Sandeep Deshpande

Sandeep Deshpande asked for comments on the overall mobile networks market progression, considering the EU's stance on high-risk vendors and increased price competition in Latin America, and how geopolitical situations are influencing the market.

Answer

Börje Ekholm, CEO, noted the mobile networks market has been flattish for two decades, and Ericsson plans for that outlook. He acknowledged increased competition in Latin America and parts of Southeast Asia/Africa. He highlighted the EU's discussion on restricting high-risk vendors as a potential positive, representing a sizable revenue opportunity for trusted vendors, though its impact will take 12-18 months to materialize.

Sandeep Deshpande of JPMorgan Chase & Co. questioned the drivers behind the robust Q3 gross margin guidance for the Networks business, asking if new IPR deals were expected or if it was due to a favorable mix shift, and also inquired about the outlook for India.

Answer

CFO Lars Sandström clarified the strong margin guidance is based on the underlying product and market mix, not anticipated new deals. He added that expectations for India's recovery in Q3 are low. CEO Börje Ekholm noted that Ericsson has successfully reduced the gross margin's sensitivity to geographic mix shifts.

Sandeep Deshpande asked about the drivers of the strong gross margin, seeking to understand the contribution from product mix versus the new IPR deal, and whether any of the IPR revenue was from one-off back payments.

Answer

CFO Lars Sandstrom declined to split the margin components but confirmed the key drivers were product mix, underlying operational improvements, and market mix. He noted the Q2 guidance includes a positive impact from retroactive IPR payments and a negative 1 percentage point impact from tariffs. Both he and CEO Börje Ekholm clarified that the IPR agreement was a partial one.

Sandeep Deshpande of JPMorgan Chase & Co. inquired about the new API monetization joint venture, asking for the operational timeline and the mechanism through which Ericsson will be compensated.

Answer

CEO Börje Ekholm explained that the JV is undergoing regulatory approval and should launch in the next few months. The JV will act as an aggregator. Ericsson's Vonage platform will then play a key role by reselling these aggregated APIs to its developer ecosystem, generating revenue from this value-added service and moving Ericsson up the stack.

Sandeep Deshpande from JPMorgan asked for the value of one-off retroactive payments in recent IPR deals, the ongoing IPR revenue run rate, and whether the U.S. market recovery is driven by inventory, new projects, or the AT&T contract.

Answer

CFO Lars Sandstrom declined to quantify the one-off IPR impact but confirmed the new run rate is approximately SEK 12 billion. CEO Börje Ekholm clarified the U.S. recovery is a combination of all three factors: inventory normalization, network quality investments, and the initial ramp-up of the AT&T contract.

Sandeep Deshpande of JPMorgan Chase & Co. asked why the optical business isn't growing faster given hyperscaler strength and inquired about Nokia's progress in expanding its routing and switching footprint with these customers.

Answer

President & CEO Justin Hotard explained that Nokia was historically not heavily penetrated in the hyperscaler optical space and is now playing catch-up, with the Infinera acquisition and new 800-gig pluggables being key to improving its competitive position. He noted some traction in routing but less in switching, stating it is an area of focus that will be detailed further at the Capital Markets Day.

Sandeep Deshpande from JPMorgan Chase & Co. asked why the optical business isn't growing faster given hyperscaler strength and questioned Nokia's progress in routing and switching within the hyperscaler segment.

Answer

President & CEO Justin Hotard acknowledged that Nokia was historically underpenetrated in the AI and cloud optical space and is now in a challenger position, catching up with new products like the 800-gig pluggable platform. He noted some traction in routing but less in switching, identifying it as a focus area to be detailed at the upcoming Capital Markets Day.

Sandeep Deshpande asked if the Mobile Networks business has been properly turned around and is on a stable trajectory. He also followed up on Nokia Technologies, asking if recent video licensing deals represent a major new opportunity.

Answer

CEO Pekka Lundmark explained that the Mobile Networks strategy now focuses on driving top-line growth from segments beyond the slow-growth service provider market, specifically targeting private wireless, public safety, and defense, aided by the Fenix acquisition. CFO Marco Wiren confirmed that new areas like video streaming, IoT, and automotive are indeed key growth opportunities for Nokia Technologies, where the company continues to invest in R&D to expand beyond its current run-rate targets.

Sandeep Deshpande of JPMorgan Chase & Co. asked whether STMicroelectronics expects to achieve year-on-year revenue growth in Q4 and if the current guidance is affected by new U.S. rules on electric vehicles.

