Ericsson (OM:ERIC B) Margin Rebound Tests Long Term Earnings Skepticism

Telefonaktiebolaget LM Ericsson (OM:ERIC B) has just reported its Q1 2026 results, with recent quarterly revenue running at about SEK 69.3b in Q4 2025 and basic EPS of SEK 2.57, against a trailing twelve month EPS of SEK 8.53 and total revenue of SEK 236.7b that follows a very large one year gain in earnings. Over recent quarters the company has seen revenue move from SEK 61.8b in Q3 2024 to SEK 72.9b in Q4 2024 and then to SEK 55.0b, SEK 56.1b, SEK 56.2b and SEK 69.3b through 2025. Quarterly basic EPS shifted from SEK 1.14 to SEK 1.43 to SEK 1.24, SEK 1.37, SEK 3.35 and SEK 2.57 as profitability improved from a 0.01% net margin last year to 12%. This earnings season release is therefore framed as a test of how durable those higher margins appear to investors.

See our full analysis for Telefonaktiebolaget LM Ericsson.

With the latest earnings in hand, the next step is to see how these margin gains and EPS trends line up with the prevailing stories investors tell about Telefonaktiebolaget LM Ericsson, and where the numbers push back against those narratives.

See what the community is saying about Telefonaktiebolaget LM Ericsson

12.4x P/E versus peers at 30.5x

• Ericsson trades on a P/E of 12.4x compared with around 30.5x for the wider European communications industry and 21.1x for the Swedish market, and peers are shown at about 80x.
• Bulls argue that a lower P/E on current profitability leaves room for upside, and the recent margin profile gives them some backing.
  • The latest trailing net profit margin is 12% compared with 0.01% a year earlier, so the current earnings that feed into that 12.4x multiple come after a very sharp swing in profitability.
  • At the same time, earnings forecasts of about 2.2% yearly growth and revenue growth of about 0.6% per year are fairly modest, which challenges the most optimistic view that the discount alone makes the share price at SEK 105.70 look misaligned with long run growth assumptions.

Bulls point to margin gains and a discounted P/E as a potential value setup, while others question whether modest forecast growth justifies that optimism. The full bullish case sets out where they think the market is underestimating the story 🐂 Telefonaktiebolaget LM Ericsson Bull Case.

Five year earnings slide versus huge one year rebound

• Over the past five years, earnings declined on average by 20.6% per year, yet trailing 12 month earnings moved from SEK 20 million to SEK 28.4 billion, a very large jump that lifts trailing EPS to SEK 8.53.
• Bears highlight that a strong recent year can mask longer term pressure, and the multi year pattern in the data supports that caution.
  • The five year decline in earnings of 20.6% per year lines up with concerns about weaker long term profit trends, even though the latest year shows a very large rebound that is not yet a long record.
  • Forecast earnings growth of about 2.2% per year and revenue growth of about 0.6% per year also fit the bearish view that the recent swing in profit may not automatically translate into fast compounding from here.

Skeptics focus on the five year earnings slide and modest growth forecasts, and the bearish narrative sets out how those trends could matter if the recent rebound proves less durable 🐻 Telefonaktiebolaget LM Ericsson Bear Case.

Margins up to 12% with unstable dividends

• Trailing net profit margin has moved to 12% from 0.01% last year, while the dividend track record is described as unstable, so income reliability has not matched the recent profitability data.
• Consensus narrative points to improving efficiency and higher margin opportunities, and the reported figures partly back that view but also highlight income risk.
  • The jump in trailing net income to SEK 28.4 billion on SEK 236.7 billion of revenue supports the idea that profitability has improved, which is important for any thesis built on better operational performance.
  • The unstable dividend history, together with only modest forecast revenue and earnings growth, means income focused investors may treat the current 12% net margin as only one piece of the picture rather than proof of a stable cash return profile.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Telefonaktiebolaget LM Ericsson on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

The mix of stronger margins, modest forecasts and contrasting views on earnings momentum gives you plenty to weigh up. Take a moment to review the figures, pressure test your own thesis and then check the 4 key rewards and 1 important warning sign

See What Else Is Out There

Ericsson combines a sharp profit rebound with only modest forecast growth, an unstable dividend record and lingering concerns about whether the earnings recovery is durable.

If you are questioning that mix of modest outlook and income uncertainty, it makes sense to compare it with companies screened as 295 resilient stocks with low risk scores now.

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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