand market remains flat over the longer term , with disciplined execution , we create room to make selective investments in growth to broaden the mobile platform to new use cases and new sectors We believe the growth will come in areas outside of our traditional CSP markets , and then we're talking about areas like enterprise and mission critical networks in our enterprise segments , which includes our wireless Wan business , private networks , network APIs , or as we now call it , actually network powered solutions .

Börje Ekholm: Even so, our planning assumptions for the RAN market remain flat over the longer term. With disciplined execution, we create room to make selective investments in growth to broaden the mobile platform to new use cases and new sectors. We believe the growth will come in areas outside of our traditional CSP markets, and then we're talking about areas like enterprise and mission-critical networks. In our enterprise segments, which includes our Wireless WAN business, private networks, network APIs, or as we now call it, actually, network-powered solutions and Mobile Money, organic growth was stronger, which is encouraging. There are new markets that we see as key opportunities going forward. Of course, new markets take time to develop, but we're now seeing these efforts start to scale. I would also comment on the loss in enterprise of SEK 1.4 billion.

Börje Ekholm: In our enterprise segments, which includes our Wireless WAN business, private networks, network APIs, or as we now call it, actually, network-powered solutions and Mobile Money, organic growth was stronger, which is encouraging. There are new markets that we see as key opportunities going forward. Of course, new markets take time to develop, but we're now seeing these efforts start to scale. I would also comment on the loss in enterprise of SEK 1.4 billion.

Speaker #2: And mobile money organic growth was stronger, which is encouraging. And there are new markets that we see as key opportunities going forward.

Speaker #2: Of course, new markets take time to develop, but we're now seeing these efforts start to scale. I would also comment on the loss in Enterprise of 1.4 billion kronor.

Speaker #2: It's clearly unacceptable, but it also includes a number of one-time costs. And we have an improvement plan in place that we're executing on.

Börje Ekholm: It's clearly unacceptable, but it also includes a number of one-time costs. We have an improvement plan in place that we're executing on, and we will expect to see that coming through shrinking losses during the rest of the year. It comes from growth, operational discipline, and of course, as the one-time costs abate. We're also driving several other growth initiatives, and there we see good progress. In mission-critical networks, which tend to be a bit lumpy and vary by quarter, we're experiencing strong interest in several verticals, particularly within defense solutions. In modern defense applications, high performance, and then I'm talking about large capacity connectivity, is required, and this will make 5G Standalone a cost-effective alternative. We've seen a trial with the Italian Navy or actually a deployment with the Italian Navy this quarter.

Speaker #2: And we expect to see that coming through, through shrinking losses during the rest of the year. That comes from growth operations, discipline, and of course, that the one-time costs abate.

Speaker #2: We're also driving several other growth initiatives. And there, we see good progress in mission-critical networks, which tend to be a bit lumpy and vary by quarter.

Börje Ekholm: We're also driving several other growth initiatives, and there we see good progress. In mission-critical networks, which tend to be a bit lumpy and vary by quarter, we're experiencing strong interest in several verticals, particularly within defense solutions. In modern defense applications, high performance, and then I'm talking about large capacity connectivity, is required, and this will make 5G Standalone a cost-effective alternative. We've seen a trial with the Italian Navy or actually a deployment with the Italian Navy this quarter.

Speaker #2: We're experiencing strong interest in several verticals, particularly within defense solutions in modern defense applications—high performance. And then I'm talking about large capacity connectivity being required.

Speaker #2: And this will make 5G standalone a cost-effective alternative. And we've seen a trial with the Italian Navy, or actually a deployment with the Italian Navy.

Speaker #2: This quarter Another very exciting area is 5G based sensing , where one of many use cases is about detecting unconnected drones and a few weeks ago , we showcased our solution , which is seeing significant customer interest Of course , given a difficult current market environment or environment , geopolitically , we see that our technology here has a great market potential and we're now starting to invest to capture these opportunities I would say this is just one example that you don't have to wait for six G to get part of new , exciting use cases with the technology , we have .

Börje Ekholm: Another very exciting area is 5G-based sensing, where one of many use cases is about detecting unconnected drones. A few weeks ago, we showcased our solution, which is seeing significant customer interest, of course, given a difficult current market environment or geopolitical environment. We see that our technology here has a great market potential, and we're now starting to invest to capture these opportunities. I would say this is just one example that you don't have to wait for 6G to get part of new exciting use cases with the technology we have. We're seeing good momentum on our strategy execution and we've strengthened Ericsson operationally, and I would say this is showing now in our Q1 results. With that, let me give the word over to you, Lars, to go through the numbers in some more detail.

Börje Ekholm: I would say this is just one example that you don't have to wait for 6G to get part of new exciting use cases with the technology we have. We're seeing good momentum on our strategy execution and we've strengthened Ericsson operationally, and I would say this is showing now in our Q1 results. With that, let me give the word over to you, Lars, to go through the numbers in some more detail.

Speaker #2: So we're seeing good momentum on our strategy execution , and we've strengthened Ericsson operationally . And I would say this is showing now in our Q1 results With that , I'll let me give the word over to you , Lars , to go through the numbers in some more detail .

Speaker #3: All right . Thank you very . I will begin with some additional comments on the group before moving over to the segments . So net sales in Q1 totaled 49.3 billion , with organic sales growing 6% year on year The growth was broad based and sales grew in all segments and free market areas delivered double digit organic growth , driven by continued 5G rollouts and increased uptake of 5G core Americas declined 2% , with strong growth in Latin America more than offset by a mid-single digit decline in North America .

Lars Sandström: All right. Thank you, Börje. I will begin with some additional comments on the group before moving over to the segments. Net sales in Q1 totaled SEK 49.3 billion, with organic sales growing 6% year on year. The growth was broad-based, and sales grew in all segments, and three market areas delivered double-digit organic growth, driven by continued 5G rollouts and increased uptake of 5G Core. Americas declined 2%, with strong growth in Latin America, more than offset by a mid-single digit decline in North America following a strong quarter last year. Reported sales decreased by 10%, impacted by a negative currency effect of SEK 7.8 billion then. Organic growth again grew 6%. IPR revenues were SEK 3.1 billion, and this run rate coming out of the quarter is approximately then SEK 13 billion. Adjusted gross income was SEK 23.7 billion, with a negative currency impact of SEK 3.8 billion.

Lars Sandström: Americas declined 2%, with strong growth in Latin America, more than offset by a mid-single digit decline in North America following a strong quarter last year. Reported sales decreased by 10%, impacted by a negative currency effect of SEK 7.8 billion then. Organic growth again grew 6%. IPR revenues were SEK 3.1 billion, and this run rate coming out of the quarter is approximately then SEK 13 billion. Adjusted gross income was SEK 23.7 billion, with a negative currency impact of SEK 3.8 billion.

Speaker #3: Following a strong quarter last year, reported sales decreased by 10%, impacted by a negative currency effect of $7.8 billion. Then.

Speaker #3: So organic growth again grew 6%. IPR revenues were $3.1 billion, and this run rate coming out of the quarter is approximately.

Speaker #3: Then 13 billion . Adjusted gross income was 23.7 billion , with a negative currency impact of 3.8 billion . Adjusted gross margin was 48.1 , in line with last year .

Lars Sandström: Adjusted gross margin was 48.1%, in line with last year, excluding iconectiv. On the cost side, operating expenses, excluding restructuring charges, dropped to SEK 18.4 billion, around SEK 2 billion lower year-over-year, driven mainly by currency as well as the divestment of iconectiv. Underlying inflationary pressures were more than offset by cost reduction, driven by headcount as well as efficiency measures. As Börje mentioned, adjusted EBITDA, which excludes restructuring but includes the other one-offs, was SEK 5.6 billion. This is down by SEK 1.4 billion, including a negative impact of SEK 2.2 billion from the divestment of iconectiv, and SEK 0.5 billion of additional share-based compensation costs coming from the increased share price here during the quarter. The EBITDA margin was 11.3%. Cash flow before M&A was SEK 5.9 billion, driven by earnings and reduced net operating assets. Let's move to the segments.

Speaker #3: Excluding , Iconectiv . On the cost side , operating expenses excluding restructuring charges dropped to 18.4 billion , around 2 billion lower year over year , driven mainly by currency as well as the divestment of Iconectiv underlying inflationary pressures were more than offset by cost reduction , driven by headcount as well as efficiency measures And as Barry mentioned , adjusted beta , which excludes restructuring .

Lars Sandström: As Börje mentioned, adjusted EBITDA, which excludes restructuring but includes the other one-offs, was SEK 5.6 billion. This is down by SEK 1.4 billion, including a negative impact of SEK 2.2 billion from the divestment of iconectiv, and SEK 0.5 billion of additional share-based compensation costs coming from the increased share price here during the quarter. The EBITDA margin was 11.3%. Cash flow before M&A was SEK 5.9 billion, driven by earnings and reduced net operating assets. Let's move to the segments.

Speaker #3: But including the other one-offs, it was $5.6 billion. This is down by $1.4 billion, including a negative impact of $2.2 billion.

Speaker #3: The divestment of I-Connected and a $0.5 billion of additional share-based compensation costs coming from the increased share price here in during the quarter, the beta margin was 11.3%.

Speaker #3: Cash flow before M&A was $5.9 billion, driven by earnings and reduced net operating assets. So let's move to the segments. In Networks, sales decreased by 8% year on year to $32.9 billion, with a negative currency impact of $5.2 billion.

