STOCKHOLM–Ericsson AB on Tuesday posted a smaller-than-expected drop in first-quarter net profit, but cautioned that the operating environment will remain choppy in 2023 with poor visibility as operators remain cautious with spending plans and continue to adjust inventories.
The Swedish telecommunications-equipment company
ERIC.A,
+0.58%
ERIC.B,
+0.24%
said that customers in early 5G markets have slowed their deployment pace somewhat, while some customers have also lowered the elevated inventory levels built up in a tight supply environment. It expects this inventory adjustment to be mostly completed during the second quarter but might spill into the third quarter.
Overall sales in its key network unit fell 4% on the year in the first quarter, but strong sales mainly in India helped offset a 30% sales drop in North America.
Large roll-out projects weighed on networks gross margins in 1Q and will remain dilutive to gross margin in the short term, while network sales in 2Q are expected to be in line with 1Q, it added.
Ericsson reported net profit attributable to shareholders of 1.52 billion Swedish kronor ($146.9 million) compared with SEK2.94 billion a year earlier, as sales rose 14% to SEK62.55 billion.
Analysts polled by FactSet had expected net profit of SEK1.44 billion on sales of SEK60.95 billion.
Write to Dominic Chopping at dominic.chopping@wsj.com
