Sami Sarkamies

Sami Sarkamies asked about Ericsson's silicon strategy, particularly in light of a competitor's announcement to build products based on NVIDIA chips, and the potential role of NVIDIA in future RAN products.

Answer

Börje Ekholm, CEO, explained Ericsson's strategy to disaggregate software and hardware, allowing software to run on various architectures (x86, GPUs, proprietary silicon, TPUs, etc.). This approach aims for independence from the hardware layer, giving customers choice and allowing Ericsson to make intelligent choices closer to AI RAN realization and 6G, confirming continued work with both x86 and GPU ecosystems.

Sami Sarkamies from Danske Bank A/S asked for details on the strong performance in Cloud Software & Services (CSS), its sustainable margin level, and an update on the IPR revenue run rate following a recent settlement.

Answer

CFO Lars Sandström reported the new IPR run rate is SEK 13 billion. He attributed the strong Q2 CSS margin to IPR and a favorable mix but stressed the underlying positive trend continues, reaffirming the mid-term goal of a double-digit EBITA margin. CEO Börje Ekholm added that the turnaround is a result of improved software mix, cost-outs, and commercial discipline.

Sami Sarkamies asked about the regional market outlook, noting that regions outside North America were not growing despite talk of pent-up demand. He questioned if there was visibility for improvement in these regions before the end of 2025.

Answer

CEO Börje Ekholm positioned North America's growth as a positive leading indicator for other markets. He noted that Europe had begun to grow in the second half of last year and that the decline in the Southeast Asia, Oceania, and India region was largely due to tough comparisons with India's peak 5G rollout in the prior year. He reiterated the external forecast for a stabilizing, flattish market for the full year.

Sami Sarkamies from Danske Bank observed that the Q4 guidance implies below-normal seasonality for markets beyond North America. He asked why the various new deals announced in Q3 are not translating into stronger revenue in Q4.

Answer

CFO Lars Sandstrom stated the guidance reflects their best judgment, considering the high starting point from Q3. CEO Börje Ekholm added that there is a natural lag between contract announcements and revenue recognition, citing the AT&T deal announced in November of the prior year as an example that took several quarters to impact results.

Sami Sarkamies from Danske Bank asked for an explanation of the higher-than-guided Q2 OpEx and the reason for not providing Q3 OpEx guidance. He also questioned why the IPR guidance wasn't raised despite a strong run rate.

Answer

CFO Lars Sandstrom (answer attributed to Börje Ekholm in transcript) clarified the Q2 OpEx surprise was due to higher costs in Enterprise, stemming from the cessation of R&D capitalization and new operational investments. He said guidance was changed to reflect a more stable cost outlook. On IPR, Lars Sandstrom stated the guidance is maintained at SEK 12-13 billion to optimize the value of future negotiations.

Sami Sarkamies from Danske Bank asked for more detail on the Network Infrastructure segment's Q2 performance, particularly the weaker growth in IP and Optical, and requested elaboration on the new strategy for a more integrated and faster-moving Nokia.

Answer

President & CEO Justin Hotard attributed the Network Infrastructure performance to supply chain constraints that hampered what would have been double-digit growth, but noted a strong book-to-bill. He explained the strategic shift involves unifying corporate functions for agility and operating leverage while maintaining P&L accountability in the business groups to better serve customers who engage with Nokia as a single entity.

Sami Sarkamies of Danske Bank asked for color on the Network Infrastructure segment's Q2 performance and H2 outlook, and requested elaboration on the strategy for a more integrated and faster-moving Nokia.

Answer

President & CEO Justin Hotard attributed NI's Q2 growth moderation to supply constraints, noting underlying demand is strong with a positive book-to-bill. He explained the organizational changes aim to better serve customers who want a single point of contact, thereby improving agility and operating leverage. CFO Marco Wirén clarified this will not increase HQ costs.

Sami Sarkamies inquired about the drivers of the 27% organic growth in enterprise sales and asked why the Amazon IP licensing deal did not appear to include significant catch-up payments.

Answer

President and CEO Justin Hotard clarified that the enterprise growth was primarily driven by hyperscale customers in the U.S. optical market, largely through the newly acquired Infinera business. Regarding the Amazon deal, CFO Marco Wiren noted its terms are confidential but confirmed it resolved all litigation and did include some catch-up payments in Q1. Justin Hotard added that Amazon is a crucial 360-degree partner across multiple business units.

Requested more detail on the drivers of the strong enterprise sales growth and asked why the Amazon IP licensing deal did not seem to include significant catch-up payments.

Answer

The enterprise growth was primarily driven by hyperscale customers in the optical segment, largely in the U.S., validating the Infinera acquisition thesis. The Amazon deal terms are confidential, but it was an amicable agreement that ended litigation and did include some catch-up payments in Q1. The overall relationship with Amazon as a partner is also important.

Sami Sarkamies sought clarification on the data center growth plan, asking about the investment-to-revenue target, the split of investment between R&D and go-to-market, and the current data center sales baseline. He also asked if the 2027 cost base would be higher than today.

Answer

CEO Pekka Lundmark confirmed the plan to invest an additional EUR 100 million in annual operating expenses to generate an incremental EUR 1 billion in sales by 2028. He stated the investment would cover both R&D and go-to-market expansion but did not provide a specific split or a current sales baseline, deferring those details until after the Infinera acquisition closes. He noted it was premature to comment on the 2027 cost base.