Shareholder Return Plan: Simultaneous Increase in Buybacks and Dividends
Swedish telecommunications equipment provider Ericsson stated after its latest financial report disclosure that the Board of Directors will propose to the shareholders meeting a stock buyback authorization of 15 billion Swedish kronor and an increase in the proposed dividend for the fiscal year 2025 to 3.00 Swedish kronor per share.
The company also emphasized that the total amount proposed to be returned to shareholders for the fiscal year 2025 could reach up to 25 billion Swedish kronor. If the buyback plan is approved, it is expected to be launched after the first quarter 2026 financial report is released and continue until the 2027 shareholders meeting.
Financial Report Highlights: Organic Growth Revives, But Currency Still Restrain Apparent Revenue
From an operational perspective, Ericsson achieved a 6% organic sales growth in the fourth quarter, but due to adverse exchange rate impacts, reported sales fell year-on-year to 69.285 billion Swedish kronor.
In terms of profitability, the company's adjusted gross margin rose to 48.0% in the fourth quarter, with adjusted EBITA reaching 12.7 billion Swedish kronor, equating to a profit margin of 18.3%, and recorded a pre-acquisition free cash flow of 14.9 billion Swedish kronor.
Annually, Ericsson disclosed that the net cash at the end of 2025 was 61.2 billion Swedish kronor; the full-year adjusted EBITA was 42.869 billion Swedish kronor with a profit margin of 18.1%, and pre-acquisition free cash flow of 26.769 billion Swedish kronor. The company also mentioned that the year’s performance included revenue impacts from the previous sale of iconectiv.
Market Interpretation: Profit Exceeds Expectations as Structural Adjustments Continue
Reuters cited data stating that Ericsson's adjusted operating profit for the fourth quarter (excluding restructuring costs) exceeded analyst expectations, putting forth the buyback proposal in this context.
However, the sectoral issue of "slowing 5G investment" remains a constraint. Reuters also reported that, to address the U.S. import tariff environment and changes in demand over the past year, the company accelerated adjustments, promoted restructuring, and announced a plan earlier this month to cut about 1,600 positions in Sweden.
Business and Outlook: Cloud Software Boosts Gross Margin, RAN Market May Level Off by 2026
From a divisional drive perspective, the company attributes part of the improvement in gross margins to the enhancement of its cloud software and services business, noting that all three major business segments achieved organic growth in the fourth quarter, with the cloud software and services segment growing by 12%.
For 2026, the company anticipates that the RAN market is likely to "remain flat," and stated an intention to increase defense-related investment while continuing to optimize cost structures to support profit margins and cash flow performance.