Answer

President & CEO Jean-Marc Chery indicated that with current backlog and booking trends, ST should grow sequentially in Q4 and be near the year-over-year turning point, but cautioned against specific customer inventory adjustments. He stated there is no significant impact from U.S. EV rules, adding that ST is adapting its silicon carbide strategy to maintain its target 30% market share amid evolving EV market dynamics.

Sandeep Deshpande of JPMorgan Chase & Co. asked if STMicroelectronics expects to achieve year-over-year revenue growth in Q4 and whether the guidance was impacted by new U.S. rules on EVs.

Answer

President & CEO Jean-Marc Chery stated that based on the current backlog, ST should grow sequentially in Q4 and be near the year-over-year turning point, though they are not immune to customer-specific adjustments. He confirmed no significant impact from the U.S. EV tax bill and noted that while the SiC market is adapting to lower EV forecasts, ST aims to maintain its 30% market share.

Sandeep Deshpande asked if ST has seen any demand impact from Chinese retaliatory tariffs and followed up on the company's market share evolution with its primary silicon carbide customer, questioning if any share loss was fully factored in.

Answer

CEO Jean-Marc Chery stated that while there has been no immediate customer reaction, ST could potentially gain business if tariffs penalize its U.S.-based competitors in China. Regarding silicon carbide, both Chery and Marco Cassis (President, APDMSG) clarified that the share adjustment with its main customer was a planned, contractual move to a dual-source model, not an unexpected market share loss, and reiterated a long-term goal of capturing at least 30% of the overall SiC market.

Sandeep Deshpande asked for a breakdown of the revised full-year guidance reduction between the Automotive and Industrial segments and questioned if the weakness in automotive orders is expected to persist.

Answer

Jean-Marc Chery, CEO, stated the guidance reduction was approximately 40% from Automotive and 60% from Industrial. The Industrial weakness was due to a lack of new orders in Q2, postponing recovery. For Automotive, he noted that while Tier 1s have very short-term visibility, he believes inventory adjustments are largely complete if vehicle production holds around 90 million units, and he reiterated confidence in the $1.3 billion silicon carbide revenue target.

Sandeep Deshpande asked if the automotive semiconductor market is facing renewed pricing pressure, citing a competitor's strategy, and questioned if market share shifts in the hyperscaler business could impact second-half revenue.

Answer

CEO Jochen Hanebeck responded that automotive pricing is largely stable under annual agreements, with the exception of silicon carbide where prices are adjusting due to commoditizing substrates and the 8-inch transition. Regarding hyperscalers, CMO Andreas Urschitz and CEO Jochen Hanebeck reiterated confidence in their AI revenue targets of €600 million this year and €1 billion next year, stating that competitive dynamics are already factored into their forecasts.

Sandeep Deshpande asked about competitive pricing pressure in the automotive sector, referencing a U.S. competitor, and questioned if market share dynamics in the hyperscaler business would impact second-half revenues.

Answer

CEO Jochen Hanebeck addressed automotive pricing by stating most is under annual agreements and that SiC price declines are largely due to forward pricing on the 8-inch transition and commoditizing substrates, which benefits Infineon. CMO Andreas Urschitz and CEO Jochen Hanebeck reiterated that the AI revenue growth targets (€600M this year, €1B next) are on track, implying they are gaining share in a growing market.

Sandeep Deshpande asked how to reconcile the 12-18 month period needed to determine High-NA's production insertion with the fact that High-NA tools for 2026 are already in the backlog, questioning the risk of cancellation.

Answer

CEO Christophe Fouquet explained that the logic for High-NA insertion has been in place with customers for years. The current backlog includes EXE:5200 tools, which are intended for high-volume manufacturing, to support the initial phase of a planned insertion. These first few tools per customer support the 'first node insertion.' Future bookings will then target larger-scale insertions in subsequent nodes, aligning the backlog with the long-term customer roadmap.

Sandeep Deshpande asked how to reconcile the 12-18 month timeline needed to confirm High-NA's production insertion with the fact that High-NA tools for 2026 shipment are already in the backlog, questioning the risk of cancellation.

Answer

CEO Christophe Fouquet explained that the insertion logic for High-NA was established with customers years ago. The EXE:5200 tools currently in the backlog are for this planned, initial high-volume manufacturing insertion. He stated that customers are sticking to this long-standing plan, and future bookings will support larger-scale insertions in subsequent nodes.