What Ericsson Bulls Got Right

If you only glanced at Ericsson’s headlines this year, the story might look mixed. Q3 2026 showed higher revenue but a sharply lower net margin, even as management flagged rising component costs and a flat RAN market. For Telefonaktiebolaget LM Ericsson shareholders, the return from the start of the year was 27.3%, including dividends. If you were deciding back on 1 January 2026, how would you have weighed that profit squeeze against the 5G and AI opportunities now on display?

Narratives are how investors here put a case on the record, with explicit assumptions about revenue, margins and the multiple. Those assumptions imply an estimated Fair Value.

Telefonaktiebolaget LM Ericsson has already moved. Pinpoint other ways to investigate the theme among 54 AI infrastructure stocks.

The Argument You Would Have Been Weighing Up On Ericsson

The shares cost SEK90.02 at the start of the period, and investors in Telefonaktiebolaget LM Ericsson were effectively choosing between two very different stories.

The bullish narrative put Fair Value at SEK100, which is 11% above the start price. It leaned on AI driven automation and network innovation, with an assumption that revenue would grow 3.1% a year and profit margins would reach 8.6%, supporting a 17.3x P/E on SEK23.1b of earnings.

The bearish script pointed to SEK56 as Fair Value, which is 38% below the start price. It stressed de globalization and tariff risk, with an assumption that revenue would decline 2.5% a year, margins would slip to 6.2%, and earnings would reach SEK14.1b on a 16.0x P/E.

What The Results Changed For Telefonaktiebolaget LM Ericsson

Q3 2026 reported revenue of SEK59,478m versus SEK56,239m a year earlier, while net income dropped from SEK11,149m to SEK5,806m and net margin fell from 19.8% to 9.8%. That mix, higher sales with sharply squeezed profitability, challenged the bullish Ericsson story that leaned on cleaner AI and 5G driven margin expansion.

The lesson here is simple. When a thesis hangs on better profitability, check whether rising revenue actually turns into a higher net margin and earnings, especially once input costs and pricing power show up in the reported numbers.

What Telefonaktiebolaget LM Ericsson’s 27% Run Already Prices In

Telefonaktiebolaget LM Ericsson now trades at SEK109, up 27.3% from the start of the year, while this cautious Narrative’s Fair Value sits below the current price.

The argument hinges on Ericsson turning AI linked 5G, enterprise and mission critical projects into solid profits. Anyone buying today would need to believe input cost pressure and weak North American mobile demand do not undercut that earnings path.

"Key Takeaways: Bearish analysts expect Ericsson's rising semiconductor and memory costs, combined with ongoing North American mobile network softness, to keep pressuring margins, even as the company holds a roughly 48 to 50% group gross margin today. The main thing that has to go right is that Ericsson converts its AI driven 5G standalone, enterprise, mission critical and defense opportunities into profitable, scaled businesses while turning the loss making enterprise segment around."

One Narrative disagrees with today's price. → See where this Narrative says Telefonaktiebolaget LM Ericsson should trade

Ericsson And A Different AI Bet

Ericsson chases AI heavy networks. You could also look where AI shows up on the device in your hand.

One large ecosystem player is pushing a personal hub idea across phones, wearables and home gear. It wants everyday tasks to feel AI native.

That same business designs its own high end chips so more intelligence can run locally. The aim is faster features without shipping everything to a data center.

Health tracking and smart home controls give it more ways to sell subscriptions around that hardware base. If those paid layers deepen, the earnings mix could look very different from Ericsson’s network driven story.

It is written up in full, assumptions and all. → Explore the Narrative that puts this company 18% above its price

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com