Telefonaktiebolaget LM Ericsson (ERIC) 2026 Q3 法說會逐字稿

Hello, everyone, and welcome to the presentation of Ericsson's third quarter 2026 results. Joining us today, we have Per Narvinger, our President and CEO; and also Lars Sandstrom, our Chief Financial Officer. As usual, we'll have a short presentation followed by Q&A. And in order to ask a question, you'll need to join the conference by phone. Details are available in the earnings release and also on the Investor Relations website.

Today's presentation contains forward-looking statements and is being recorded. Actual results may differ materially due to various risks and uncertainties. Please refer to today's earnings report and the annual report for additional information.

I'll now hand the call over to Per for his introductory comments.

Thanks, Daniel, and good morning, everyone. So today marks my first earnings call as CEO of Ericsson. I'm pleased to begin by reporting a strong third quarter where we are executing well in a challenging environment. So looking at top line, organic sales grew 7% with organic growth in all segments. Growth was driven by solid customer demand in strategic markets and effective commercial execution.

Our gross margin was 47.7% and EBITA margin came in at 17%. The quarter demonstrates the earnings leverage we create with sales growth and discipline on costs. So Lars will soon go through the numbers in more detail. Let me give a few more general reflections first.

So since the announcement of my appointment, I have spent a lot of time meeting with customers and a consistent theme is the need for increasingly intelligent and autonomous networks to improve performance, efficiency and customer experience. So with the rapid development of AI, it's obvious that the -- that many new applications are going to be dependent on mobile connectivity. This means that networks will need to be even more reliable and resilient in the future.

We are well positioned to help our customers on this journey. So with AI models optimized for their use cases and leveraging Ericsson's purpose-built silicon, we enable our customers to get more out of their spectrum assets without increasing power consumption. So we will continue to invest and make sure we stay on the forefront of this development.

At the same time, we remain realistic about the market. The RAN market is broadly flat and component costs are increasing in the wake, of course, the AI boom. So far, we've been able to mitigate with tactical actions such as product substitution and upselling. These tactical efforts, however, they will not be enough long term.

We are also taking structural action, including portfolio optimization, raising prices, supply chain measures and efficiency improvements. Many customer contracts are multiyear, so structural mitigations will take time to flow through. We will not be immune to higher component costs, but protecting the value of our technology and the profitability of our Mobile Networks business remains our top priority. We are also maintaining cost discipline while at the same time, prioritizing the investments needed for technology leadership and supporting our customers.

The organizational changes that we announced today are part of that work. So from January, we are creating market area Asia Pacific by combining Northeast Asia with Southeast Asia, Oceania and India. This will help us operate more effectively across the region while maintaining strong customer focus at country level. We are strengthening our focus on seamless connectivity and want to make sure that we can offer a rich indoor portfolio that leverages the full R&D competence in the company.

We are therefore making changes to enterprise wireless solutions to capture these R&D synergies, drive product innovation and accelerate the growth with both CSPs and enterprise customers. These changes will also create a leaner executive team with clear accountability and the ability to move fast in a dynamic market.

So with that, I will hand over to Lars to go through the financial results in more detail.

All right. Thank you, Per. I will begin with some additional comments on the group before moving on to the segments. Net sales in Q3 totaled SEK59.5 billion, with organic sales increasing 7% year-over-year. Sales in all market areas grew with the exception of Americas, which reported a slight decline of 1%.

In Americas, sales grew slightly in North America but were lower in Latin America. In the other market areas, sales were driven by Japan, India, Vietnam and the Middle East. Sales in Market Area Other grew with enterprise sales broadly stable and growth in IPR. IPR revenues were SEK3.9 billion with an increase of SEK0.8 billion year-over-year. Part of the increase is due to retroactive revenue related to previously unlicensed periods. The current IPR run rate is approximately SEK13.5 billion.

Turning to the rest of the P&L. Adjusted gross income was SEK28.4 billion with a gross margin close to 48%. Gross income increased year-over-year by SEK1.4 billion due to higher sales in Mobile Networks. Gross margin was broadly stable. On the cost side, we were affected by component cost increases, mostly in Networks. I will cover this in more detail later.

