Morgan Stanley downgrades Ericsson to underweight, sees margin pressure - BN

Morgan Stanley downgraded Ericsson (NASDAQ:ERIC) to Underweight, lowering its price target to $9.00. The firm expects flat mobile RAN market growth and margin pressure due to rising input costs. Ericsson's Q2 revenues declined 5% YoY in North America, with Q3 guidance showing a 100 bps margin decline. Morgan Stanley reduced 2027 EBIT and EPS estimates by 5% and 6%, respectively. Ericsson's P/E is 11.19, with a PEG ratio of 0.32, suggesting potential undervaluation.

Ericsson and VodafoneThree launched an upgraded 5G Core network, powered by Ericsson's dual-mode 5G Core, for VodafoneThree's 28.6 million customers. The network offers faster speeds, guaranteed minimum download speeds, and dedicated network slices for consumers and businesses. The project is part of an SEK 12.5 billion partnership and aims to support growing data demands with a capacity of 9 Tbps.

AT&T (T) partnered with Ericsson (ERIC) for 5G expansion, upgrading networks while Ericsson faces hardware delivery challenges. AT&T's Q2 2026 revenue rose 2.3% to $31.6B, EPS up 20.4% to $0.65. Ericsson's Q2 sales fell 6% to $5B, net income down 12%. Hedge funds adjusted stakes in both. AT&T's debt and legacy revenue declines are risks; Ericsson's margins face pressure from component costs.

SoftBank and Ericsson's AI-RAN trial improved spectral efficiency by 25% and user throughput by 50%. Google invested $12.18bn in Marvell Technology for custom AI chips. Comsol plans 5G expansion in South Africa. Telekom Malaysia's Q2 revenue rose 6.8% but net profit fell. Negratín and Telefónica trialed IoT solutions. India may disband the Digital Communications Commission. NTT Data and Palo Alto Networks formed a $1bn cybersecurity alliance.

Ericsson reported Q2 results with adjusted gross margin of 48.4%, up from 48% a year earlier, despite weaker sales. Revenue fell 6% YoY to SEK 52.7 billion, with organic sales down 1% due to lower IPR licensing revenue. Cloud Software and Services grew 5% organically. Management warned Q3 Networks margins may face pressure from higher deployment volumes.

Ericsson was selected by the Queensland Government to supply the first-stage private 5G communications platform for Queensland’s “The Wave” next-generation rail network linking Brisbane and the Sunshine Coast. Ericsson will work with UGL Transport and Frequentis to deliver a 5G-enabled Digital Radio System supporting ETCS Level 2 rollout, with Sector 1 North of the network.