Lars Sandström: In Network, sales decreased by 8% year on year to SEK 32.9 billion, with a negative currency impact of SEK -5.2 billion. Organic sales increased by 7%. Organic revenues grew in three of our four market areas. Two strategic markets, India and Japan, grew strongly. North America declined, impacted by customer spend reallocation in Q1 this year following recent market consolidation. Customer investments were also elevated last year due to tariff uncertainty impacting the comparison. Network's adjusted gross margin decreased slightly to 50.4%, mainly reflecting actions to enhance resilience in the supply chain. Adjusted EBITDA was SEK 6.4 billion, impacted by a negative currency impact of SEK -2 billion and benefiting from lower operating expenses, which were also supported by continued efficiency improvements. Adjusted EBITDA margin was 13.3%. Looking at the right-hand graph, the rolling four-quarter gross margin stabilized around 50% and adjusted EBITDA margin at around 20%.

Speaker #3: Organic sales increased by 7% . Organic revenues grew in three of our four market areas . Two strategic markets , India and Japan , grew strongly .

Speaker #3: North America declined, impacted by customer spend reallocation in Q1 this year following recent market consolidation. Customer investments were also elevated last year due to tariff uncertainty, impacting the comparison. Networks adjusted gross margin decreased slightly to 50.4%, mainly reflecting actions to enhance resilience in the supply chain. Adjusted EBITDA was SEK 6.4 billion, impacted by a negative currency impact of SEK 2 billion and benefiting from lower operating expenses, which were also supported by continued efficiency improvements.

Lars Sandström: Network's adjusted gross margin decreased slightly to 50.4%, mainly reflecting actions to enhance resilience in the supply chain. Adjusted EBITDA was SEK 6.4 billion, impacted by a negative currency impact of SEK -2 billion and benefiting from lower operating expenses, which were also supported by continued efficiency improvements. Adjusted EBITDA margin was 13.3%. Looking at the right-hand graph, the rolling four-quarter gross margin stabilized around 50% and adjusted EBITDA margin at around 20%.

Speaker #3: Adjusted EBITA margin was 13.9 . Sorry , 13.3% . Looking at the right hand graph , the rolling four quarter gross margin stabilized around 50% and adjusted EBITA margin at around 20% .

Lars Sandström: Moving to the segment Cloud Software and Services. Sales here decreased 9% to SEK 11.8 billion, including a negative currency impact of SEK -1.6 billion. Organically, sales grew by 4%, with growth primarily in core. Adjusted gross margin came in at 43.2%, an improvement from 39.9% last year, supported by improved delivery efficiency, and a favorable product mix. Adjusted EBITDA increased to SEK 0.6 billion, with a margin of 5.3%, despite a negative currency impact of SEK -0.3 billion. Lower gross income was offset by lower operating expenses here. Looking at the right-hand graph, the rolling four quarters adjusted gross margin was around 44% and adjusted EBITDA margin around 12%, and these are both new high levels. Reported sales on the enterprise side decreased 30%, impacted by the sale of iconectiv and currency. On organic basis, enterprise grew by 4%, and this marks the second quarter of organic growth.

Speaker #3: Moving to the segment, cloud software and services sales here decreased 9% to $11.8 billion, including a negative currency impact of $1.6 billion.

Speaker #3: So organically , sales grew by 4% , with growth primarily in core adjusted gross margin came in at 43.2% , an improvement from 49.9 last year , supported by improved delivery efficiency and a favorable product mix .

Speaker #3: Adjusted EBITA increased to $0.6 billion, with a margin of 5.3%. Despite a negative currency impact of $0.3 billion, lower gross income was offset by lower operating expenses.

Lars Sandström: Lower gross income was offset by lower operating expenses here. Looking at the right-hand graph, the rolling four quarters adjusted gross margin was around 44% and adjusted EBITDA margin around 12%, and these are both new high levels. Reported sales on the enterprise side decreased 30%, impacted by the sale of iconectiv and currency. On organic basis, enterprise grew by 4%, and this marks the second quarter of organic growth.

Speaker #3: Here. And looking at the right-hand graph, the rolling four quarters adjusted gross margin was around 44%, and adjusted EBITA margin was around 12%.

Speaker #3: And these are both new high levels. So, reported sales on the enterprise side decreased 30%, impacted by the sale of I. Connective and currency. On an organic basis, enterprise grew by 4%, and this marks the second quarter of organic growth.

Lars Sandström: Adjusted gross margin declined to 49.0%, reflecting the impact of the divestment of iconectiv and change in business mix in Global Communications Platform. Adjusted EBITDA landed at SEK -1.4 billion, reflecting the divestment of iconectiv and non-recurring cost of SEK 0.3 billion in the current quarter. Turning to free cash flow, which was SEK 5.9 billion before M&A in the quarter. We delivered a cash to net sales of 13% for the rolling four quarters above our 9% to 12% target, and cash flow generation was strong, supported by earnings and a stronger than normal seasonal reduction in operating net assets. Net cash increased sequentially by SEK 6.9 billion to SEK 68.1 billion here in the quarter. The buyback program of up to SEK 15 billion was approved by the AGM, and share repurchases will start now soon. Next, I will cover the outlook.

Speaker #3: Adjusted gross margin declined to 49.0%, reflecting the impact of the divestment of Iconectiv and changing business mix in Global Communications Platform. Adjusted EBITA landed at -$1.4 billion, reflecting the divestment of Iconectiv and non-recurring cost of $0.3 billion in the current quarter.

Speaker #3: Turning then to free cash flow, which was $5.9 billion before M&A in the quarter, we delivered a cash to net sales of 13% for the rolling four quarters, above our 9 to 12% target.

Lars Sandström: We delivered a cash to net sales of 13% for the rolling four quarters above our 9% to 12% target, and cash flow generation was strong, supported by earnings and a stronger than normal seasonal reduction in operating net assets. Net cash increased sequentially by SEK 6.9 billion to SEK 68.1 billion here in the quarter. The buyback program of up to SEK 15 billion was approved by the AGM, and share repurchases will start now soon. Next, I will cover the outlook.

Speaker #3: And cash flow generation was strong , supported by earnings and the stronger than normal seasonal reduction in operating net assets , net cash increased sequentially by 6.9 billion to 68.1 billion .

Speaker #3: Here in the quarter, the buyback program of up to SEK 15 billion was approved by the AGM, and share repurchases will start now, soon.

Speaker #3: Next, I will cover the outlook. Global uncertainty remains elevated given the broad geopolitical and macroeconomic environment, including the global semiconductor situation.

Lars Sandström: Global uncertainty remains elevated given the broad geopolitical and macroeconomic environment, including the global semiconductor situation, and Börje Ekholm will come back to this. The Q2 outlook assumes no tariff changes and the exchange rates specified in the report. For Networks, we expect sales growth to be broadly similar to the three-year average quarter-on-quarter seasonality. For Cloud Software and Services, we expect sales growth to be above the three-year average quarter-on-quarter seasonality. We expect Networks' adjusted gross margin to be in the range of 49% to 51%. Restructuring charges for 2026 are expected to be at an elevated level, with a fairly large part already seen in Q1. With that, I hand back to you, Börje Ekholm.

Speaker #3: And we will come back to this the Q2 outlook assumes no tariff changes and the exchange rate specified in the report for networks , we expect sales growth to be broadly similar to the three year average quarter on quarter seasonality .

Lars Sandström: For Cloud Software and Services, we expect sales growth to be above the three-year average quarter-on-quarter seasonality. We expect Networks' adjusted gross margin to be in the range of 49% to 51%. Restructuring charges for 2026 are expected to be at an elevated level, with a fairly large part already seen in Q1. With that, I hand back to you, Börje Ekholm.

Speaker #3: And for cloud software and services , we expect sales growth to be above the three year average quarter on quarter seasonality . We expect net adjusted gross margin to be in the range of 49 to 51% , and restructuring charges for 2026 are expected to be at an elevated level , with a fairly large part already seen in Q1 .

Speaker #3: So with that, I hand back to you, via.

Börje Ekholm: Thanks a lot, Lars. Our Q1 results demonstrate the strong execution on our strategic priorities and the actions we've taken over the last several years to strengthen the company operationally. This includes how we made Ericsson less reliant on any specific geographical mix, enabling us to sustain healthy margins in varying market conditions, as you've seen in today's report. Our actions also include how we diversified our supply chain to mitigate as much of the geopolitical disturbances as possible. This continues to be a clear competitive advantage, enabling us to meet customer commitments amid the current backdrop. Of course, the global semiconductor situation remains challenging as the AI boom is increasing input costs. We continue to take actions, and Lars mentioned this as well, to mitigate this impact by working closely with both our customers and suppliers, of course, including our pricing.

Speaker #2: Thanks a lot, Lars. So, our Q1 results demonstrate the strong execution on our strategic priorities and the actions we've taken over the last several years to strengthen the company operationally. This includes how we made Ericsson less reliant on any specific geographical mix, enabling us to sustain healthy margins in varying market conditions.

Speaker #2: As you've seen in today's report, our actions also include how we diversified our supply chain to mitigate as much of the geopolitical disturbances as possible. This continues to be a clear competitive advantage, enabling us to meet customer commitments amid the current backdrop.

Börje Ekholm: This continues to be a clear competitive advantage, enabling us to meet customer commitments amid the current backdrop. Of course, the global semiconductor situation remains challenging as the AI boom is increasing input costs. We continue to take actions, and Lars mentioned this as well, to mitigate this impact by working closely with both our customers and suppliers, of course, including our pricing.

Speaker #2: Of course, the global semiconductor situation remains challenging as the AI boom is increasing input costs. We continue to take actions on large, mentioning this as well, to mitigate this impact.

Speaker #2: By working closely with both our customers and suppliers, of course, including our pricing. But we believe we're in a good position.

Börje Ekholm: While we believe we're in a good position, we're not immune to these disturbances, so they will have consequences on price and availability. As, of course, AI may be the key driver for our industry longer term. We see AI as a net positive for us. The next phase of AI, we'll see AI being industrialized, shifting focus from current focus on data centers, large language models, rather to applications, devices, use cases. This will require advanced mobile connectivity with capabilities such as ultra-low latency and high uplink. This puts us in the middle of the next phase of the AI era. With our strategy, we are well positioned to capitalize on this opportunity. We're doing this by providing the industry's best networks for AI and by expanding the mobile platform to new use cases and sectors.

Speaker #2: We're not immune to these disturbances So so they will have consequences on price and availability at the same as long as of course , AI may be the key driver for our industry .

Speaker #2: Longer term We see AI as a as a net positive for us . The next phase of AI will see AI being industrialized , shifting focus from current focus on data centers , large language models , rather to applications .

Speaker #2: Devices , use cases This will require advanced mobile connectivity with capabilities such as ultra low latency and high uplink . This puts us in the middle of the next phase of the AI era with our strategy , we are well positioned to capitalize .

Börje Ekholm: This will require advanced mobile connectivity with capabilities such as ultra-low latency and high uplink. This puts us in the middle of the next phase of the AI era. With our strategy, we are well positioned to capitalize on this opportunity. We're doing this by providing the industry's best networks for AI and by expanding the mobile platform to new use cases and sectors.

Speaker #2: Capitalize on this opportunity. We're doing this by providing the industry's best networks for AI and by expanding the mobile platform to new use cases and sectors.

Börje Ekholm: This includes exposing network capabilities through network-powered solutions, allowing developers to use the network capabilities to create new use cases. It also includes opening up new addressable markets, such as enterprise solutions based on cellular technology and mission-critical networks. This will allow us to capture a greater share of the value from connectivity and drive mid-single-digit growth for Ericsson while achieving our long-term margin targets of 15% to 18%. With that, I think it's time for some Q&A.

Speaker #2: This includes exposing network capabilities through network powered solutions , allowing developers to use the network capabilities to create new use cases . It also includes opening up new addressable markets such as enterprise solutions based on cellular technology and mission critical networks , and this will allow us to capture a greater share of the value from connectivity and drive mid-single digit growth .

Speaker #2: For Ericsson , while achieving our long term margin targets of 15 to 18% . So with that , I think it's time for some Q&A .

Daniel Morris: Thanks, Börje. As a reminder, if you'd like to ask a question, you'll need to press star one and one on your telephone and wait for your name to be announced. If you're streaming the webcast, please could we ask you to mute the webcast audio while asking a question to minimize any audio feedback. As usual, if I could request one question per participant so we have time to hear from as many of you as possible, please, today. Thanks, operator. Time for the first question. The first question this morning is going to come from Simon Granath at ABG. Simon, your line's open. Please go ahead.

Operator: Thanks, Börje. As a reminder, if you'd like to ask a question, you'll need to press star one and one on your telephone and wait for your name to be announced. If you're streaming the webcast, please could we ask you to mute the webcast audio while asking a question to minimize any audio feedback. As usual, if I could request one question per participant so we have time to hear from as many of you as possible, please, today.

Speaker #1: Thanks , Maria . As a reminder , if you'd like to ask a question , you'll need to press star one and one on your telephone and wait for your name to be announced .

Speaker #1: If you're streaming the webcast, please could we ask you to mute the webcast audio while asking a question to minimize any audio feedback. And, as usual, if I could request one question per participant so we have time to hear from as many of you as possible.

Speaker #1: Please . Today . Thanks . Operator . Time for the first question The first question this morning is going to come from Simon Granath at ABG Simon , your line is open .

Daniel Morris: Thanks, operator. Time for the first question. The first question this morning is going to come from Simon Granath at ABG. Simon, your line's open. Please go ahead.

Speaker #1: Please go ahead

Simon Granath: Thank you so much, Daniel, and good morning, all. I have a question on Lars on the memory and cost inflation. The Q1 margin performance for networks was, in my view, strong. Given the rising memory prices and as inventory runs down through the year, how confident are you that memory prices won't be a significant headwind for the rest of the year? All else equal, and on this topic, should we see Q1 marking the highest level for the year? Thanks.

Speaker #4: Thank you so much . Daniel , and good morning , all I have a question on Lars on the memory and cost inflation and the Q1 margin performance for networks was , in my view , strong .

Speaker #4: But given the rising memory prices, and as inventory runs down through the year, how confident are you that memory prices won't be a significant headwind for the rest of the year?

Speaker #4: And all else equal. And on this topic, should we see Q1 marking the highest level for the year? Thanks.

Börje Ekholm: All right. Thanks, Simon. When it comes to outlook, we give, as you know, outlook for the next quarter here. When it comes to memory cost and other semiconductor cost, there is, as we say here, a headwind coming. We should also remember that it is the smaller part of our total cost base, of course. There is a headwind coming, and we are working hard to mitigate together with our suppliers, but also together with our customers to share the burden here. Then it comes to what can we do when it comes to product substitution, et cetera. It is a bit too early, I think, already now to say how the impact will be. If there is and when there is things happening, you will see that more coming into H2.

Lars Sandström: All right. Thanks, Simon. When it comes to outlook, we give, as you know, outlook for the next quarter here. When it comes to memory cost and other semiconductor cost, there is, as we say here, a headwind coming. We should also remember that it is the smaller part of our total cost base, of course.

Speaker #3: All right . Thanks , Simon . When it comes to outlook , we give , as you know , outlook for the first or for the next quarter here .

Speaker #3: So but when it comes to Mr. . Memory cost another semiconductor cost , there is , as we say here a headwind coming .

Speaker #3: And—but we should also remember that it is a smaller part of our total cost base. Of course. But there is a headwind coming.

Lars Sandström: There is a headwind coming, and we are working hard to mitigate together with our suppliers, but also together with our customers to share the burden here. Then it comes to what can we do when it comes to product substitution, et cetera. It is a bit too early, I think, already now to say how the impact will be. If there is and when there is things happening, you will see that more coming into H2.

Speaker #3: And we are working hard to mitigate together with our suppliers, but also together with our customers to share the burden here. And then it comes to what can we do when it comes to product substitution, etc.

Speaker #3: . And it is a bit too early , I think already . Now to say how the impact will be , but you will if there is , and when there is things happening , you will see that more coming into the second half of the year

Simon Granath: Thank you so much. Appreciate it.

Speaker #4: Thank you so much. I appreciate it.

Daniel Morris: Thanks for the question. Moving to the next question, please. The next question will come from the line of Andrew Gardiner at Citi. Andrew, please go ahead.

Speaker #1: Thanks for the question. Moving to the next question, please. The next question will come from the line of Andrew Gardner at Citi.

Speaker #1: Andrew , please go ahead

Andrew Gardiner: Good morning, all. Thanks, Daniel. Just on the North American revenue trends that you saw in Q1, you've highlighted the pressure there for you, sort of mid-single-digit down year-on-year. I'm just wondering what your view for 2026 as a whole is for that region. The comps, as you suggested, were particularly tough in Q1 given the tariff impact last year and some buy-forward. Does the decline that you've seen in Q1 lessen as we come through 2026, or are there other factors we should be aware of?

Speaker #5: Good morning all . Thanks , Daniel . So just on the north American American revenue trends that you saw in the quarter , you you've highlighted the pressure there , sort of mid single digit down year on year .

Speaker #5: I'm just wondering what your view for 2026 as a whole is for that region . You know , the comps , as you suggested , were particularly tough in the first quarter given the tariff impact last year .

Speaker #5: And some by forward. Does that—does the decline that you've seen in the first quarter, should that lessen as we come through 2026, or are there other factors we should be aware of?

Börje Ekholm: You see a lot of forecasts in the market, on the North American market, and I would say the development you're seeing during Q1 is probably similar to what we should expect for the year. I think that's fair to say given our customers' guidance. At the same time, we have a little bit different mix compared to the market where, as Lars noted, we were maybe hit a bit harder than the general market Q1 because of the consolidation we've seen among the operators in the US that was closed. If you net-net, I don't see a change in market condition, but I see a better mix for us vis-à-vis the market. As you note, we had a tough comp in Q1. Don't assume the US all of a sudden is going to change direction.

Speaker #2: You know, you see a lot of forecasts in the market on the North American market, and I would say the development you see during the first quarter is probably similar to what we should expect for the year.

Speaker #2: The . I think that's fair to say , given given our customers guidance at the same time , you know , we have a little bit different mix compared to the market where as , as Lars noted , the we were maybe hit a bit harder than the general market .

Speaker #2: The first quarter because the of the consolidation we've seen among the operators in the US that was closed . So I , you know , if you're net net , I don't see a change in market condition , but I see a bit better mix for us vis a vis the market .

Börje Ekholm: If you net-net, I don't see a change in market condition, but I see a better mix for us vis-à-vis the market. As you note, we had a tough comp in Q1. Don't assume the US all of a sudden is going to change direction. That's why I want to come back to what I think is more important today, is we're less exposed to North America from a geographic mix perspective. The investments and commitment we've been talking about to diversify our mix.

Speaker #2: And as you know , we had a tough comp in Q1 . But but you know , don't don't assume the the US all of a sudden is going to change direction .

Börje Ekholm: That's why I want to come back to what I think is more important today, is we're less exposed to North America from a geographic mix perspective. The investments and commitment we've been talking about to diversify our mix. If we are a bit weaker in North America, but stronger in another market for a quarter, we can actually compensate that and keep a very healthy gross margin. That, I think, lends for a better predictability of the total company and actually for a healthier way of operating the company. While I think North America always will be important, from a mix point of view, it will be less important going forward. We work with the customers as front-runner customers, but it's always going to swing a bit up and down in a quarter.

Speaker #2: That's why I want to come back to what I think is more important. Today, we're less exposed to North America from a geographic mix perspective.

Speaker #2: And the investments and commitment we we have been talking about to diversify our our mix . So if we are a bit weaker in North America , but stronger in another market for a quarter , we can actually compensate that .

Börje Ekholm: If we are a bit weaker in North America, but stronger in another market for a quarter, we can actually compensate that and keep a very healthy gross margin. That, I think, lends for a better predictability of the total company and actually for a healthier way of operating the company. While I think North America always will be important, from a mix point of view, it will be less important going forward.

Speaker #2: And keep a very healthy , gross margin . And that that I think lends for a better predictability of the total company . And actually , for a healthier way of operating the company .

Speaker #2: So, while I think North America always will be important from a mix point of view, it will be less important going forward.

Börje Ekholm: We work with the customers as front-runner customers, but it's always going to swing a bit up and down in a quarter. On the one hand, yes, I would always prefer them to grow, but the reality is it will swing. The question is more how we can provide a healthy gross margin, a much more stable gross margin. I think Q1 is a good indication of the work we've done.

Speaker #2: You know , we work with the customers as front runner customers , but it's always going to swing a bit up and down in in a quarter .

Börje Ekholm: On the one hand, yes, I would always prefer them to grow, but the reality is it will swing. The question is more how we can provide a healthy gross margin, a much more stable gross margin. I think Q1 is a good indication of the work we've done.

Speaker #2: So we're , you know , on the one hand , yes , I would always prefer them to grow . But the reality is it will swing .

Speaker #2: So the question is more how we can provide help to gross margin, a much more stable gross margin. And I think Q1 is a good indication of the work we've done.

Andrew Gardiner: I suppose related to that, you mentioned the other strategic markets. India and Japan have been the two you've highlighted away from North America. You did see good growth there. Is that something that is not just a Q1 impact, but we should expect steady growth from those two key markets through the year?

Speaker #5: I mean, I suppose related to that, you mentioned the other strategic markets. India and Japan have been the two you've highlighted away from North America.

Speaker #5: You did see good growth . There . Is that something that is not just a one ? Q impact , but we should expect a steady growth from those two key markets through the year .

Börje Ekholm: I would say there we have actually strengthened our market position. We should see healthy growth as we continue to deliver on those opportunities. I'm actually very comfortable about that.

Speaker #2: I would add that there we have actually strengthened our market position. So, so we should see healthy growth as we continue to deliver on those opportunities.

Speaker #2: So, I'm actually very comfortable about that.

Andrew Gardiner: Understood. Thank you very much.

Daniel Morris: Thanks for the question, Andrew. Moving to the next question, please. The next question is going to come from the line of Erik Lindholm-Röjestål from SEB. Please go ahead, Erik, your line is open.

Speaker #5: Understood. Thank you very much.

Speaker #1: Thanks for the question, Andrew. Moving to the next question, please. The next question is going to come from the line of Erik Lindholm from SEB.

Erik Lindholm-Röjestål: Thank you. Good morning, everyone, and thanks for taking my questions. Just one question here. I wanted to ask on OpEx and the impact of cost savings. It looks like underlying OpEx is down around half a billion SEK, as you mentioned, despite the one-off impact that you flagged here. What sort of inflationary pressures do you see in OpEx for the rest of the year? When should we start to see the impact from the cost savings that you've launched in Sweden here at the start of the year, for example? Thank you.

Speaker #1: Please go ahead. Erik, your line is open.

Speaker #3: Thank you .

Speaker #6: And good morning everyone , and thanks for for taking my questions . Just just one question here . I wanted to ask on opex and the impact of cost savings .

Speaker #6: I mean , it looks like underlying opex is is down around half a billion , as you mentioned , despite the one off impact that you flagged here .

Speaker #6: So what sort of inflationary pressures do you see in opex for the rest of the year ? And when should we start to , you know , see the impact from the cost savings that you've launched in Sweden here at the start of the year , for example ?

Lars Sandström: Yeah. When it comes to OpEx, I think in the quarter here, it's down organically. I think it's currency and iconectiv that is impacting. Then there is somewhat also underlying cost reduction coming through here. We are continuously working with that. The inflation we talk about, since a big portion of the cost base in OpEx is related to people. Of course, there is an underlying continuous salary increase that is coming that we need to work with. Our working assumption is that we live in the flat RAN market and that we need to accommodate too, by continuously working and finding efficiencies and reductions where it is possible, and then we do that continuously. That is what we are working with here every quarter continuously.

Speaker #6: Thank you .

Speaker #3: Yeah. When it comes to opex, I think in the quarter here, it's down organically. I think it's currency, and I think it's connective that is impacting.

Speaker #3: And then there is a somewhat also underlying cost reduction coming through here. And we are continuously working with that. The inflation we talked about seems a big portion of the cost base in opex is related to, to people.

Lars Sandström: Of course, there is an underlying continuous salary increase that is coming that we need to work with. Our working assumption is that we live in the flat RAN market and that we need to accommodate too, by continuously working and finding efficiencies and reductions where it is possible, and then we do that continuously.

Speaker #3: Of course, there is an underlying continuous salary increase that is coming that we need to work with. And our working assumption is that we live in a flat market and that we need to accommodate both by continuously working and finding efficiencies and reductions where it is possible.

Lars Sandström: That is what we are working with here every quarter continuously. You saw there was quite a bit of restructuring here coming in the Q1 now, primarily to the Sweden area, but also the rest of Europe. We have activities in North America, in Asia, et cetera. That is a continuous work that we are doing, and we will continue that also in the coming quarters.

Speaker #3: And then we do that continuously. So that is what we are working with here every quarter, continuously. You saw there was quite a bit of restructuring here coming in in the first quarter.

Lars Sandström: You saw there was quite a bit of restructuring here coming in the Q1 now, primarily to the Sweden area, but also the rest of Europe. We have activities in North America, in Asia, et cetera. That is a continuous work that we are doing, and we will continue that also in the coming quarters.

Speaker #3: Now primarily to to the Sweden area , but also the rest of Europe . We have activities in North America , in Asia , etc.

Speaker #3: So that is a continuous work that we are doing, and we will continue that also in the coming quarters.

Erik Lindholm-Röjestål: All right. I guess it's fair to say that these measures will more so show in the H2 than.

Speaker #6: All right . But I guess it's it's fair to say that this this measures will more . So show in the second half .

Lars Sandström: The ones that we announced today or in this quarter, of course, they come more in H2 of the year and into next year. We have the previous ones that is coming. You can see now, so that is a continuous work that we do.

Speaker #6: Then

Speaker #3: The ones that we announced today or in this quarter, of course, they come more in the second half of the year and into next year.

Speaker #3: And then we have the previous ones. That is coming. You can see now. So, so that is a continuous work that we do.

Erik Lindholm-Röjestål: Okay. Perfect. Thank you.

Börje Ekholm: I would just add there, by experience, it takes a bit longer than you hope to see it in the numbers. Theoretically it should come in Q3 of course, or Q2, Q3, but it will be a bit of a delay there. That's why you see the cost kind of not exactly following the number of employees, because it simply is so set that we cost around when we take costs out. You will see it after the H2 and into next year.

Speaker #2: Just add there . It by by experience . It takes a bit longer than you hope to see it in , in the numbers .

Speaker #2: So you know , the theoretically it should come in , in , in Q3 . Of course , or Q2 , Q3 , but it will , it will be a bit of a delay there .

Speaker #2: That's why you see the cost kind of not exactly following the number of employees, because it's simply associated with costs around when we take costs out.

Speaker #2: So, the but, but, but you will see it after the second half and into next year.

Erik Lindholm-Röjestål: Excellent. Thank you.

Daniel Morris: Thanks for the question, Eric. 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.

Speaker #6: Excellent . Thank you .

Speaker #1: Thanks for the question, Eric. Moving to the next question, please. The next question is going to come from the line of Andreas Olsen at DNB.

Andreas Joelsson: Thank you, and good morning, everyone. A follow-up on the COGS question that we had. Of course, there's a headwind coming from the component prices, but you have been able to increase the gross margin in networks for some time, and now it has stabilized. What other areas within costs have you, from experience the last few years, learned that you can use to compensate for component price increases? It's not just negotiations with vendors and customers that could keep the gross margin resilient, as you say. If you understand that blurry question.

Speaker #1: Please go ahead, Andreas.

Speaker #7: Thank you and good morning everyone . Follow up on the Cogs question that we had . Of course , there's a headwind coming from the component prices , but you have been able to increase the gross margin in networks for some time .

Speaker #7: And now it has stabilized . What other areas within costs have you thought of from experience the last few years learned that there is maybe that you can use to compensate for component price increases .

Speaker #7: So it's not just negotiations with the vendors and customers that could keep the gross margin resilient. As you say, if you understand that blurry question.

Börje Ekholm: No. Thanks for the question, Andreas. I can try to give you a notion. Of course, the most important one is the work on the prices. It's undoubtedly the case, and that we continue to do. The other levers we have, which actually have proven to be very sizable, is product substitution. Through technology development, we deliver a product that performs the same but at a lower price, or a lower cost point, I should say. That's actually maybe the most important one that we've been able to do for quite some time. I feel quite comfortable we'll get that with the next generation ASICs coming within the not too distant future. We have also been able to take a lot of costs out on service delivery. There, I think there are more costs to be taken out. It doesn't come easy.

Speaker #2: No , thanks for your question , Andreas . I can try to give you a notion . There . Of course , the most important is , is to work on on the on the prices .

Speaker #2: It's undoubtedly the case . And that will continue to do the other levers we have , which actually have proven to be very sizable , is product substitution , i.e. we can we , through technology development , we deliver a product that performs the same .