Operating expenses, excluding restructuring charges, improved to SEK18.4 billion, around SEK0.7 billion lower year-over-year. Cost reduction actions are mitigating wage pressures. Adjusted EBITA was SEK10.1 billion. Excluding the divestment of iconectiv, EBITA increased year-on-year. The EBITA margin was 17%, showing the benefits of operating leverage with higher sales. Cash flow before M&A was SEK4.9 billion, driven by earnings and impacted by higher inventories. I will come back to this later.

Let's move to the segments. In Networks, sales increased by 9% year-over-year to SEK38.7 billion. Year-to-date, organic sales grew by 4%. Organic sales grew in all market areas with the exception of Americas. North America grew slightly, while Latin America declined. Sales were driven by three main building blocks.

First, our strong commercial momentum in the past 12 to 18 months is translating into share gains and financial performance in strategic markets, for example, Japan. Second, we are seeing a near-term shift in customer behavior with some customers accelerating spend before price increase. And third, good commercial execution on the near-term sales mitigation activities.

As you know, we put this in place to support sales and margins as component costs increase. Networks adjusted gross margin was stable at 50.3%, benefiting from product mix and retroactive IPR licensing revenues, offsetting some of the component cost increases. Adjusted gross income increased to SEK19.4 billion. And adjusted EBITA was SEK9 billion, up from SEK7.2 billion last year, mostly due to higher sales. Adjusted EBITA margin was 23.1%.

And looking at the right-hand graph, the rolling four quarter adjusted gross margin was around 50% and adjusted EBITA margin around 21%. Moving over to Cloud Software and Services. Sales increased by 3% to SEK15.8 billion. Growth was broad-based across the commodities and benefited from growth in adjacencies, leveraging our capabilities into non-CSP verticals. Adjusted gross margin came in at 43.5%, and broadly stable compared to last year. Adjusted gross income increased to SEK6.9 billion.

And adjusted EBITA increased slightly to SEK2.0 billion with a margin close to 13%. And looking at the right-hand graph here, the rolling four-quarter adjusted gross margin was around 44% and adjusted EBITA margin around 13%. Then on Enterprise. Reported sales decreased by 10% due to the sale of iconectiv in the prior year. On an organic basis, enterprise sales grew by 1%.

And within Enterprise, we are seeing good customer momentum in the enterprise 5G private networks. And as Per mentioned, the changes announced today will capture R&D synergies, drive product innovation and accelerate growth. Adjusted gross margin declined to 50%, reflecting the impact of the divestment of iconnectiv. Adjusted EBITA landed at minus SEK0.5 billion and improved sequentially. Efficiency actions are underway to improve profitability further.

Then turning to free cash flow, which was SEK4.9 billion before M&A in the quarter. Cash flow generation was supported by earnings, but impacted by increased operating net assets, mainly inventories. The buildup in inventory was due to higher component prices as well as the usual buildup of finished goods ahead of Q4. We delivered a cash flow to net sales of 11% for the rolling four quarters within our 9% to 12% target. And net cash increased sequentially to SEK60.7 billion.

Gross cash increased to SEK98 million, and we raised a EUR500 million bond in Q3, preparing for upcoming maturities. The share buyback continued in Q3 with SEK4.5 billion of cash flow used for buybacks and impacting net cash. Year-to-date, this has delivered SEK8 billion back to shareholders with 79 million shares repurchased alongside SEK5 billion of dividends.

Next, I will cover the outlook. Global uncertainty remains elevated given the broad geopolitical and macroeconomic environment, including the global semiconductor situation. We are not immune. The industry is entering a period of higher input costs and the financial impact will continue to build up in the coming quarters. Our near-term mitigation actions across the business, mainly commercial measures are working well so far.

As per mentioned, we are continuing with our plans to gradually implement longer-term structural actions. These will be needed to more sustainably offset these impacts and protect our position in the value chain. We are adjusting pricing in current tenders and discussing to broaden price increases and commercial mitigations with current customers. We are also continuing efficiency and supply chain actions.

Turning to the Q4 outlook. The outlook assumes the exchange rates specified in the report. And for Networks and Cloud Software Services, we expect sales growth to be broadly similar to the three-year average quarter-on-quarter seasonality. We expect Networks adjusted gross margin to be in the range of 49% to 51%, benefiting from product mix. Restructuring charges for 2026 will be elevated as you have already seen in the first nine months.

With that, I hand back to you, Per.

Thank you, Lars. So let me close with three messages. First, we are executing from a position of strength. The quarter demonstrates the earnings potential of Ericsson when customer demand, commercial execution and cost discipline come together. Second, we are acting decisively on challenges ahead. We are addressing higher component costs and a broadly flat RAN market while protecting the investments that underpin our technology leadership. Third, the opportunity ahead is significant.

AI will increase the demand place on mobile networks and create new opportunities for our customers. With our technology, customer relationships and the actions we are taking, Ericsson is well positioned to deliver sustainable, profitable long-term growth across the group. Finally, I'd like to give a big thank you to all of my Ericsson colleagues for their contribution to the quarter and their commitment to our customers.

And with that, Daniel, let us open up the line for questions.

Thanks, Per. We'll now move to the Q&A portion of the presentation. (Event Instructions) Operator, we're now ready to go to the first question.

Simon Granath, ABG.

And especially, congrats on the new position, Per. I have a question around investment trends in light of recent news about satellite operators potentially looking into buying and building their own terrestrial network. Could you talk about whether you see this as an emerging opportunity for Ericsson? And what is your assessment as to how operators are responding to this? Are they revising any CapEx around priorities due to these industry dynamics?

Thank you, Simon. It's a very good question. We discuss satellite with most of our customers at the moment, to be honest. First of all, for the end user, satellite communication will be a fantastic addition to terrestrial networks. What we see will be very important is to have a seamless connectivity between outdoor and indoor. Obviously, that's going to be one of the challenges for satellite, how to take the outdoor coverage indoor.

So we believe that for our customers, that seamless, high-performing experience is going to be very, very important. That's also one of the reasons now that we are consolidating our R&D efforts in the indoor segment, meaning that we then also move our activities from our enterprise wireless solution business area into networks.

So overall, we would want to see this as it actually shows the importance of connectivity. There will be more players for connectivity, but you cannot rely on satellite alone. You're going to need the terrestrial coverage as well. So we basically see it as positive.

Andreas Joelsson, DNB.

A question on sales and the demand and how we should look at that going forward. It's very strong in the quarter, obviously, and the outlook for Q4 states that it will be normal seasonal patterns, so also a quite strong end to the year. And then you say that the market is broadly flat. So how should we look at this into 2027?

Is there a flat market also the most likely going forward? And also how that impacts your long-term mitigating -- or actions to the higher component costs? Can you be a little bit more sort of clear in what you do to further mitigate because you've obviously been quite successful so far?

Thank you, Andreas. Maybe I'll start. So what we are seeing is a strong quarter in sales. As you are alluding to, there is a lot of headwinds on the cost side. And we, of course, sit on fairly long contracts with our suppliers. We also sit with long contracts with our customers. And that means in the short term, what we can work with is tactical actions, and that would be things like upselling, making sure we do product substitution.

So we have products with a better cost profile in what we are selling. Those are the kind of tactical actions we are taking. You could also probably see some kind of signal that looking at the product mix because there are less services. So maybe some of our customers are now trying to buy before price increases because we are signaling that we do see that this AI demand will continue, meaning, of course, cost on components will be high also next year.

And you can only do tactical actions for so long. So that means we need to get some of these more long-term actions in place for next year, meaning we need to get prices up with our customers as, of course, then contracts get renewed. Over time, this will, of course, ripple through the P&L. Our view is that this is, of course, structural.

Everyone is having the same challenge, meaning in the end, we, as a supplier, cannot absorb these costs, they have to be passed on. But of course, there can be a transition period, and that's what we are saying that '27 could be such a transition period. But obviously, this quarter, we have managed well with tactical actions. I don't know if there's anything you want to add to that, Lars?

No, I think you asked on the demand and our ability to grow. And I think we live. We have not changed our view on the RAN market per se. Then of course, we try -- we work closely with our customers, how can we grow, how can we, with our technology, gain market share, et cetera, what can we do in adjacencies, et cetera. So our clear ambition is, of course, to capture some of that opportunity also in 2027 as we have done in 2026.

Sandeep Deshpande, JPMorgan.

My question is regarding -- you've had a third quarter, which was much better than seasonal. And now you're guiding the fourth quarter to be seasonal levels of growth. I mean, is this showing some kind of share gains by Ericsson or something else happening in the market given that you continue to say that the market is flat. So this doesn't seem like a normal sort of behavior or it was that because Q2 was below seasonal that you had Q3, which was well above seasonal. So I'm just trying to understand the dynamics of the guidance at this point.

Sure. Yes. So I think you're right in that, Sandeep, that, as you said, we were a bit weak in Q2, as we said, and we were coming out stronger in Q3, as we also said. And then looking at where we are year-to-date in Networks, we are around 4% up year-to-date. So I think that is stabilizing again.

And to measure share gains in just one single quarter, I think that is too short term to think like that. We have some improvements in some markets where we are prioritizing. So we see that happening, for example, in Japan, which is good, but it's not the big driver in that sense and especially not in a single quarter.

Daniel Djurberg, Handelsbanken.

Yes, my question would be on if you can comment a little bit more on the actions you do in the Enterprise business area and how soon we should expect the remaining part, parts, i.e., the Global Communication platform to show profitability?

Thanks, Daniel. Let me start. So what we're announcing today is then the Enterprise Wireless Solutions, which we have had as a business area, and we will dissolve the business area as such, but of course, continue with the portfolio and the solutions. We are taking what we call neutral host and EP5G, and we are actually then moving them to networks where we believe we can get a better R&D muscle, and we can then also accelerate the journey towards profitability.

There will still be parts left. So what actually used to be Cradle point, we will keep as a stand-alone unit. And that unit will be headed up by Yossi Cohen, who is also our Head of Americas. That business is actually showing strong improvements, and we are getting to black numbers. So that will then stay in what today is the enterprise segment.

What is then the other big part is, of course, what used to be Vonage. When it comes to Vonage, we made one change in the quarter in leadership. And Christophe just coming on board have, of course, the target not just to grow the business, but we have also been very clear that we need to look at the cost -- on the cost side of Vonage business.

It is absolutely my experience in this company that we rarely succeed by just having growth. We also need to look at the cost side. So that is the target at hand for Christoph. And of course, we will come back and report progress as we go along. But it's absolutely a priority to get to black numbers quicker on the Enterprise segment.

Jakob Bluestone, BNP.

Could I ask you about the magnitude of the pull-ins that you're seeing? So you mentioned that you're seeing customers kind of responding behavioral changes ahead of potential price hikes. And just sort of if you can help us understand how big a contributor was that actually to your growth, just so we can kind of break down what are more underlying sort of structural growth drivers and what's maybe perhaps a little bit more phasing related?

Yes. Thanks. No, I mean as I mentioned there in the beginning, we talked about three areas of growth drivers in this quarter, and this is one of the three. We don't quantify each of them, but as we bring up those three, you can drive a bit of conclusions from that, I think. And so it's not -- it's there.

It's not super big. That's why I also tried to talk a little bit on the year-to-date growth in Networks of around 4% to give a more flavor of how it's performing. So there is some pull-ins coming. And -- but it's not that it's a big material impact going for 2027 from one quarter or this.

Felix Henriksson, Nordea.

I'd like to double-quick on the near-term tactical commercial measures that you've used in offsetting the component cost inflation, especially when it comes to upselling. What kind of products have you been successful in upselling? And how sustainable you see this sort of as a lever for offsetting the component cost inflation that you're witnessing?

Thanks, Felix. And so maybe I'll elaborate a bit on what kind of contracts we typically have. So we write frame agreements, maybe three or five years out. And of course, in those contracts, we can only include what we know at the time. Of course, as we develop new products, we can set the right price on those products as they become available.

And with tactical, you could see it as you try to sell, of course, the newer products. You try to -- because obviously, they have then the right price structure and cost structure. You could also look at it; there's always differences across the portfolio. If the cost of certain memory is going up, you might have more or less memory in different type of products in your portfolio, you might try to steer sales towards those that are better.

And of course, you can always try to have find upsell or do upselling, trying to find, I don't know, opportunities on software side or in other areas that will actually help the margin. So those are what we would call as tactical activities. And of course, you cannot continue to do that forever. In the end, you need to get the right prices in your price book.

Francois Bouvignies, UBS.

I have a quick question on OpEx. I mean you are doing a lot of work on the OpEx side. You talked about the inflation of components. And obviously, you are OpEx down this quarter. I mean, this year, you're going to have a good cost control. How should we think about the OpEx next quarter and next year, more importantly, I mean, should -- do you expect some inflation there or the cost measure would lead to flattish or maybe down OpEx? Just directionally, how should we think about OpEx from here given all the work you are doing?

Yes. But when it comes to OpEx, if we think next quarter, there is always a bit of seasonality in Q4. So I think that you can expect also this year. But when it comes to the more -- and there is a continuous that we have with salary increases that we need to work with. And I think that we have had the intention and the hard work that we should offset any of these inflationary impacts that we see coming into OpEx, and that journey continues going forward as well.

And I think this quarter, we have been done pretty okay. And you have seen the restructuring measures that we have done impacting both OpEx and cost of sales, of course. But -- and that journey will need to continue because we live in this, as we talk about the flat RAN market. And as long as we don't see any change there, we need to continue that work.

Any direction for next year, flat, up, down? Just direction. I don't care about the --

No, I think the direction is that we need to continue to offset any salary increases. And then with the component cost impact, we need to rethink also is there more that we need to do. But I think as for now on, it's still to offset and then continue work.

Stephane Houri, ODDO.

The question is about the market and the pricing because in a flat RAN market, how much pricing do you think you can realistically pass through to the operators? And do you expect to fully offset the component inflation in 2027? Or is there some gross margin dilution built into your thinking?

Thank you. Maybe I start and then Lars can pitch in. So we are talking about headwind in '27. And that is, of course, because as I tried to say in the beginning, it takes some time for this to ripple through with all customers and in the full P&L. Our view is that over time, we need to pass on this cost and our customers in the end will have to pass on the cost, the increased CapEx they get to their end users.

So this is more a timing question on how it plays out. And of course, while you have that, you try to mitigate as much as possible with the more short-term tactical actions, as I said, right? But we are flagging that '27 is probably somewhat of a transition year, but we will, of course, work to mitigate. And I don't know if you want to --

I think you captured it well. And when it comes to -- I think everyone understands this and you meet a lot of customers, and they understand the situation. Of course, nobody likes it and our operators in large parts of the world are struggling with return on capital employed. So this -- that's why it takes a bit of time to get this through, but everyone understand it.

Okay. And just one short follow-up. How do you work with your component manufacturers or suppliers? Do you have regular meetings to update prices? Or do you fix the prices for a certain period as much as you can?

We have a lot of meetings with our suppliers; I can tell you. Everyone, of course, want to increase their prices similar to us wanting to increase prices with our customers. I don't think there's an easy answer or a universal answer to the question you have. Of course, in some areas, we have to work with committing on volumes in order to simply have the supply resilience. But there is not one simple answer to that. But I would say the supply and sourcing organization is having an intense year.

Sami Sarkamies, Danske Bank.

I have a broader question for you as a new CEO. Could you highlight the areas where Ericsson needs to improve the most and summarize the changes you are now implementing as CEO. I guess you know the company well. It will not take that much time for these changes to happen?

Thanks for that question, Sami. We are performing well in our core business, so in BCSS and BU. We, of course, have to make sure that we stay in the strong position we have and then defend our leadership. And I think many of the questions today are around that part. The area where we, of course, have more work to do is in the enterprise segment.

And we announced some changes today. And as I mentioned before, we are also going to be focusing on trying to get to black numbers faster for Vonage, so working with cost. With the changes I also make, we make some changes to the market area structure today. So while doing that, we believe we can support our customers better and also get some cost synergies.

It also means that I will get a somewhat leaner executive team, which I think is important because it means we can be faster and more agile in a very dynamic environment that we operate in. Having said all this, I think the largest challenge at hand is, of course, that we operate in a market that is very flattish. So if you ask me what is the more long-term challenge we have, it's, of course, to find growth.

And I would say you can put the growth in different type of buckets. You could put growth in more than working with what you have. I mean we have already talked about market share gains whenever it makes sense. You can put another bucket where we help our customers, of course, to get deploying new use cases, increasing their revenue, also meaning more money should be flowing in our direction. And there's also an element then of business development.

So what can we do in adjacent fields? What could we do with mission-critical networks, how to leverage sensing technologies for different type of industries, including also defense. And I also put enterprise in that bucket because we haven't really gotten the growth or the benefit from what you could do more in the enterprise segment and with network APIs. So I would say trying to find long-term growth will, of course, be something we are working with, but they will also come in different type of buckets.

Robert Sanders, Deutsche Bank.

Maybe you could just update us on your views around putting GPUs into the baseband. Have you completely closed the door to doing that given you seem to be working more on the custom silicon side? Is there a scenario perhaps where you reconsider that point of view if TMOS, for example, demonstrates significant jumps in spectral efficiency over the next sort of year? Or do you see yourself just philosophically just against that approach altogether?

Thank you for that question. We are not philosophically against anything. We always try to do what makes business sense. We have disaggregated our software and hardware, meaning we have a lot of flexibility on what path to embark on in the future. Having said that, right now, we see that it's an extraordinary asset to have your own ASICs. That really makes it possible for us to get our functionality fast. It makes it possible for us to be very cost competitive.

I also want to mention, so we -- you might have heard us talking about us getting new features out there based on AI functionality. We have one of my favorite features, it's called AI-native link adaptation. It's been around in the industry for as long as I've been. So it's more than three decades. I know we've been trying to optimize it. And now replacing that with an AI model, we get 10% gain in spectrum efficiency.

Today, we have that deployed commercially, commercial deployment with three operators, and we have more than 60,000 base stations running this functionality. So we are reaping these AI gains today. So reaping gains from AI is not about what platform you execute on. It's actually to get the functionality out there, of course, to create these innovative models and reap the benefits.

So we are leading in this space. But of course, we are not ruling out any other platform. And of course, we continuously evaluate what is more cost efficient to run on. But AI is not something that will happen in 2028. It is happening here and now in our networks.

Ulrich Rathe, Bernstein.

I wanted to ask about free cash flow. In Q2, I think you said free cash flow was affected by inventory building for the deliveries in the third quarter. Now you're mentioning deliveries -- sorry, you're mentioning inventory build-up again also in the context of component cost. Could you elaborate on that a little bit? And in this context, could you also please clarify whether this -- the IPR catch-up revenue were already collected in free cash flow in the third quarter or whether that's like a stretched out collection?

Yes. First on the IPR, it's not in this quarter. It's coming in coming quarters primarily. And when it comes to inventory buildup, as you see over this year, we have had quite a big buildup over the quarters. And that is partly through building inventories. And as I said, and as you mentioned, therefore, the deliveries coming out for Q4, but also the cost increase.

We have been talking about component cost increases, and they are impacting inventories as well. So that's -- you see it in both ends, so to say, and it's coming into the inventory side as well. And there is -- we are working on ensuring that we have the stability in the supply chain, and that means that we have inventories coming up a bit and also a bit on the market mix impacts with lead times. So in some markets, we have longer lead times, and that is also what you see in this inventory buildup.

Oliver Wong, Bank of America.

I wanted to also ask about AI RAN. I was curious -- to what extent do you think that AI RAN could be driving revenues today, maybe in terms of market share? And also whether there's any dynamics related to the custom silicon you're focusing on versus the GPUs from a customer standpoint that you could flag?

Thank you. It is a revenue opportunity because it's obvious, we are providing value. So the example I just gave with 10% more in spectrum efficiency. We could put it in the context of SpaceX buying spectrum last week for USD8 billion. Obviously, if suddenly you get 10% more out of that spectrum, you could very quickly, of course, translate that to USD800 million of value. So of course, that value, we feel, of course, some of that should come in -- back to Ericsson.

So we definitely see it as a potential upsell with customers. We absolutely see that, that will be a differentiator when you're competing in the market. Again, we are doing this on custom silicon. The feature I mentioned earlier today that one can be executed on basebands out there deployed today already. I mean, obviously, we will always come with next-generation hardware.

