After a pickup in demand in North America fuelled prospects of a recovery from broader market difficulties, Ericsson topped profit and sales predictions on Friday, driving its shares to their highest level since October 2022.

The manufacturer of telecom equipment and its competitor, Nokia, have reduced expenses and slashed thousands of jobs as fewer people purchase 5G telecom equipment. However, in April, both businesses expressed greater optimism, predicting that demand would progressively recover by the end of the year.

“We expect market conditions to remain challenging this year as the pace of India investments slow. However, our sales will benefit during the second half from contract deliveries in North America,” CEO Börje Ekholm said.

Although adjusted core earnings (EBITA) decreased by half to 4.05 billion crowns from 8.21 billion crowns in the previous year, it nevertheless exceeded a consensus forecast by 9.5%, as reported by J.P. Morgan. The 14% increase in sales in North America was mostly responsible for it.

With sales shifting towards the higher margin U.S. market, an increased adjusted gross margin also played a role, rising to 43.9% from 38.3% a year earlier.

After defeating Nokia to get a significant deal to sell equipment to mobile operator AT&T, Ericsson is reaping benefits in North America.

CFO Lars Sandström told Reuters that a number of clients helped the North American second quarter, but he did not identify them. “Larger customers” in the networks business area were mentioned in the company’s statement.

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The stock of Ericsson recovered somewhat, and at 0920 GMT, it was up 5% from its peak of 74 crowns, which it had reached in October 2022.

PP Foresight analyst Paolo Pescatore called the results “encouraging” given the challenging market conditions, while Jefferies predicted improved sales and gross margin in the second half, aided by the AT&T acquisition.

Growing volumes in the North American Networks market, according to Inderes analysts, are generating optimism that major operators there may resume spending by year’s end.

(Adapted from Investing.com)