Ericsson AB (ERIC) saw its shares rise higher on Friday after its Q2 earnings beat analysts’ expectations, aided by cost-cutting measures amid what the company described as a “challenging market environment.”
Adjusted earnings before interest and taxes increased by 14% year-over-year to 3.23 billion kronor ($307 million), excluding impairments, the Stockholm-based company announced on Friday. This figure topped the 2.7 billion kronor average forecast by analysts surveyed by Bloomberg.
Ericsson’s U.S.-listed shares rose more than 6.4% in premarket trading Friday.
“We are continuously taking further actions as we are still in a declining market,” said CFO Lars Sandstrom. “A big portion of our cost base is connected to people. We need to look into that going forward.”
During the quarter, Ericsson’s net sales decreased by 7% to 59.8 billion kronor, which was above the analyst expectations of 58.5 billion kronor.
The adjusted earnings figures excluded an impairment previously announced this month concerning its Vonage business.
Ericsson recorded an 11.4 billion kronor non-cash impairment due to the unit’s declining performance, resulting in a net loss of 11 billion kronor for the period. This marks the second writedown on the asset, which Ericsson agreed to purchase in 2021, since October.
Analysts believe that sales may stabilize in the coming months. Ericsson has previously stated that its $14 billion network deal with U.S. operator AT&T (NYSE:) will start to yield benefits in the second half of the year.
“While Vonage continues to be a drag on results, we expect sales and gross margin to further strengthen in H2-24 as the AT&T roll-out gains momentum, alongside continued cost reduction efforts,” analysts said in a note.
Ericsson and its Nordic competitor Nokia (NOK), which is set to report next week, have struggled with a sluggish telecom equipment market for years, as anticipated investments in 5G technology have not materialized.
The prolonged downturn led Ericsson to cut about 8% of its workforce, or 8,500 employees globally, last year to reduce costs. In March, the company announced it would eliminate 1,200 jobs in Sweden.