Who knows? Maybe we will deploy on GPUs in the future, but then you need to go out to the site and deploy that new hardware. Here, you have an area where we can actually start deploying these models already today and reap the benefits. And of course, that is a fantastic value for our customers. And some of that value should, as I said, come our way.

Sebastien Sztabowicz, Kepler Cheuvreux.

On a midterm view on 6G, even though we remain quite far away from first deployment, do you expect a normal upgrade cycle with 6G with a tangible hardware refresh cycle? Or there is a risk to see more a software upgrade cycle this time given the reluctance of many large operators to embark on a major CapEx cycle when it comes to 6G. I'm just curious about your sentiment with the next cycle?

It's a good question. We, of course, discuss this intensely with our customers as well. It's always difficult to say exactly what will be the case until the standard is set. Our ambition for sure is that most of our portfolio should be upgradable to 6G, meaning, of course, that you can reuse basebands, you can reuse radios also for 6G.

There will, for sure, be some new spectrum bands coming with 6G and then obviously, you need to deploy new radios. So we're not so different from when 5G came about. We see that there will be some additional CapEx, but also, you'll be able to reuse the legacy or the equipment you have out in the field today. Of course, in the end, it depends what services will run on top of the network. And I think that is really the million-dollar question because you can today have much more advanced services and use cases on top of 5G networks as well.

So I think the more difficult question is when will that start materializing? When will we see more AI devices out in the networks that probably will generate much more uplink traffic. The way we see, of course, 6G will help in this. For example, in the 6G, you will be able to have a more dynamic allocation between uplink and downlink. But of course, we will support 6G on many of our existing products, but also, of course, have new 6G products.

Daniel Djurberg, Handelsbanken.

I will be brief here. On these growth green shots, you mentioned first responders, defend, hybrid Satcom and potentially enterprise as well. And we know that China, India, US is a little bit ahead, but we've also seen some forward-leaning European operators going for quality on demand and recently also 5G slicing in German, Italy, et cetera. Can you comment if you -- this is a little bit of a trend towards the programmable network that you have spoken about for years?

Thanks, Daniel. I think it is. And that is part of the challenge we have, right? We start talking about what is possible so long in advance that when it actually starts happening, it becomes old news. But we actually start seeing now that some of our customers are making use of the 5G stand-alone functionality. And that's, of course, something we've been talking about for a long time.

Having said that, we don't see it happening in volume yet. Then you also bring in mission-critical. And it's quite different in nature because it's mission-critical, for example, a blue light networks. Of course, if you sell a new blue light network, it's an entire network and it becomes a bit black or white, either you have one or you don't have one.

So that is a very good business already today. But really what we are waiting for are, of course, the kind of use cases you are alluding to with -- I mean, making use of the quality on-demand type of functionality that we now have in modern 5G SA networks. And again, think of AI applications. I don't -- I'm convinced that we will have people so dependent on AI agents that you will want to be guaranteed that you have access to that agent always.

That means you cannot have what you have today because today is the best effort paradigm. You are not guaranteed that you will be able to watch your favorite video whenever. But if you have an AI agent, that, in my mind, speaks for having this kind of network slicing where you have different quality on different services. So this will happen. It's a matter of time. And as you're also saying, we see good examples of this is being implemented worldwide even if the volume is not there.

Andreas Joelsson, DNB.

Sorry, you will hate this question. But if you would see 2027 and if you didn't do anything in -- or be successful in mitigating the component price increase, how much would that impact the gross margin if 2027 would be this transition year that you talked about earlier.

I cannot not give numbers on that. I don't know if Lars wants to have a go at it. But otherwise, I'll just say you can look at just on the server business to get a feel for how much the memory cost increase, I mean, we're talking about.

So it will have a dilution effect significant if we are not taking action. I think that's what we are saying. But as you see, we have also been very successful in this quarter with tactical actions. So again, you should see this over time that it could be an intermediate year '27, but we will, of course, make sure and try to minimize the impact.

No, I think that's right. And it's a question, as you said, on phasing. How much will the tactical mitigations, how will they phase out and how will they be replaced by the more structural activities that we implement. And that is actually not easy to answer today. So -- but there will be some impact, and we have highlighted that also in the report.

And sorry, I had to try.

Thanks, Andreas. Thank you, everyone, for joining. That concludes the conference call today. Thank you.