Hello everyone, and welcome to the presentation of Ericsson's first quarter 2026 results. Joining us by video today is Börje Ekholm, our President and CEO, and in the studio, I'm joined by Lars Sandström, our Chief Financial Officer.

As usual, we'll have a short presentation followed by Q&A. In order to ask a question, you'll need to join the conference by phone.

Details can be found in today's earnings release and on the investor relations website as well. Please be advised that today's call is being recorded and that today's presentation may include forward-looking statements.

These statements are based on our current expectations and certain planning assumptions, which are subjects to risks and uncertainties. Actual results may differ materially due to factors mentioned in today's press release and discussed in the conference call.

We encourage you to read about these risks and uncertainties in our earnings reports as well as in our annual report. I'll now hand the call over to Börje and Lars for their introductory comments.

Thanks, Daniel, and good morning, everyone, and thanks for joining us today. Q1 was a solid start of the year and with results that reflects our continued execution against our operational and strategic priorities.

We saw a very large currency headwind during the quarter, probably one of the toughest quarters from a comp ratio as the Swedish krona strengthened towards almost all currencies compared to last year. This, of course, materially impacted every line of our financial statements, with reporting sales falling 10%.

At the same time, we've performed well operationally, realizing strong organic growth of 6% with all segments contributing. Our results are a testament to our leading portfolio and the investments we've been making in furthering our technology leadership.

Over the last few years, we've actively managed to reduce dependence on geographic mix. Of course, we realize that North America often receive a disproportionate interest from I guess the analyst community, but also around the world.

That's of course natural, because it is a front-runner market. This quarter, we saw sales reduced by mid-single digits in North America.

We could still deliver a gross margin of 48.1% for the group and 50.4% for segment Networks, indicating that the work we've done to balance out the geographic mix is coming through in the results and giving us less sensitivity to geographic mix. Cloud Software and Services continue to execute well.

We reached a gross margin of 43.2%, that's up more than 300 basis points year-over-year. Revenue seasonality was in line with the guidance we had for the quarter, and we saw some deals being pushed into Q2, and we expect to see therefore stronger seasonality than normal next quarter.

EBITA came in at 5.6 billion kronor with a margin of 11.3%. The strengthening of the Swedish krona affected EBITA by 2.2 billion kronor.

You've also seen we had the revaluation of the long-term stock-based programs. All of those are of course included in the results.

Cash flow during the first quarter is seasonably lower typically. Despite this, cash flow came in at a healthy 5.9 billion kronor with a net cash position of 68.1 billion.

As you've seen, just a couple of weeks ago, the AGM approved the board's proposal on increased dividend and our first share buyback program. We will start to execute on the share buyback program next week with a target to buy back 15 billion kronor.

In the next phase of AI, we see that high-performance mobile connectivity will become increasingly important. Even so, our planning assumptions for the RAN market remains flat over the longer term.

With disciplined execution, we create room to make selective investments in growth to broaden the mobile platform to new use cases and new sectors. We believe the growth will come in areas outside of our traditional CSP markets, and then we're talking about areas like enterprise and mission-critical networks.

In our Enterprise segment, which includes our wireless WAN business, private networks, network APIs, or as we now call it actually network powered solutions, and mobile money, organic growth was stronger, which is encouraging. There are new markets that we see as key opportunities going forward.

Of course, new markets take time to develop, but we're now seeing these efforts start to scale. I would also comment on the loss in Enterprise of 1.4 billion kronor.

It's clearly unacceptable, but it also includes a number of one-time costs. We have an improvement plan in place that we're executing on, and we will expect to see that coming through shrinking losses during the rest of the year.

Comes from growth, operational discipline, and, of course, that the one-time costs abate. We're also driving several other growth initiatives, and there we see good progress.

In mission-critical networks, which tend to be a bit lumpy and vary by quarter, we're experiencing strong interest in several verticals, particularly within defense solutions. In modern defense applications, high-performance, and then I'm talking about large-capacity connectivity, is required.

This will make 5G Standalone a cost-effective alternative. We've seen a deployment with the Italian navy this quarter.

Another very exciting area is 5G-based sensing, where one of many use cases is about detecting unconnected drones. A few weeks ago, we showcased our solution, which is seeing significant customer interest, of course, given a difficult current market or environment geopolitically.

We see that our technology here has a great market potential, and we're now starting to invest to capture these opportunities. I would say this is just one example that you don't have to wait for 6G to get part of new exciting use cases with the technology we have.

We're seeing good momentum on our strategy execution, and we've strengthened Ericsson operationally. I would say this is showing now in our Q1 results.

With that, let me give the word over to you, Lars, to go through the numbers in some more detail.

All right. Thank you, Börje.

I will begin with some additional comments on the group before moving over to the segments. Net sales in Q1 totaled 49.3 billion with organic sales growing 6% year-on-year.

The growth was broad-based, and sales grew in all segments, and three market areas delivered double-digit organic growth driven by continued 5G rollouts and increased uptake of 5G Core. Americas declined 2%, with strong growth in Latin America more than offset by a mid-single-digit decline in North America following a strong quarter last year.

Reported sales decreased by 10% impacted by negative currency effect of 7.8 billion then. Organic growth again grew 6%.

IPR revenues were 3.1 billion, and this run rate coming out of the quarter is approximately then 13 billion. Adjusted gross income was 23.7 billion with a negative currency impact of 3.8 billion.

Adjusted gross margin was 48.1%, in line with last year excluding iconectiv. On the cost side, operating expenses excluding restructuring charges dropped to 18.4 billion, around 2 billion lower year-over-year, driven mainly by currency as well as the divestment of iconectiv.

Underlying inflationary pressures were more than offset by cost reduction driven by headcount as well as efficiency measures. As Börje mentioned, adjusted EBITA, which excludes restructuring but includes the other one-offs, was 5.6 billion.

This is down by 1.4 billion, including a negative impact of 2.2 billion, the divestment of iconectiv, and a 0.5 billion of additional share-based compensation cost coming from the increased share price here during the quarter. The EBITA margin was 11.3%.

Cash flow before M&A was 5.9 billion driven by earnings and reduced net operating assets. Let's move to the segments.

In Networks, sales decreased by 8% year-on-year to 32.9 billion with a negative currency impact of 5.2 billion. Organic sales increased by 7%.

Organic revenues grew in three of our four market areas. Two strategic markets, India and Japan, grew strongly.

North America declined, impacted by customer spend reallocation in Q1 this year following recent market consolidation. Customer investments were also elevated last year due to tariff uncertainty, impacting the comparison.

Networks adjusted gross margin decreased slightly to 50.4%, mainly reflecting actions to enhance resilience in the supply chain. Adjusted EBITA was 6.4 billion impacted by negative currency impact of 2 billion, and benefiting from lower operating expenses, which were also supported by continued efficiency improvements.

Adjusted EBITA margin was 13.9 sorry, 13.3%. Looking at the right-hand graph, the rolling four-quarter gross margin stabilized around 50%, and adjusted EBITA margin at around 20%.

Moving to the segment Cloud Software and Services. Sales here decreased 9% to 11.8 billion, including a negative currency impact of 1.6 billion.

Organically, sales grew by 4% with growth primarily in core. Adjusted gross margin came in at 43.2%, an improvement from 39.9% last year supported by improved delivery efficiency and a favorable product mix.

Adjusted EBITA increased to 0.6 billion with a margin of 5.3% despite negative currency impact of 0.3 billion. Lower gross income was offset by lower operating expenses here.

Looking at the right-hand graph, the rolling four-quarters adjusted gross margin was around 44%, and adjusted EBITA margin around 12%, and these are both new high levels. Reported sales on the Enterprise side decreased 30% impacted by the sale of iconectiv and currency.

On organic basis, Enterprise grew by 4%, and this marks the second quarter of organic growth. Adjusted gross margin declined to 49.0% reflecting the impact of the divestment of iconectiv and change in business mix in Global Communications Platform.

Adjusted EBITA landed at -1.4 billion reflecting the divestment of iconectiv and non-recurring cost of 0.3 billion in the current quarter. Turning then to free cash flow, which was 5.9 billion before M&A in the quarter.

We delivered a cash-to-net-sales of 13% for the rolling four quarters, above our 9% to 12% target. Cash flow generation was strong, supported by earnings and a stronger than normal seasonal reduction in operating net assets.

Net cash increased sequentially by 6.9 billion to 68.1 billion here in the quarter. The buyback program of up to 15 billion was approved by the AGM, and share repurchases will start now soon.

Next, I will cover the outlook. Global uncertainty remains elevated given the broad geopolitical and macroeconomic environment, including the global semiconductor situation, and Börje will come back to this.

The Q2 outlook assumes no tariff changes and the exchange rates specified in the report. For Networks, we expect sales growth to be broadly similar to the three-year average quarter-on-quarter seasonality.

For Cloud Software and Services, we expect sales growth to be above the three-year average quarter-on-quarter seasonality. We expect Networks adjusted gross margin to be in the range of 49% to 51%.

Restructuring charges for 2026 are expected to be at an elevated level, with a fairly large part already seen in Q1. With that, I hand back to you, Börje.

Thanks a lot, Lars. Our Q1 results demonstrate a strong execution on our strategic priorities and the actions we've taken over the last several years to strengthen the company operationally.

This includes how we made Ericsson less reliant on any specific geographical mix, enabling us to sustain healthy margins in varying market conditions as you've seen in today's report. Our actions also include how we diversified our supply chain to mitigate as much of the geopolitical disturbances as possible.

This continues to be a clear competitive advantage, enabling us to meet customer commitments amid the current backdrop. Of course, the global semiconductor situations remains challenging as the AI boom is increasing input costs.

We continue to take actions, and Lars mentioned this as well, to mitigate this impact by working closely with both our customers and suppliers, of course including our pricing. While we believe we're in a good position, we're not immune to these disturbances.

They will have consequences on price and availability. Of course, AI may be the key driver for our industry longer-term, we see AI as a net positive for us.

The next phase of AI will see AI being industrialized, shifting focus from current focus on data centers, large language models, rather to applications, devices, use cases. This will require advanced mobile connectivity with capabilities such as ultra-low latency and high uplink.

This puts us in the middle of the next phase of the AI era. With our strategy, we are well positioned to capitalize on this opportunity.

We're doing this by providing the industry's best networks for AI and by expanding the mobile platform to new use cases and sectors. This includes exposing network capabilities through network powered solutions, allowing developers to use the network capabilities to create new use cases.

It also includes opening up new addressable markets, such as enterprise solutions based on cellular technology and mission-critical networks. This will allow us to capture a greater share of the value from connectivity and drive mid-single-digit growth for Ericsson while achieving our long-term margin targets of 15% to 18%.

With that, I think it's time for some Q&A.

Thanks, Börje. As a reminder, if you'd like to ask a question, you'll need to press *1 and 1 on your telephone and wait for your name to be announced.

If you are streaming the webcast, please could we ask you to mute the webcast audio while asking your question to minimize any audio feedback. As usual, if I could request one question per participant, we have time to hear from as many of you as possible, please, today.

Thanks, operator. Time for the first question.

The first question this morning is going to come from Simon Granath at ABG. Simon, your line's open.

Please go ahead.

Thank you so much, Daniel, and good morning, all. I have a question on Lars on the memory and cost inflation and the Q1 margin performance for Networks was in my view strong.

Given the rising memory prices and as inventory runs down through the year, how confident are you that memory prices won't be a significant headwind for the rest of the year? All else equal, and on this topic, should we see Q1 margin the highest level for the year?

Thanks.

All right. Thanks, Simon.

When it comes to outlook, we give, as outlook for the next quarter here. When it comes to memory costs and other semiconductor costs, there is, as you say, here a headwind coming.

We should also remember that it is a smaller part of our total cost base, of course. There is a headwind coming, and we are working hard to mitigate, together with our suppliers, but also together with our customers to share the burden here.

Then it comes to what can we do when it comes to product substitution, etc. It is a bit too early, I think, already now to say how the impact will be.

If there is and when there is things happening, you will see that more coming into the second half of the year.

Thank you so much, appreciate it.

Thanks for the question. Moving to the next question, please.

The next question will come from the line of Andrew Gardiner at Citi. Andrew, please go ahead.

Good morning, all. Thanks, Daniel.

Just on the North American revenue trends that you saw in the quarter, you've highlighted the pressure there, Börje, a sort of mid-single digit down year-on-year. I'm just wondering what your view for 2026 as a whole is for that region.

The comps, as you suggested, were particularly tough in the first quarter given the tariff impact last year and some buy-forward. Does the decline that you've seen in the first quarter, should that lessen as we come through 2026, or are there other factors we should be aware of?

You see a lot of forecasts in the market on the North American market, and I would say the development you've seen during the first quarter is probably similar to what we should expect for the year. I think that's fair to say, given our customers' guidance.

At the same time, we have a little bit different mix compared to the market, where as Lars noted, we were maybe hit a bit harder than the general market the first quarter because of the consolidation we've seen among the operators in the US that was closed. Net-net, I don't see a changing market condition, but I see a bit better mix for us vis-à-vis the market.

As you noted, we had a tough comp in Q1. Don't assume the US all of a sudden is going to change direction.

That's why I want to come back to what I think is more important today is we're less exposed to North America from a geographic mix perspective. The investments and commitments we've been talking about to diversify our mix, if we are a bit weaker in North America, but stronger in another market for a quarter, we can actually compensate that and keep a very healthy gross margin.

That, I think, lends for a better predictability of the total company, and actually for a healthier way of operating the company. While I think North America always will be important from a mix point of view, it will be less important going forward.

We work with the customers as front-runner customers, but it's always going to swing a bit up and down in a quarter. On the one hand, yes, I would always prefer them to grow.

The reality is it will swing. The question is more how we can provide a healthy gross margin, a much more stable gross margin, and I think Q1 is a good indication of the work we've done.

I suppose related to that, you mentioned the other strategic markets. India and Japan have been the two you've highlighted away from North America.

You did see good growth there. Is that something that is not just a 1Q impact, but we should expect steady growth from those two key markets through the year?

I would say

there we have actually strengthened our market position, we should see healthy growth as we continue to deliver on those opportunities. I'm actually very comfortable about that.

Understood. Thank you very much.

Thanks for the question, Andrew. Moving to the next question, please.

The next question is going to come from the line of Erik Lindholm-Röjestål from SEB. Please go ahead, Erik, your line is open.

Thanks you, and good morning, everyone. Thanks for taking my questions.

Just one question here. I wanted to ask on opex and the impact of cost savings.

It looks like underlying opex is down around half a billion, as you mentioned, despite the one-off impact that you flagged here. What sort of inflationary pressures do you see in opex for the rest of the year?

When should we start to see the impact from the cost savings that you launched in Sweden here at the start of the year, for example? Thank you.

When it comes to opex, I think in the quarter here, it's down organically. I think it's currency and iconectiv that is impacting, and then there is somewhat also underlying cost reduction coming through here.

We are continuously working with that. The inflation we talk about, since a big portion of the cost base in opex is related to people, of course, there is an underlying continuous salary increase that is coming that we need to work with.

Our working assumption is that we live in the flat RAN market, and that we need to accommodate to by continuously working and finding efficiencies and reductions where it is possible. Then we do that continuously.

That is what we are working with here every quarter continuously. You saw there was quite a bit of restructuring here coming in in the first quarter now primarily to the Sweden area, but also the rest of Europe.

We have activities in North America, in Asia, etc. That is a continuous work that we are doing.

We will continue that also in the coming quarters.

All right, but I guess it's fair to say that these measures will more so show in the second half then?

The ones that we announced today, or in this quarter, of course, they come more in the second half of the year and into next year. Then we have the previous ones that is coming you can see now, to say.

That is a continuous work that we do.

I would just add there, by experience, it takes a bit longer than you hope to see it in the numbers. Theoretically it should come in Q3, of course, or Q2, Q3, but it will be a bit of a delay there.

That's why you see the cost kind of not exactly following the number of employees, because it's simply associated with costs around when we take costs out. You will see it after the second half and into next year.

Excellent. Thank you.

Thanks for the question, Erik. Moving to the next question, please.

The next question is going to come from the line of Andreas Joelsson at DNB. Please go ahead, Andreas.

Thank you, and good morning, everyone. Follow-up on the COGS question that we had.

Of course, there's a headwind coming from the component prices. You have been able to increase the gross margin in Networks for some time, and now it has stabilized.

What other areas within costs have you sort of from experience the last few years learned that there is maybe that you can use to compensate for component price increases? It's not just negotiations with vendors and customers that could keep the gross margin resilient, as you say, if you understand that blurry question.

No, thanks for the question, Andreas. I can try to give you a notion.

Of course, the most important one is to work on the prices. It's undoubtedly the case, and that we continue to do.

The other levers we have, which actually have proven to be very sizable, is product substitution, i.e., through technology development, we deliver a product that performs the same, but at a lower price, or a lower cost point, I should say. That's actually is maybe the most important one that we've been able to do for quite some time.

I feel quite comfortable we'll get that with the next-generation ASICs coming within not-too-distant future. Then we have also been able to take a lot of costs out on service delivery.

There, I think there are more costs to be taken out. I think it doesn't come easy.

It doesn't come, in that sense, for free. I do think there is a number of areas we can kind of leverage to protect a healthy gross margin longer term.

That's why I feel we have kind of reached a different level of performance and control on the cost side. Component prices have varied already now.

We've been able to handle that in many different ways. Our ambition is clear.

That's what we intend to do going forward as well. We have a number of degrees of freedom in what we actually do to manage the margins.

Perfect. Thank you.

Thanks for the question, Andreas. Moving to the next question, please.

The next question is going to come from the line of Richard Kramer at Arete. Please go ahead, Richard.

Thanks very much. Börje, you mentioned the early stages of physical AI, which would involve greater mobile connectivity.

Can you point to anything within your portfolio which could provide a material uplift to group sales growth, especially addressing the sort of data center AI spending boom, given that enterprise remains fairly small in the mix? Thanks.

Richard, that's a good question. We're not going to see any sales directly from data center expansions right now.

Our call it exposure to AI is more gonna come from the applications when you start to see inference play a very different role. We may not be the front-runner on the AI wave, but we are rather the longer term, I would say, it's one of our key drivers of traffic in the networks.

The connectivity will thus look different. That's why I believe the exposure we have is going to come more from that traffic development from AI moving into implementations, but it's also going to come from AI in enterprises.

Here we start to see some front-runner industrial companies still small, but actually picking up demand in two areas: enterprise connectivity, i.e., wireless solutions, or as a matter of fact, in interest for network APIs and embedding that into enterprise use cases. I don't want to promote that we have any exposure to data centers, so that wave is going to go.

We're more a little bit behind that. I guess I don't know what to call it, but kind of benefiting from the overall migration of applications towards AI.

Thanks.

Thanks for the question, Richard. Moving to the next question, please.

Next question is going to come from the line of Felix Henriksson at Nordea. Please go ahead, Felix.

Hi, thanks for taking my question. Good to see the Cloud Software and Services EBITA margin extending to around 12% on a 12-month rolling basis.

I wanted to ask, is there any reason why the margin expansion in this segment should not continue, given that growth seems to be led by very margin-accretive 5G Core demand? Thanks.

[laughter]

Oh, it's a good question. I think what we have said is that the first aim here is to reach a stable double-digit margin, and then we work from there.

