Ericsson Sales Drop 16% in Q4 As Mobile Operators Cut Capex

Ericsson, a global leader in telecom equipment manufacturing, has disclosed its financial performance for the fourth quarter and the entire fiscal year of 2023.
Ericsson Business Overview 2023In Q4 2023, Ericsson experienced a 16 percent decrease in sales, totaling SEK 71.9 billion. The overall performance for the year 2023 reflected a 3 percent decline in sales, with figures dropping from SEK 271.5 billion in 2022 to SEK 263.4 billion.

The decline in network sales was particularly notable, with decrease of 23 percent year-on-year (YoY). This downturn was attributed to customers prioritizing cash flow. Sales in the Indian market also saw a quarterly decline, signaling a shift to normalized investment levels following a period of intense roll-out activity. The gross margin for Q4 improved quarter-on-quarter (QoQ), reaching 43.2 percent.

In the Cloud Software and Services sector, Ericsson met its EBITA target by achieving at least breakeven in 2023. Q4 saw an EBITA of SEK 2.0 billion, contributing to a full-year total of SEK 1.7 billion. The company emphasized its commitment to bolstering commercial discipline, automation, and delivery efficiency to ensure long-term profitability.

Enterprise sales witnessed a 7 percent YoY growth, primarily propelled by Enterprise Wireless Solutions. However, the EBITA (loss) remained stable YoY, influenced negatively by an inventory write-off in the Enterprise Wireless Solutions segment.

Ericsson’s strategic focus includes enhancing leadership in mobile networks, emphasizing technology prowess to enable customers in building high-performance, programmable, and open networks. This approach aims to provide an exceptional customer experience, maximize return on investment (ROI), and accelerate business innovation. The company reported a record win in Q4, underscoring the success of this strategy.

The second pillar of Ericsson’s strategy involves expanding into the enterprise sector, aiming to create new monetization opportunities. By offering network APIs to developers and enterprises, Ericsson seeks to unlock new revenue streams and applications that leverage network capabilities. The Enterprise Wireless Solutions offerings are positioned to extend the market for high-performance mobile technology into the enterprise domain.

Despite these efforts, Ericsson acknowledged the challenging landscape in the mobile network industry. The company anticipates market uncertainties to persist into 2024, with a further decline expected in the Radio Access Network (RAN) market outside China.

This cautious business outlook is attributed to customers exercising prudence and the normalization of investment pace in India. Ericsson anticipates the commencement of the new U.S. contract to ramp up in the second half of 2024.

Baburajan Kizhakedath