Börje Ekholm: That's actually maybe the most important one that we've been able to do for quite some time. I feel quite comfortable we'll get that with the next generation ASICs coming within the not too distant future. We have also been able to take a lot of costs out on service delivery. There, I think there are more costs to be taken out. It doesn't come easy.

Speaker #2: But at a lower price or a lower cost point . I should say . So that's actually the , maybe the most important one that we've been able to do for , for , for quite some time .

Speaker #2: And I feel quite comfortable . We'll get that with the next generation Asics coming within . The not too distant future . Then then we have also been able to take a lot of costs out on service delivery .

Speaker #2: And there , I think there are more costs to be taken out . So I think we have , you know , it's not it doesn't come easy .

Börje Ekholm: It doesn't come in that sense for free. I do think there is a number of areas we can leverage to protect a healthy gross margin longer term. That's why I feel we have reached a different level of performance and control on the cost side. Component prices have varied already now. We've been able to handle that in many different ways, and our ambition is clear. That's what we intend to do going forward as well. We have a number of degrees of freedom in what we actually do to manage the margins.

Speaker #2: It doesn't come, in that sense, for free. But I do think there are a number of areas we can, can kind of leverage to protect the healthy gross margin longer term.

Speaker #2: And that's why I feel we have kind of reached a different level of performance and control on the cost side.

Speaker #2: And , you know , component prices have varied already . Now . So we've been able to , to handle that in many different ways .

Speaker #2: And our ambition is clear. That's what we intend to do going forward as well. And we have a number of degrees of freedom in what we actually do to manage the margins.

Andreas Joelsson: Perfect. Thank you.

Daniel Morris: Thanks for the question, Andreas. Moving to the next question, please. The next question is going to come from the line of Richard Kramer at Arete. Please go ahead, Richard.

Speaker #7: Perfect . Thank you .

Speaker #1: Thanks for the question, Andreas. Moving to the next question, please. The next question is going to come from the line of Richard Kramer at Arity.

Richard Kramer: Thanks very much. Börje, you mentioned the early stages of physical AI, which would involve greater mobile connectivity. Can you point to anything within your portfolio which could provide a material uplift to group sales growth, especially addressing the sort of data center AI spending boom, given that enterprise remains fairly small in the mix? Thanks.

Speaker #1: Please go ahead, Richard.

Speaker #8: Thanks very much . Boria . You mentioned the early stages of physical AI , which would involve , you know , greater mobile connectivity .

Speaker #8: But can you point to anything within your portfolio which could provide a material uplift to group sales growth, especially addressing the sort of data center AI spending boom, given that enterprise remains fairly small in the mix.

Börje Ekholm: Yeah, Richard, that's a good question. We're not going to see any sales directly from data center expansions right now. Our, call it exposure to AI, is more going to come from the applications. When you start to see inference play a very different role. We may not be the front runner on the AI wave, but we are rather the longer term, I would say, to one of our key drivers of traffic in the networks, and the connectivity will thus look different. That's why I believe the exposure we have is going to come more from that traffic development from AI moving into implementations, but it's also going to come from AI in enterprises. Here we start to see some front-runner industrial companies, still small, but actually picking up demand in two areas: enterprise connectivity, i.e.

Speaker #8: Thanks .

Speaker #2: Yeah . Richard , that's a good question . You know , we're not we're not going to see any sales directly from data center expansions right now .

Speaker #2: Our call it exposure to AI is more, more going to come from the applications, when you start to see inference play a very different role.

Speaker #2: So, we may not be the front runner on the AI wave, but we are rather the longer term. I would say it's one of our key drivers of traffic in the networks, and the connectivity will thus look different.

Börje Ekholm: That's why I believe the exposure we have is going to come more from that traffic development from AI moving into implementations, but it's also going to come from AI in enterprises. Here we start to see some front-runner industrial companies, still small, but actually picking up demand in two areas: enterprise connectivity, i.e.

Speaker #2: That's why I believe the exposure we have is going to come more from that traffic development, from AI moving into implementations. But it's also going to come from AI in enterprises.

Speaker #2: And here we start to see some front runner industrial companies still small , but actually picking up demand in , in two areas , enterprise connectivity , a wireless solutions or as a matter of fact , in interest for network APIs and embedding that into enterprise use cases .

Börje Ekholm: Wireless solutions, or, as a matter of fact, interest for network APIs and embedding that into enterprise use cases. I don't want to promote that we have any exposure to data centers. That wave is going to go. We're a little bit behind that. I don't know what to call it, but kind of benefiting from the overall migration of applications towards AI.

Speaker #2: So I'm— I would like— not— I don't— I don't want to promote that we have any exposure to data center, so that wave is going to go.

Speaker #2: We're more a little bit behind that, I guess in the, I don't know what to call it, but kind of benefiting from the overall migration of applications towards AI.

Richard Kramer: Okay, thanks.

Daniel Morris: Thanks for the question, Richard. Moving to the next question, please. Next question is going to come from the line of Felix Henriksson at Nordea. Please go ahead, Felix.

Speaker #8: Okay . Thanks .

Speaker #1: Thanks for the question, Richard. Moving to the next question. The next question is going to come from the line of Felix Hendrickson at Nordair.

Felix Henriksson: Hi. Thanks for taking my question. Good to see the Cloud Software and Services EBITDA margin expanding to around 12% on a 12-month rolling basis. I wanted to ask, is there any reason why the margin expansion in this segment should not continue given that growth seems to be led by very margin-accretive 5G Core demand? Thanks.

Speaker #1: Please go ahead . Felix

Speaker #9: Hi. Thanks for taking my question. Good to see the cloud software services EBITDA margin expanding to around 12% on a 12-month rolling basis.

Speaker #9: I wanted to ask, is there any reason why the margin expansion in this segment should not continue, given that growth seems to be led by very margin-accretive 5G core demand?

Börje Ekholm: It's a good question. I think what we have said is that. The first aim here is to reach a stable double-digit margin, and then we work from there. I think we need to remember that Cloud Software is also connected to the flat RAN market. Still there is an underlying growth that we are able to capture in the core area, which is good, I think. We have managed to show that we are having a good market position there, so we continue to work on that. We don't promise. We guide quarter per quarter, as you know, but we feel we have reached a stable level now in a good way in the company.

Lars Sandström: It's a good question. I think what we have said is that. The first aim here is to reach a stable double-digit margin, and then we work from there. I think we need to remember that Cloud Software is also connected to the flat RAN market. Still there is an underlying growth that we are able to capture in the core area, which is good, I think. We have managed to show that we are having a good market position there, so we continue to work on that. We don't promise. We guide quarter per quarter, as you know, but we feel we have reached a stable level now in a good way in the company.

Speaker #9: Thanks

Speaker #3: Oh , it's a good question . I think what we have said is that the first aim here is to reach a stable double digit margin , and then we work from there .

Speaker #3: And I think we need to remember that the cloud software is also connected to the flat ran market . So the there is , but still there is an underlying growth that we are able to capture with the growth in the core area , which is good , I think .

Speaker #3: And we have managed to show that we are having a good market position there. So we continue to work on that. So we don't promise, we guide quarter by quarter.

Speaker #3: As you know, but we feel we have reached a stable level now, in a good way, in the company.

Felix Henriksson: Thank you.

Daniel Morris: Thanks, Felix. Moving to the next question, please. The next question will come from the line of Ulrich Rathe at Bernstein. Please go ahead, Ulrik.

Speaker #9: Thank you .

Speaker #1: Thanks , Felix . Moving to the next question , please . The next question will come from the line of Ulrich Rather at Bernstein .

Ulrich Rathe: Thanks very much. There's one more question for Lars, please. You talked about how you have immunized margin to the foreign exchange moves by matching cost and revenue better. Can you sort of talk about that a little bit more? I'm wondering in particular two areas here. One is, to what extent are you still benefiting from hedging that could roll off and produce an incremental headwind if the FX rates stay at where they are? Also, with the current level of FX matching in cost and revenue, what would be the effect of a weakening Swedish krona? Would that actually correspond to a material margin driver for you or not? Thank you.

Speaker #1: Please go ahead, Ulrich.

Speaker #7: Thanks very much. This is more a question for Lars, please. You talked about how you have immunized margin to the foreign exchange moves by matching cost and revenue.

Speaker #7: Better. Can you sort of talk about that a little bit more? And I'm wondering in particular about two areas here. One is, to what extent are you still benefiting from hedging that could roll off and produce an incremental headwind?

Speaker #7: You know , if the FX rates stay at where they are and also with the current level of FX matching in cost and revenue , what would be the effect of a strengthening , sorry , of a weakening Swedish crown ?

Speaker #7: Would that actually correspond to a material margin driver for you or not? Thank you.

Börje Ekholm: I think we need to separate between gross margin and EBITDA margin here. On the gross margin, we are fairly balanced in the currency basket, whereas in the OpEx side, we are much more exposed with the Swedish SEK ratio there. It's higher there, so we get more of an impact from that end. That's what's impacting, so to say, the FX mix that we have. If there is a significant change, you would see that more impacting EBITDA rather than gross margins in that sense. When it comes to hedging, we have some hedging, but rather low levels and they are coming out. It should not be a big impact going forward.

Lars Sandström: I think we need to separate between gross margin and EBITDA margin here. On the gross margin, we are fairly balanced in the currency basket, whereas in the OpEx side, we are much more exposed with the Swedish SEK ratio there. It's higher there, so we get more of an impact from that end. That's what's impacting, so to say, the FX mix that we have. If there is a significant change, you would see that more impacting EBITDA rather than gross margins in that sense. When it comes to hedging, we have some hedging, but rather low levels and they are coming out. It should not be a big impact going forward.

Speaker #3: I think we need to separate between gross margin and EBITA margin here. On the gross margin, we are fairly balanced in the currency basket, whereas on the opex side we are much more exposed with the Swedish CSC ratio there.

Speaker #3: So it's higher there . So we get more of an impact from that end . So I think from a more . So that's what's impacting , so to say , the FX mix that we have .

Speaker #3: So, I think that. And if there is a significant change, you will see that more impacting EBITA, ordering gross margins. In that sense.

Speaker #3: And then when it comes to , to hedging , we have some hedging . But rather low levels . And they are coming out .

Ulrich Rathe: Very helpful. Thank you very much.

Speaker #3: So, it should not be a big impact going forward.

Daniel Morris: Thanks, Ulrich. Moving to the next question, please. Next question will come from the line of Sandeep Deshpande at J.P. Morgan. Please go ahead, Sandeep.

Speaker #7: I have. Thank you very much.

Speaker #1: Thanks , Ulrich . Moving to the next question , please Next question will come from the line of Sandeep Deshpande at JP Morgan .

Sandeep Deshpande: Yeah. Hi. Could I ask, you've seen this weakness in North America. In terms of your exposure to 5G and 5G Core outside North America, do you see there is potential for significant upgrades? That is, the market hasn't shifted as much to 5G or 5G Core over the last few years as it has in North America, and thus the growth outside North America could compensate if North American growth over the next couple of years is not going to be as strong. The question I'm asking here is that historically outside North America, they have not been as keen to quickly upgrade to the advanced technologies like 5G or 4G even before that. How do you see that progress at this point?

Speaker #1: Please go ahead, Sandeep.

Speaker #10: Yeah . Hi . Could I ask I mean , you've seen this weakness in North America in terms of your exposure to 5G and 5G core outside North America .

Speaker #10: Do you see there is potential for significant upgrades ? I mean , that is the market hasn't shifted as much to 5G or 5G core over the last few years as it has in America .

Speaker #10: And thus, the growth outside North America could compensate if North American growth over the next couple of years is not going to be as strong.

Speaker #10: And the question I'm asking here is that historically, outside North America, they have not been as keen to quickly upgrade to next-generation technologies like 5G or 4G.

Speaker #10: Even before that . So , I mean , how do you see that progress ? I mean , at this point

Daniel Morris: Börje, maybe we ask you to take that one.

Börje Ekholm: Yeah. That's a very good question. North America have been a front runner market. It's still not fully migrated to 5G-SA even there. The only market which is fully 5G-SA actually is China. We see that that's where the market will go. We see a number of operators today increasingly focused on migrating from 5G Non-Standalone into 5G-SA and then 5G Advanced. It's still largely a work in progress, so if you try to give some sort of statistics, maybe a quarter of the operators have some sort of 5G-SA, or 5G-SA of scale is fewer than that. I would say that's actually one of the major opportunities for our industry. It's two things. Of course, it's a upgrade cycle for us, but I think more importantly, it will allow the operators to start offering differentiated services.

Speaker #1: Barry, maybe we ask you to take that one.

Speaker #2: Yeah , I that's a very good question . You know , North America . Have been a front runner market , you know , the , the it's still not fully migrated to 5G even there .

Speaker #2: The only market which is fully 5G actually is , is China . So we see that that's where the market will go . We see a number of operators today increasingly focused on migrating to from 5G non-standalone into 5G essay , and then 5G advanced .

Börje Ekholm: It's still largely a work in progress, so if you try to give some sort of statistics, maybe a quarter of the operators have some sort of 5G-SA, or 5G-SA of scale is fewer than that. I would say that's actually one of the major opportunities for our industry. It's two things. Of course, it's a upgrade cycle for us, but I think more importantly, it will allow the operators to start offering differentiated services.

Speaker #2: It's it's it's still largely a work in progress . So , you know , if you try to give some sort of statistics , maybe a quarter of the operators have some sort of 5G essay and or 5G of scale is fewer than that .

Speaker #2: So I would say that's actually one of the major opportunities for our industry . And it's two things , of course , it's a upgrade cycle for us , but I think more importantly , it will allow the operators to start to offer offering differentiated services .

Börje Ekholm: You can have network slicing, dynamic network slicing, for example, can happen when you have 5G Standalone. The way we think about this is, it's actually one of our more positive opportunities from a medium term perspective as companies or operators upgrade. The way to think about this is, in order to prepare your network for 6G, that eventually will come, you need to actually migrate through 5G Standalone into 5G Advanced, and then have built the architecture that's prepared for 6G. I see while not everyone have transitioned today, they will need to go that way. It will provide an interesting opportunity for us as operators upgrade. That's why we've invested in positioning as well on 5G Core, and we are now starting to see growth coming through on 5G Core.

Speaker #2: So you can have , you know , network slicing , dynamic network slicing for example , can happen when you have 5G standalone .

Speaker #2: So , so the way we think about this is it's actually one of our more positive opportunities from a , from a medium term perspective , as companies or operators upgrade and the way to think about this is in order to prepare your networks for six G that , that eventually will come , you need to actually migrate through 5G standalone into 5G advanced and then have built the architecture that's prepared for 60 .

Börje Ekholm: I see while not everyone have transitioned today, they will need to go that way. It will provide an interesting opportunity for us as operators upgrade. That's why we've invested in positioning as well on 5G Core, and we are now starting to see growth coming through on 5G Core. It's actually, I think, a net positive for us as we move forward.

Speaker #2: So I see why not everyone has transitioned today. They will need to go that way, so it will provide an interesting opportunity for us as operators to upgrade.

Speaker #2: So that's why we've invested in positioning as well on 5G Core. And we're now starting to see growth coming through on 5G Core.

Börje Ekholm: It's actually, I think, a net positive for us as we move forward.

Speaker #2: So it's actually, I think, a net-net positive for us as we move forward.

Sandeep Deshpande: Thank you.

Daniel Morris: Thanks for the question, Sandeep. Moving to the next question, please. Next question is coming to the line of Daniel Djurberg at Handelsbanken. Please go ahead, Daniel.

Speaker #11: Thank you .

Speaker #1: Thanks for the question, Sandeep. Moving to the next question. The next question is coming to the line of Daniel Djurberg at Handelsbanken.

Daniel Djurberg: Thank you, Daniel, and good morning, Börje and Lars. A question. I was quite impressed by the Networks gross margin, given the geographical mix with large deployment in India and also growth in LatAm. It could indicate that it was capacity heavy, and if that is correct, should we expect to know more of coverage and hardware deployment in H2 in India, for example, and Japan, i.e. support driven gross margins, and then also we have the cost inflation that you mentioned.

Speaker #1: Please go ahead, Daniel.

Speaker #6: Thank you . Daniel . And good morning . I question I was quite impressed by the network across margin given the geographical mix with large deployment in India and also growth in Latam It could indicate that it was capacity heavy and if that is correct .

Speaker #6: Should we expect, you know, more coverage and hardware deployment in the second half in India, for example, and in Japan? Is that supportive on gross margins?

Daniel Morris: Maybe Börje, we can start with your thoughts on those two markets more broadly.

Speaker #6: And then also, we have the cost inflation that you mentioned.

Börje Ekholm: Yeah

Daniel Morris: ... Lars on the margin.

Speaker #1: Maybe , Barry , we can start with your thoughts on those two markets more broadly . And Lars , on the on the margin .

Börje Ekholm: Yeah. I know we were often talking about the coverage and capacity before. I would say what we have tried to do is actually to reduce the dependence on that as well. When you look at this, there is always an element of higher margin software sales versus hardware, but it's less important going forward. The comment here is probably to say that there is a tad more capacity, but it's not meaningfully impacting the profile here.

Speaker #2: Yeah, I know we were often talking about capacity coverage and capacity. Before, I would say what we have tried to do is actually to reduce the dependence on that as well.

Speaker #2: So when you , when you look at this , there is always an element of higher margin software sales versus hardware , but it's less important going forward .

Speaker #2: So , so , you know , the comment here is , is probably to say that there is a tad more capacity , but it's not meaningfully impacting the profile here .

Daniel Djurberg: Perfect. Yeah. No, but I think you cover it well.

Börje Ekholm: Mm-hmm.

Speaker #6: Perfect .

Lars Sandström: I think the outlook you see for the Q2 here for Networks is 49 to 51, and that is what we see now based on the product portfolio, product deliveries, and market mix we foresee now. I think it signals, rather, stability as well.

Speaker #3: Yeah . No , but I think you covers it well So I think the outlook you see in the for the Q2 here for networks is 49 to 51 .

Speaker #3: And that is what we see now, based on the product portfolio and product deliveries and market mix. We foresee that now. So I think it signals rather stability as well.

Börje Ekholm: Super.

Daniel Morris: Thanks for the question, Daniel. Moving to the next question, please. The next question is coming to the line of Sébastien Sztabowicz at Kepler Cheuvreux. Please go ahead, Sébastien.

Speaker #6: Jesper .

Speaker #1: Thanks for the question, Daniel. Moving to the next question, please. The next question is coming from the line of Sebastian Sabovic at Kepler Cheuvreux.

Sébastien Sztabowicz: Yeah. Hi, everyone, and thanks for taking my question. On the defense market opportunity, you've been talking about a $10 billion opportunity in that market. Now you are talking about some trials happening currently in Italy. When do you expect those opportunity to materialize and generate first significant revenue? Is it an opportunity over three, five, or beyond five years? Just to understand a little bit the phasing and the ramp of this technology. Thank you.

Speaker #1: Please go ahead, Sebastian.

Speaker #12: Yeah. Hi, everyone. Thanks for taking my question on the defense market opportunity. You've been talking about a $10 billion opportunity in that market.

Speaker #12: Now you are talking about some trials happening currently in Italy. When do you expect those opportunities to materialize and generate significant revenue?

Speaker #12: Is it an opportunity over three, five, or beyond five years, just to understand a little bit the phasing and the ramp of this technology?

Daniel Morris: Sure. Börje, your thoughts on the overall opportunity?

Börje Ekholm: Yeah. I actually think the opportunity is more near term. It's very hard to judge, but I think it's a very good question, and your perspective may be as good as ours. What we see though is a very near term, very strong need in the market for modern, call it, modern warfare, involves a lot of AI and actually heavy need of communication and connectivity therefore. We see that this is much more of a near term opportunity. I wouldn't say 5 years plus. It's more kind of a mid, call it, use 3 years, for lack of a better word, before this opportunity. If you start to think about take a critical site, it could be a sports arena or a nuclear power station or an energy generation station or something like that. The threat from drones are pretty much today.

Speaker #12: Thank you .

Speaker #1: Sure. Your thoughts on the overall opportunity? I—

Speaker #2: I actually think the opportunity is more near term . It's very hard to judge , but I think it's a it's a very good question .

Speaker #2: And your perspective may be as good as ours What we see though is a , is a very near term , very strong need in the market for , you know , modern call it modern warfare involves a lot of AI and actually heavy need of communication and connectivity .

Börje Ekholm: We see that this is much more of a near term opportunity. I wouldn't say 5 years plus. It's more kind of a mid, call it, use 3 years, for lack of a better word, before this opportunity. If you start to think about take a critical site, it could be a sports arena or a nuclear power station or an energy generation station or something like that. The threat from drones are pretty much today.

Speaker #2: Therefore . So we see that this is much more of a near-term opportunity . I wouldn't say five years plus . It's more kind of a mid call it use three years for lack of a better word , before this opportunity .

Speaker #2: But you know, if you start to think about taking a— a critical site, it could be a sports arena, or a nuclear power station, or an energy generation station, or something like that.

Börje Ekholm: When you start to think about when is the technology needed from a risk perspective and protection perspective, it's actually a near-term risk. As I know it or as I see it, I think we need to tackle that need when the market is there. Had I wished we would have started a few years earlier, yes. I think we're in pretty good shape to start to see these opportunities materialize over the next even maybe 9, 12, 18 months opportunity, and then they start to scale at two, three years. I'm quite excited about these opportunities because the communication network and the scale we have makes our solutions rather competitive. I'm thinking this is our ambition is that this is a nearer-term opportunity than 5+ years.

Speaker #2: The threat from drones are pretty much today . So , so when you start to think about when is the technology needed from a risk perspective and protection perspective , it's actually near term risk .

Speaker #2: So, as I know it, or as I see it, I think we need to tackle that need when the market is there.

Speaker #2: So , so I had , I wished we would have started a few years earlier . Yes , but I think we're in in pretty good shape to start to see this opportunities materialize over the next even , you know , maybe , maybe nine , 12 , 18 months opportunity .

Börje Ekholm: I'm quite excited about these opportunities because the communication network and the scale we have makes our solutions rather competitive. I'm thinking this is our ambition is that this is a nearer-term opportunity than 5+ years. Putting an exact number on it, I can't, to be honest, but the reception we get from customers is very positive.

Speaker #2: And then they start to scale at , at two , three years . So I quite excited about this opportunities because the , the communication network and the scale we have makes our solutions rather competitive .

Speaker #2: So I'm , I'm actually , I'm thinking this is our ambition is that this is a nearer term opportunity than , than five plus years , but then putting an exact number on it , I , I can't , to be honest , but I'm but the , the , the , the , the reception we get from customers is very positive

Börje Ekholm: Putting an exact number on it, I can't, to be honest, but the reception we get from customers is very positive.

Sébastien Sztabowicz: Thank you.

Daniel Morris: Thanks for the question, Sébastien. Moving to the next question, please. The next question is coming from the line of Sami Sarkamies at Danske. Go ahead, Sami.

Speaker #12: Thank you .

Speaker #1: Thanks for the question . Sebastian . Moving to the next question , please . The next question is coming from the line of Sami at Dansk .

Sami Sarkamies: Hi. I still wanted to go back to the rising input costs that were discussed earlier in the call. I have a two-part question. Firstly, can you elaborate on how your current operator agreements allow you to raise prices if needed? Do they, for example, cater for above-normal cost inflation? Secondly, when you look at your operator customers, are you seeing rising energy costs having an impact on their behavior and potentially investment plans for the year?

Speaker #1: Go ahead . Sami

Speaker #13: Hi. I still wanted to go back to the rising input costs that were discussed earlier in the call. I have a two-part question.

Speaker #13: Firstly, can you elaborate on if your current operator agreements allow you to raise prices if needed? Do they, for example, cater for above-normal cost inflation?

Speaker #13: And then secondly, when you look at your operator customers, are you seeing rising energy costs have an impact on their behavior and potentially investment plans for the year?

Daniel Morris: Lars, should we start with you on the first and then?

Lars Sandström: If we start on the customer side, it depends on the renewal cycle of contracts that we have with customers, and that can vary a bit in different markets and different customers. There are still an opportunity, I think, to take this discussion because these are a bit exceptional times, so we need to take this in a good commercial discussion with our customers. When it comes on the energy impact on operators, I think that is an important part. The TCO, where our products with the right investments they do, they can drive down their TCO. I think in that sense, it helps our competitive advantage in the market. We have not seen any big impacts yet. Of course, if there is a prolonged situation with high energy costs, that could have an impact. We have not seen that.

Speaker #1: Should we start with you on the first one.

Speaker #3: Start on the customer side? There are—it depends on the renewal cycle of contracts that we have with customers, and that can vary a bit in different markets and with different customers.

Speaker #3: So there are , but there are still an opportunity , I think , to take this discussion because we are these are a bit exceptional times .

Lars Sandström: When it comes on the energy impact on operators, I think that is an important part. The TCO, where our products with the right investments they do, they can drive down their TCO. I think in that sense, it helps our competitive advantage in the market. We have not seen any big impacts yet. Of course, if there is a prolonged situation with high energy costs, that could have an impact.

Speaker #3: So there is we need to take this in a good commercial discussion in with our customers . And when it comes on the energy impacts on operators , I think that is an important part .

Speaker #3: The TCO, where our products with the right investments they do, they can drive down their TCO. So I think in that sense it helps our competitive advantage in the market.

Lars Sandström: We have not seen that. I think we should also remember the revenue base of our customers is very stable. We have seen this historically, and normally, our industry or our customers are quite resilient over time. I don't know if you want to add more on that, but yeah.

Speaker #3: But we have not seen any big impacts yet. But, of course, if there is a prolonged situation with high energy costs, that could have an impact.

Lars Sandström: I think we should also remember the revenue base of our customers is very stable. We have seen this historically, and normally, our industry or our customers are quite resilient over time. I don't know if you want to add more on that, but yeah.

Speaker #3: But we have not seen that. And I think we should also remember the revenue base of our customers is very stable. So they have quite a—we have seen this historically, and normally our industry or our customers are quite resilient over time.

Börje Ekholm: You've captured it. What we see an increasing focus on energy efficiency in discussions with customers. I think this will be a topic, and as Lars said, it kind of goes both ways, right? It's an opportunity because they need to actually upgrade some of the old equipment, and they actually need to move towards modern. At the same time, they get a bit tougher on their own cost position. It kind of sits in that as we say in Swedish. I don't know what that translates to. That's kind of the situation, right? The interesting thing is that when we now are around, we start to see customers talking about how you actually phase out old technology.

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

Speaker #2: I think you've captured it. What we see, and we see an increase in focus on energy efficiency in discussions with customers. So I think this will be a topic.

Speaker #2: And as Laura said, it kind of goes both ways, right? It's an opportunity because they need to actually upgrade some of the old equipment, and they actually need to move towards modern.

Börje Ekholm: At the same time, they get a bit tougher on their own cost position. It kind of sits in that as we say in Swedish. I don't know what that translates to. That's kind of the situation, right? The interesting thing is that when we now are around, we start to see customers talking about how you actually phase out old technology. We're even starting to see customers in some markets talk about how do we phase out 4G and actually migrate to 5G, and in a way then have only 5G and 6G.

Speaker #2: And at the same time , they get a bit , you know , tougher on their own cost position . So it kind of sits in that For her , as we say in Swedish , I don't know what that translates to , but , but that that's , that's kind of the , the situation , right ?

Speaker #2: The interesting thing is that when we now are around, we start to see customers talking about how you actually phase out old technology.

Börje Ekholm: We're even starting to see customers in some markets talk about how do we phase out 4G and actually migrate to 5G, and in a way then have only 5G and 6G. Of course, 3G being phased out in most regions except Europe possibly, that will also support energy efficiency. This energy squeeze leads to a bit of a change in behavior. When you asked about change in behavior, yes, it is a change in behavior, but much more focused on how do I get on the latest technology curve that helps me with lower process costs. That will include phasing out 2G, 3G, and soon 4G in some markets.

Speaker #2: And we're even starting to see customers in some markets talk about how do we phase out 4G and actually migrate to 5G and in a way then have only 5G and 6G.

Börje Ekholm: Of course, 3G being phased out in most regions except Europe possibly, that will also support energy efficiency. This energy squeeze leads to a bit of a change in behavior. When you asked about change in behavior, yes, it is a change in behavior, but much more focused on how do I get on the latest technology curve that helps me with lower process costs. That will include phasing out 2G, 3G, and soon 4G in some markets.

Speaker #2: Of course, 3G being phased out in most regions except Europe—possibly that will also support energy efficiency. So we're actually in this energy squeeze, which leads to a bit of a...

