Ericsson has announced its quarterly core earnings. The company’s second-quarter adjusted quarterly operating income increased from 3.9 billion Swedish crowns a year ago to 4.5 billion Swedish crowns. According to a Refinitiv poll of analysts, this is significantly higher than the mean forecast of 3.36 billion crowns.
Meanwhile, total revenue increased by 1 per cent to reach 55.6 billion crowns during the period under consideration.
This increase in earnings has been attributed to higher margins on the sale of telecom equipment. Despite the economic uncertainty caused by COVID-19 outbreak, telecom companies globally have been moving ahead with plans to upgrade to 5G networks. This has given an impetus to Ericsson’s commercial contract wins which stand at 99 currently.
However, some of Ericsson’s contract wins have come with a cost. Ericsson, which won contracts from China’s three largest telecom operators – China Mobile, China Telecom and China Unicom, had to take hit on gross margins as it wrote down about 1 billion crowns in product inventory.
Nonetheless, gross margin rose from 36.7 per cent a year ago to 38.2 in the quarter under consideration. This is inclusive of the 1.6 per cent points hit.
Further, Ericsson has said that it was keeping its financial targets for 2020 and 2022.