Ericsson (OM:ERIC B) 12% TTM Margin Surge Tests Bearish Earnings Decline Narrative

Telefonaktiebolaget LM Ericsson (OM:ERIC B) has wrapped up FY 2025 with fourth quarter revenue of SEK 69.3b and basic EPS of SEK 2.57, capping off a trailing twelve month net income of SEK 28.4b and EPS of SEK 8.53. Over recent quarters the company has seen revenue move from SEK 72.9b in Q4 2024 to SEK 69.3b in Q4 2025, while quarterly EPS shifted from SEK 1.43 to SEK 2.57 as trailing net profit margin reached 12% versus 0.01% a year earlier. This points to materially different earnings power on a twelve month view. With that backdrop, the latest results put profitability front and center for investors weighing how durable these margins might be.

See our full analysis for Telefonaktiebolaget LM Ericsson.

With the headline numbers on the table, the next step is to see how they line up against the widely followed narratives around Ericsson’s earnings power, risks, and long term outlook.

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12% TTM margin after SEK 28.4b earnings swing

• On a trailing twelve month basis, Ericsson reports SEK 236.7b in revenue and SEK 28.4b in net income, with net profit margin at 12% versus 0.01% a year earlier, showing a very large year on year earnings change.
• What stands out for the bullish view is how a very large one year earnings improvement sits alongside a longer term earnings decline of 20.5% per year over five years. This can lead optimists to focus on the current 12% margin, while longer term trends and the forecast 9.6% yearly earnings decline challenge the idea that this higher margin level is firmly established.
  • Supporters can point to SEK 28.4b of trailing net income and 8.53 SEK TTM EPS as evidence that recent profitability is meaningfully stronger than the 20 SEK of net income and near zero EPS reported a year earlier.
  • Cautious investors, however, may focus on the forecast 9.6% yearly earnings decline and 0.2% yearly revenue decline over the next three years as a sign that this margin profile may not repeat in the same way.

To see how this sharp margin shift fits into longer term growth and valuation views, many investors look for a balanced narrative that ties the earnings jump to the bigger picture. 📊 Read the full Telefonaktiebolaget LM Ericsson Consensus Narrative.

Quarterly EPS swings around SEK 3.35 peak

• Across FY 2025, quarterly basic EPS moved from 1.24 SEK in Q1 to 1.37 SEK in Q2, then to 3.35 SEK in Q3 and 2.57 SEK in Q4, while quarterly net income ranged between SEK 4.1b and SEK 11.1b over the same period.
• Critics who lean bearish often point to how uneven profit contribution looks across the year, and the EPS pattern in 2025 gives them some support, because the strongest quarter at 3.35 SEK EPS and SEK 11.1b net income in Q3 carries a large share of the trailing 8.53 SEK EPS. This raises questions for them about how closely future profitability might track the more moderate quarters instead of the single strongest one.
  • Q3 2025 basic EPS of 3.35 SEK compares with 1.37 SEK and 1.24 SEK in Q2 and Q1, which bears can frame as reliance on one outsized quarter inside the trailing twelve month period.
  • Net income of SEK 8.6b in Q4 2025 and SEK 4.6b in Q2 2025, while solid in absolute terms, is noticeably below the SEK 11.1b level in Q3, so bearish voices may question how repeatable that peak contribution is.

11.1x P/E versus DCF fair value gap

• With the share price at SEK 94.8, Ericsson trades on an 11.1x trailing P/E, which sits well below European communications peers at 40.9x and the cited DCF fair value of SEK 168.67, implying the shares change hands at around 43.8% below that DCF fair value mark.
• Supporters of a more optimistic angle argue that this low 11.1x P/E and the large gap to the SEK 168.67 DCF fair value could signal room for upside if future earnings come in better than the forecast 9.6% yearly decline. At the same time, the same data set reminds them that analysts are currently projecting both earnings and revenue to step down over the next three years, which makes that valuation gap something investors tend to cross check carefully against the profit and dividend profile.
  • The combination of a 12% trailing net margin and an 11.1x P/E is often contrasted with the sector’s 40.9x multiple, which valuation focused investors may see as a sign that Ericsson is priced more conservatively than many peers.
  • At the same time, an unstable dividend record and the expectation of a 0.2% yearly revenue decline can matter for income oriented holders who want both payout consistency and clearer top line support for any valuation re rating.

  Next Steps

  Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Telefonaktiebolaget LM Ericsson's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

  See What Else Is Out There

  Ericsson’s earnings story leans heavily on one very strong quarter, while forecasts point to yearly earnings and revenue declines that raise questions about consistency.

  If you want ideas where growth looks steadier and less dependent on one standout period, check out CTA_SCREENER_STABLE_GROWTH to quickly spot companies with more consistent track records.

  This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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