I think we need to remember that Cloud Software is also connected to the flat RAN market. Still, there is an underlying growth that we are able to capture in the core area, which is good, I think.

We have managed to show that we are having a good market position there, we continue to work on that. We don't promise, we guide quarter-per-quarter as but we feel we have reached a stable level now in a good way in the company.

Thank you.

Thanks, Felix. Moving to the next question, please.

The next question will come from the line of Ulrich Rathe at Bernstein. Please go ahead, Ulrich.

Thanks very much. There's more a question for Lars, please.

You talked about how you have immunized margin to the foreign exchange moves by matching costs and revenue better. Can you sort of talk about that a little bit more, and I'm wondering in particular two areas here.

One is to what extent are you still benefiting from hedging that could roll off and produce an incremental headwind if the FX rates stay at where they are? Also, with the current level of FX matching in cost and revenue, what would be the effect of a weakening Swedish krona?

Would that actually correspond to a material margin driver for you or not? Thank you.

I think we need to separate between gross margin and EBITA margin here. On the gross margin, we are fairly well-balanced in the currency baskets, whereas in the opex side, we are much more exposed with the Swedish SEK ratio there.

It's higher there, we get more of an impact from that end. That's what's impacting, to say, the FX mix that we have.

I think that, and if there is a significant change, you will see that more impacting EBITA rather than gross margins in that sense. Then when it comes to hedging, we have some hedging, but rather low levels, and they are coming out, it should not be a big impact going forward.

Helpful. Thank you very much.

Thanks, Ulrich. Moving to the next question, please.

Next question will come from the line of Sandeep Deshpande at J.P. Morgan.

Please go ahead, Sandeep.

Hi. Could I ask, you've seen this weakness in North America.

In terms of your exposure to 5G and 5G Core outside North America, do you see there is potential for significant upgrades? The market hasn't shifted as much to 5G or 5G Core over the last few years as it has in North America.

Thus, the growth outside North America could compensate if North American growth over the next couple of years is not going to be as strong. The question I'm asking here is that historically outside North America, they have not been as keen to quickly upgrade to the next-generation technologies like 5G or 4G even before that.

How do you see that progress at this point?

Börje, maybe we ask you to take that one?

That's a very good question. North America have been a front-runner market.

It's still not fully migrated to 5G SA even there. The only market which is fully 5G SA actually is China.

We see that that's where the market will go. We see a number of operators today increasingly focused on migrating from 5G non-standalone into 5G SA and then 5G-Advanced.

It's still largely a work in progress. If you try to give some sort of statistics, maybe a quarter of the operators have some sort of 5G SA, and of 5G SA of scale is fewer than that.

I would say that's actually one of the major opportunities for our industry. It's two things.

Of course, it's a upgrade cycle for us. I think more importantly, it will allow the operators to start offering differentiated services.

You can have network slicing, dynamic network slicing, for example, can happen when you have 5G Standalone. The way we think about this is it's actually one of our more positive opportunities from a medium-term perspective as companies or operators upgrade.

The way to think about this is in order to prepare your networks for 6G that eventually will come, you need to actually migrate through 5G Standalone into 5G-Advanced, and then have built the architecture that's prepared for 6G. I see while not everyone have transitioned today, they will need to go that way.

It will provide an interesting opportunity for us as operators upgrade. That's why we've invested in positioning us well on 5G Core.

We're now starting to see growth coming through on 5G Core. It's actually I think a net-net positive for us as we move forward.

Thank you.

Thanks for the question, Sandeep. Moving to the next question, please.

Next question is coming from the line of Daniel Djurberg at Handelsbanken. Please go ahead, Daniel.

Thank you, Daniel. Good morning, Börje and Lars.

A question, I was quite impressed by the Networks gross margin given the geographical mix with large deployment in India and also growth in LatAm. It could indicate that it was capacity-heavy, and if that is correct, should we expect more of coverage and hardware deployment in second half in India, for example, in Japan, i.e., less supportive on gross margins, and then also we have the cost inflation that you mentioned?

Maybe, Börje, we can start with your thoughts on those two markets more broadly, and then Lars on the margin?

I know we were often talking about coverage and capacity before. I would say what we have tried to do is actually to reduce the dependence to that as well.

When you look at this, there is always an element of higher-margin software sales versus hardware, but it's less important going forward. The comment here is probably to say that there is a tad more capacity, but it's not meaningfully impacting the profile here.

Perfect. No, but I think you covers it well.

I think the outlook you see for the Q2 here for Networks is 49% to 51%, and that is what we see now based on the product portfolio and product deliveries and market mix we foresee now. I think signals rather stability as well.

Super.

Thanks for the question, Daniel. Moving to the next question, please.

The next question is coming from the line of Sébastien Sztabowicz at Kepler Cheuvreux. Please go ahead, Sébastien.

Hi everyone, and thanks for taking my question. On the defense market opportunity, you've been talking about a $10 billion opportunity in that market.

Now you are talking about some trials happening currently in Italy. When do you expect those opportunity to materialize and generate first significant revenue?

Is it a opportunity over 3, 5, or beyond 5 years just to understand a little bit the phasing and the ramp of this technology? Thank you.

Sure. Börje, your thoughts on the overall opportunity?

I actually think the opportunity is more near-term. It's very hard to judge, but I think it's a very good question and your perspective maybe as good as ours.

What we see though is a very near-term, very strong need in the market for modern call it modern warfare involves a lot of AI and actually heavy need of communication and connectivity therefore. We see that this is much more of a near-term opportunity.

I wouldn't say five years plus, it's more kind of a mid call it use three years for lack of a better word before this opportunity. If you start to think about take a critical site, it could be a sports arena, or a nuclear power station, or an energy generation station, or something like that, the threat from drones are pretty much today.

When you start to think about when is the technology needed from a risk perspective and protection perspective, it's actually a near-term risk. As I know it, or as I see it, I think we need to tackle that need when the market is there.

Had I wished, we would have started a few years earlier, yes. I think we're in pretty good shape to start to see this opportunities materialize over the next maybe 9, 12, 18 months opportunity, and then they start to scale at 2, 3 years.

I'm quite excited about this opportunities because the communication network and the scale we have makes our solutions rather competitive. Our ambition is that this is a nearer-term opportunity than 5-plus years.

Then putting an exact number on it, I can't, to be honest. The reception we get from customers is very positive.

Thank you.

Thanks for the question, Sébastien. Moving to the next question, please.

The next question is coming from the line of Sami Sarkamies at Danske. Go ahead, Sami.

Hi. I still wanted to go back to the rising input costs that were discussed earlier in the call.

I have a two-part question. Firstly, can you elaborate on your current operator agreements allow you to raise prices, if needed?

Do they, for example, cater for above-normal cost inflation? Then secondly, when you look at your operator customers, are you seeing rising energy costs to have an impact on their behavior and potentially investment plans for the year?

Lars, should we start with you on the first, and Börje on the second?

If we start on the customer side, it's depends on the renewal cycle of contracts that we have with customers, and that can vary a bit in different markets and different customers. There are still an opportunity, I think, to take this discussion because these are a bit exceptional times, we need to take this in a good commercial discussion in with our customers.

When it comes on the energy impacts on operators, I think that is an important part, the TCO, where our products with the right investments they do, they can drive down their TCO. I think in that sense, it helps our competitive advantage in the market.

We have not seen any big impacts yet. Of course, if there is a prolonged situation with high energy costs, that could have an impact.

We have not seen that, and I think we should also remember the revenue base of our customers is very stable. We have seen this historically and normally, our industry or our customers are quite resilient over time.

I don't know if you want to add more on that, Börje?

You've captured it. We see an increasing focus on energy efficiency in discussions with customers.

I think this will be a topic. As Lars said, it kind of goes both ways, right?

It's an opportunity because they need to actually upgrade some of the old equipment, and they actually need to move towards modern. At the same time, they get a bit tougher on their own cost position.

