Swedish telecommunications equipment maker Ericsson posted a better-than-expected operating margin for the second quarter of 2026, offsetting a slight miss on revenue and lifting its share price in European trading. The company reported an adjusted operating margin of 12.4%, ahead of the 11.8% consensus forecast, although sales fell 3% year-on-year to SEK 59.8 billion, narrowly below analyst expectations.
Investors focused on the margin improvement, which came from aggressive cost reductions and a shift toward higher-margin software and services. Ericsson has been cutting thousands of jobs and streamlining operations as telecom operators paused spending on 5G equipment. The group's Networks division, its largest unit, saw a 2% decline in sales but management noted that order intake had stabilised in recent months, suggesting the worst of the demand downturn may be over.
Chief Executive Börje Ekholm said the company was seeing 'early signs of a recovery in the network infrastructure market,' particularly in North America and parts of Europe, where operators are beginning to invest again after a prolonged slowdown. 'We are managing the business for profitable growth, and the cost actions we have taken are delivering,' he added in the earnings release.
The improved outlook for Networks is significant for UK-listed telecom equipment suppliers and infrastructure investors. Shares in Ericsson rose 4.2% on the Stockholm exchange, while London-listed peers such as Spirent Communications and BT Group also edged higher in sympathy. Analysts at Jefferies noted that the margin beat 'underscores the success of Ericsson's restructuring' and that a recovery in operator spending could provide a tailwind for the sector into 2027.
For UK investors and pension funds with exposure to European equities, the result offers some reassurance that the telecom equipment cycle may be bottoming out. However, with sales still contracting and competition from Huawei and Nokia remaining intense, the recovery is likely to be gradual. Ericsson maintained its full-year guidance for modest sales growth and continued margin improvement, subject to macroeconomic conditions.