Speaker #2: When you asked about changing behavior , yes , it is a change in behavior . A much more focus on how do I get on the latest technology curve that helps me with lower process costs , and that will include phasing out 2G , 3G , and 4G in some markets

Sami Sarkamies: Thanks.

Daniel Morris: Thanks for the question, Sami. Moving on to the next question, please, which is coming from the line of Tal Liani at Bank of America. Please go ahead, Oliver. Your line's open.

Speaker #13: Thanks .

Speaker #1: Thanks for the question , Sami . Moving on to the next question , please , which is coming from the line of Oliver Wong at Bank of America .

Tal Liani: Hi. Good morning, gentlemen. Thank you for letting me ask a question. I wanted to focus on perhaps the cost from things like logistics and transportation, since given ongoing global geopolitical events, it seems like there could be some impact on that. Also, perhaps on the instability of the supply chain, could that be a risk to you? Yeah, it'd be great to discuss about the logistics and transportation costing of goods. How is that relative to perhaps the impact from rising memory in terms of potential headwinds going into the year? Thanks.

Oliver Wong: Hi. Good morning, gentlemen. Thank you for letting me ask a question. I wanted to focus on perhaps the cost from things like logistics and transportation, since given ongoing global geopolitical events, it seems like there could be some impact on that. Also, perhaps on the instability of the supply chain, could that be a risk to you? Yeah, it'd be great to discuss about the logistics and transportation costing of goods. How is that relative to perhaps the impact from rising memory in terms of potential headwinds going into the year? Thanks.

Speaker #1: Please go ahead. Oliver, your line is open.

Speaker #14: Hi . Good morning gentlemen . Thank you for letting me ask a question . I wanted to focus on perhaps the cost from , you know , things like logistics and transportation .

Speaker #14: Since , you know , given ongoing global geopolitical events , you know , it seems like , you know , there could be , you know , some impact on that .

Speaker #14: And also , you know , perhaps on the instability of the supply chain , you know , could that be a risk to you ?

Speaker #14: So , so yeah , it'd be great to kind of , you know , discuss about the logistics and transportation costs , you know , good .

Lars Sandström: Yeah, I think when it comes to logistics and transportation, we have seen some impact now, but in the total scheme of our cost base, it's limited. We should remember that. I think it's important. Especially now in Q1, we had some additional costs with the Middle East conflict there where we have to do some rerouting, changing transportation lines, et cetera, utilizing then our flexible production system and supply chain. I think, yes, it has given some, but we have been able to make sure that we deliver to our customers, which is at the end of the day most important for us. That ties a little bit into your supply chain question there. We have a rather well-distributed supply chain today to manage disturbances. We have proven that, I think, during the pandemic.

Speaker #14: How is that relative to, you know, perhaps the impact from rising memory in terms of potential headwinds going into the year?

Speaker #14: Thanks .

Speaker #3: Yeah . When it comes to logistics and transportation , we have seen some impact . Now , but in the total scheme of our cost base , it's limited .

Speaker #3: So we should remember that . I think it's important and especially now in . Q Q1 we had some additional costs with Mid conflict where we have to do some rerouting , changing trans transportation lines , etc.

Lars Sandström: I think, yes, it has given some, but we have been able to make sure that we deliver to our customers, which is at the end of the day most important for us. That ties a little bit into your supply chain question there. We have a rather well-distributed supply chain today to manage disturbances. We have proven that, I think, during the pandemic.

Speaker #3: , utilizing then our flexible production system and supply chain . So I think , yes , it has given some , but we have been able to make sure that we deliver to our customers , which is at the end of the day , most important for us .

Speaker #3: So I think, and that ties a little bit into your supply chain question there. We have a rather well-distributed supply chain today to manage disturbances.

Lars Sandström: We have proven that now during last year on the tariff side, et cetera. We continuously work with this and try to mitigate when the things are happening. Of course, as we have said on the tariff side here, we cannot guarantee that we are immune, of course, but we are, I think, managing it pretty well.

Speaker #3: We have proven that. I think, during the pandemic, we have proven that, and now, during last year on the tariff side, etc.

Speaker #3: . So we continuously work with this and and try to mitigate when things are happening . And of course , as we have said on the tariff side , here we are , we cannot guarantee that we are immune .

Börje Ekholm: The tariff comment is also that we have a distribution hub in the Middle East. We've been impacted for sure already, and been able to mitigate that fully by leveraging the flexible supply chain. I think we'll have to focus on monitoring and managing it as well as we can.

Speaker #3: Of course, but we are—I think—managing it pretty well.

Speaker #2: The fair comment is also that we have a you know , distribution hub in the Middle East . So we've been impacted for sure already and been able to , to , to mitigate that fully by leveraging the flexible supply chain .

Tal Liani: Very clear. Thank you very much.

Oliver Wong: Very clear. Thank you very much.

Speaker #2: So, I think this—we'll have to focus on managing it, monitoring and managing it as well as we can.

Daniel Morris: Thanks for the question, Tal Liani. We have time for one final question this morning. We can move to the next. Follow-up question from Daniel Djurberg at Handelsbanken. Please go ahead, Daniel.

Speaker #14: Very clear. Thank you very much.

Speaker #1: Thanks for the question , Oliver . We have time for one final question this morning . We can move to the next . So follow up question from Daniel Djurberg at Handelsbanken .

Daniel Djurberg: Thank you very much, Daniel. I know I could ask your customer this, and I will, but still, Latin America saw good growth in networks. This is a geography with really tough competition. To me, your radio access network portfolio is more competitive to peers than for many years, which you showcased at Mobile World Congress. Can you give any examples of this, if it's correct, and how we should think about markets like Latin America, sub-Sahara, Eastern Europe, where you have tough Chinese competition? Thanks.

Speaker #1: Please go ahead, Daniel.

Speaker #6: Thank you very much, Daniel. I know I should ask your customer this — and I will — but still, Latin America saw good growth in networks.

Speaker #6: And this is a geography with really tough competition to me. Your radio access network portfolio is more competitive to Pearson for many years, which you showcased at Mobile World Congress.

Speaker #6: And can you give or obviously , can you give any examples of this ? If it's correct and how we should think about , markets like Latin America , sub-Sahara Eastern Europe , where you have tough Chinese .

Börje Ekholm: It's a good question, and the reason why I'm hesitating is more that we get into specific customer situations. I don't want to talk about that for the simple reason that if I would be our customers, I wouldn't like us to talk about it, because it may be my competitive positioning in the market that I'm revealing. That's why I think it's inappropriate for us to talk about customers. What I can say is that, we think the competitor we have to always beat is one of the Chinese. They're of course very strong. I have no doubt about that. We can see that we can actually go head on with our product portfolio thanks to the strong in-field performance we see on quality benchmarking, when we compete with them. We come out well.

Speaker #6: Thanks

Speaker #2: You know , the , the , the We get two . It's a good question . And the reason why I'm hesitating is more that we get into specific customer situations , and I don't want to talk about that for the simple reason that if I would be our customers , I wouldn't like us to talk about it because it may be my competitive positioning in the market that I'm revealing .

Börje Ekholm: What I can say is that, we think the competitor we have to always beat is one of the Chinese. They're of course very strong. I have no doubt about that. We can see that we can actually go head on with our product portfolio thanks to the strong in-field performance we see on quality benchmarking, when we compete with them. We come out well.

Speaker #2: That's why I think it's it's inappropriate for us to talk about customers , but what I can say is that , you know , we've we think our the competitor we have to always beat is , is one of the Chinese .

Speaker #2: There are of course , very strong . I have no doubt about that . But we can see that we can actually go head on with our product portfolio , thanks to the strong performance , the strong in-field performance , we see on quality benchmarking when we compete with them , we're we're we come out well , you can see that in , in All the the whether it's , you know , umlaut test or , or Opensignal or whatever we come out well in that comparison , we perform also very well on , on energy .

Börje Ekholm: You can see that in all, whether it's Umlaut tests or Opensignal or whatever, we come out well in that comparison. We perform also very well on energy once you're in the field, and it's because the way we have focused on developing the product, it's actually dedicated not to lab trials, but more to in-field performance. Operators that looks at that total perspective, there we can compete. We've seen that in Latin America. In Africa, it's maybe the hardest market to compete, and you've seen us fight there. At the end of the day, we remain competitive, and it depends on operator preferences as well. We certainly, in Southeast Asia, win market share where we compete also with the Chinese competitors.

Börje Ekholm: Operators that looks at that total perspective, there we can compete. We've seen that in Latin America. In Africa, it's maybe the hardest market to compete, and you've seen us fight there. At the end of the day, we remain competitive, and it depends on operator preferences as well. We certainly, in Southeast Asia, win market share where we compete also with the Chinese competitors.

Speaker #2: Once you're in the field, and it's because of the way we have focused on developing the products, it's actually dedicated not to lab trials, but more to in-field performance.

Speaker #2: So operators that looks at that total perspective there . We can compete , right . And we've seen that in Latin America . We see some in Africa is maybe the hardest market to compete .

Speaker #2: And you've seen us fight their . But but at the end of the day , we remain competitive . And it depends on on .

Speaker #2: Operator preferences as well. We certainly, in Southeast Asia, win market share. When we compete also with the Chinese competitors...

Daniel Djurberg: Perfect. Thank you.

Daniel Morris: Thank you. That comes to the end of the Q&A session. Thank you for joining us. Thanks, Börje and Lars as well.

Speaker #6: Perfect . Thank you

Börje Ekholm: Thank you.

Speaker #1: Thank you . So that comes to the end of the Q&A session . Thank you for joining us . Thanks , Maria and Lars .

Speaker #1: Sure .

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