It kind of sits in that [foreign language], as we say in Swedish. I don't know what that translates to.

That's kind of the situation, right? The interesting thing is that when we now are around, we start to see customers talking about how you actually phase out old technology.

We're even starting to see customers in some markets talk about how do we phase out 4G and actually migrate to 5G, and in a way then have only 5G and 6G. Of course, 3G being phased out in most regions except Europe, possibly.

That will also support energy efficiency. When you asked about change in behavior, yes, it is a change in behavior, much more focus on how do I get on the latest technology curve that helps me with lower process costs.

That will include facing out 2G, 3G, and soon 4G in some markets.

Thanks.

Thanks for the question, Sami. Moving on to the next question, please, which is coming from the line of Oliver Wong at Bank of America.

Please go ahead, Oliver, your line's open.

Hi, good morning, gentlemen. Thank you for letting me ask a question.

I wanted to focus on perhaps the cost from things like logistics and transportation, since, given ongoing global geopolitical events, it seems like there could be some impact on that. Also, perhaps on the instability of the supply chain, could that be a risk to you?

It'd be great to kind of discuss about the logistics and transportation costing. How is that relative to perhaps the impact from rising memory in terms of potential headwinds going into the year?

Thanks.

When it comes to logistics and transportation, we have seen some impact now. In the total scheme of our cost base, it's limited.

We should remember that, I think it's important. Especially now in Q1, we had some additional costs with the Mideast conflict there where we had to do some rerouting, changing transportation lines, etc., utilizing then our flexible production system and supply chain.

I think, yes, it has given some, but we have been able to make sure that we deliver to our customers, which is at the end of the day most important for us. I think and that ties a little bit into your supply chain question there.

We have a rather well-distributed supply chain today to manage disturbances. We have proven that, I think, during the pandemic.

We have proven that now during last year on the tariff side, etc. We continuously work with this and try to mitigate when things are happening.

Of course, as we have said on the tariff side here, we cannot guarantee that we are immune, of course. We are, I think, managing it pretty well.

The fair comment is also that we have a distribution hub in the Middle East. We've been impacted for sure already and been able to mitigate that fully by leveraging the flexible supply chain.

I think we'll have to focus on managing it, monitoring and managing it as well as we can.

Very clear. Thank you very much.

Thanks for the question, Oliver. We have time for one final question this morning.

We can move to the next. Follow-up question from Daniel Djurberg at Handelsbanken.

Please go ahead, Daniel.

Thank you very much, Daniel. I know I should ask your customer this, and I will, but still.

Latin America saw good growth in Networks, and this is a geography with really tough competition. To me, your radio access network portfolio is more competitive to peers than for many years, which you showcased at Mobile World Congress.

Obviously, can you give any examples of this if it's correct and how we should think about markets like Latin America, Sub-Sahara, Eastern Europe, where you have tough Chinese competition? Thanks.

It's a good question. The reason why I'm hesitating is more that we get into specific customer situations, and I don't want to talk about that for the simple reason that if I would be our customers, I wouldn't like us to talk about it because it may be my competitive positioning in the market that I'm revealing.

That's why I think it's inappropriate for us to talk about customers. What I can say is that we think the competitor we have to always beat is one of the Chinese.

They're of course very strong, I have no doubt about that. We can see that we can actually go head-on with our product portfolio thanks to the strong in-field performance we see on quality benchmarking, we come out well.

You can see that, whether it's umlaut test or open signal or whatever, we come out well in that comparison. We perform also very well on energy once you're in the field, and it's because the way we have focused on developing the products is actually dedicated not to lab tries, but more to in-field performance.

Operators that looks at that total perspective, there we can compete, right? We've seen that in Latin America.

We see some in Africa is maybe the hardest market to compete, and you've seen us fight there. At the end of the day, we remain competitive, and it depends on operator preferences as well.

We certainly in Southeast Asia win market share when we compete also with the Chinese competitors.

Perfect. Thank you.

Thank you.

That comes to the end of the Q&A session. Thank you for joining us.