Is 5G Ericsson’s Next Revenue Growth Driver?

1 2 3 4 5 6 7
Part 7
Is 5G Ericsson’s Next Revenue Growth Driver? PART 7 OF 7

Why Ericsson’s Research and Development Is Important

R&D expenditure rose 15% YoY in 2Q17

Ericsson’s (ERIC) R&D (research and development) expenses rose 15.0% YoY (year-over-year) in 2Q17 to 8.0 billion SEK (Swedish kronor) from 7.0 billion SEK in 2Q16. Ericsson has stated that its strategy is focused on a product- and technology-led approach, which means it needs to increase competitiveness in networks. That can be achieved by increasing R&D investments, which might also positively impact gross margins.

Why Ericsson&#8217;s Research and Development Is Important

Interested in ERIC? Don't miss the next report.

Receive e-mail alerts for new research on ERIC

Success! You are now receiving e-mail alerts for new research. A temporary password for your new Market Realist account has been sent to your e-mail address.

Success! has been added to your Ticker Alerts.

Success! has been added to your Ticker Alerts. Subscriptions can be managed in your user profile.

CEO (chief executive officer) Börje Ekholm stated, “There is a lag between growing R&D expense and the effecting gross margin, but we expect to see that over time.” R&D expenses accounted for 16.0% of Ericsson’s total revenue in 2Q17 compared to 12.9% in 2Q16.

Investments in radio

During Ericsson’s 2Q17 earnings call, management stated that it has started to increase investments in R&D in radio in order to provide a competitive product offering in LTE (long-term evolution). R&D is also important in order for Ericsson to ensure leadership in the 5G (fifth-generation) space.

R&D is critical for technology companies to ensure continuous product development that will cater to the needs of their clients. R&D expenditure accounted for 21.6% of Nokia’s (NOK) revenue and 12.4% of Cisco’s (CSCO) revenue in fiscal 2Q17.


Please select a profession that best describes you: