“We continue to execute on our focused business strategy and are tracking well towards our 2020 target.

Customers turn to new technology in order to manage growing demand for data with sustained quality and without increasing costs. This, together with fixed wireless access, represent the first business cases for 5G. We will continue to invest in securing leadership in 5G. This includes further investments in R&D, to solidify our complete 5G portfolio, and investments in field trials. We also intend to selectively capture new business opportunities, through our 5G-ready 4G portfolio, to extend our footprint as operators prepare for 5G. We provide solutions for all frequency bands for 5G, which strengthens our global competitiveness.

We have good market traction in Networks, with a sales growth of 2%, particularly in North America where all major operators are preparing for 5G. Digital Services is tracking towards a turnaround. However, while losses decreased both YoY and QoQ, we still have a lot of work to do. The top priority is to turn around performance in the segment, but we are in parallel accelerating investments to make the portfolio 5G ready and cloud native. Managed Services had a positive operating income. We have also on-boarded several new contracts in the quarter.

In segment Emerging Business and Other, we invest in strategic future growth areas such as Internet of Things (IoT). We see increasing momentum with several important customer wins with our connectivity platform in the quarter. However, sales

are still low. Our media business generated a loss of SEK -0.4 b. in the quarter. We expect to close the announced divestment of Media Solutions, recently renamed MediaKind, by the end of the third quarter.

The SEK 10 b. cost reduction program, launched in Q2 2017, has been successfully completed. We reduced the total workforce by more than 2,000 in the quarter and by 20,500 in total as part of the program. These are tough but necessary actions to ensure competitiveness. Run-rate savings to date amount to more than SEK 10 b., and the effect is gradually becoming visible in the earnings, mainly through lower service delivery costs and common costs. Even though the cost reduction program is completed, our estimate for restructuring charges of SEK 5-7 b. for the full year remains, as we will continue our efficiency activities throughout the year.

Our cash position remains strong. Our work to further strengthen the balance sheet continues.

We see strengthened momentum for 5G in the quarter and it is clear that our 5G-ready portfolio is attractive and competitive in the market. We have gradually improved the cost position and will continue to have a strict cost focus in order to further increase competitiveness and efficiency.”

Börje Ekholm

President and CEO

Planning assumptions going forward

Market related

Currency exposure

Ericsson related, 2018

Net sales

Sales as reported decreased by -1 %YoY. Sales as reported in Networks increased by 2% YoY, driven by strong sales growth in North America. Digital Services sales declined by -11% YoY, mainly due to continued decline in legacy product sales and lower telecom core sales in North East Asia. Managed Services sales declined by -2% YoY, mainly as a result of customer contract reviews. Sales in Emerging Business and Other increased by 2% YoY, mainly driven by growth in iconectiv and IoT partly offset by lower sales in the media solutions business.

Sequential sales increased by 15%.

IPR licensing revenues

IPR licensing revenues declined to SEK 1.8 (2.0) b. YoY and decreased sequentially from SEK 1.9 b.

Gross margin

Gross margin improved to 34.8% (29.1%). Key drivers of the improvement were cost reductions, ramp-up of Ericsson Radio System (ERS) product platform, market mix and good progress in addressing non-strategic contracts in Managed Services. Completion in 2017 of the amortization of software release development expenses had a positive effect on gross margin YoY.

Sequentially, gross margin increased to 34.8% from 34.2%.

Operating expenses

Operating expenses increased to SEK 17.2 (15.4) b.

R&D expenses were SEK 9.8 (8.4) b. The net effect of higher amortized than capitalized R&D expenses was SEK -0.3 (0.1) b.

SG&A increased YoY due to higher restructuring charges. Cost reductions of SEK 0.7 b. YoY were offset by costs related to revaluation of customer financing of SEK -0.2 b. and higher provision for variable compensation.

Each quarter, 25% of the anticipated full year variable compensation is provisioned for. In Q2 2017, SG&A were positively impacted as provisions were reversed following the weak company results.

Impairment losses on trade receivables increased to SEK -0.4 (-0.2) b. Impairment testing is made continuously using a methodology where country and customer risks are assessed.

Operating expenses increased sequentially following increased investments in Networks R&D, impacted by seasonality and currency effects. Operating expenses increased by approximately SEK -0.3 b. QoQ, due to currency effects.

Other operating income and expenses

Other operating income and expenses, which comprises several minor items, were SEK 0.0 (0.2) b. Other operating income and expenses in Q1 2018 were SEK 0.1 b.

Consequences of technology and portfolio shifts

Due to technology and portfolio shifts, the company is reducing the capitalization of development expenses for product platforms and software releases as well as the deferral of hardware costs. As a consequence, higher amortization than capitalization of development expenses and higher recognition than deferral of hardware costs had a negative impact on operating income YoY. The amounts related to capitalized software releases were fully amortized in 2017.

Net impact from amortization and capitalization of development expenses and from recognition and deferral of hardware costs

Restructuring charges

Restructuring charges were SEK -1.9 (-1.5) b. Restructuring charges in Q1 2018 were SEK -1.2 b.

Operating income and margin

Operating income increased to SEK 0.2 (-0.5) b. YoY.

Operating income improved sequentially to SEK 0.2 b. from -0.3 b. .

Financial net

Financial net was SEK -0.8 (0.1) b. mainly due to negative revaluation and realization effects of foreign exchange forecast hedging at SEK -0.3 (0.3) b. and negative return on assets. The financial net declined sequentially from SEK -0.5 b. In Q1 2018 the revaluation and realization effects of foreign exchange forecast hedging was SEK -0.1 b.

Taxes

Taxes amounted to SEK -1.2 (0.0) b. in the quarter and were impacted by SEK -0.7 b. as a result of revaluation of deferred tax assets due to a change in Swedish corporate tax rate. Certain profits realized in foreign jurisdictions and adjustments for taxes related to prior periods also impacted taxes negatively.

Net income (loss) and EPS

The losses in net income and the negative EPS diluted increased both YoY and QoQ, following increased taxes and negative financial net, partly offset by improved operating income.

Employees

The number of employees on June 30, 2018, was 95,260 – a net reduction of 2,321 employees in the quarter and of 13,867 employees compared with June 30, 2017. The decrease is mainly a result of activities under the cost reduction program.

Focused strategy execution

The following four measures are indicators of the progress of strategy execution.

Changes in segment reporting

As of Q2 2018, sales related to Application Development and Maintenance (ADM) and certain sales related to Business Support Solutions (BSS) were moved between the segments Managed Services and Digital Services, with a sales increase in Managed Services and a corresponding sales decrease in Digital Services (net effect of SEK 1.9 b in 2017). The corresponding impact on 2017 gross income was SEK 0.2 b. (positive for Managed Services, negative for Digital Services). Historical data have been restated to reflect the organizational change.

South East Asia, Oceania and India

Sales declined YoY. Large 4G deployments are ongoing, however timing of orders impacted Networks sales negatively YoY. Digital Services sales declined slightly YoY, due to timing of project milestones. Managed Services sales increased, partly driven by a newly signed contract.

North East Asia

Sales declined YoY due to lower Networks sales in Mainland China as a consequence of reduced LTE investments. Digital Services sales declined YoY, due to a telecom core contract delay. Sales in Japan recovered after finalization of spectrum allocations.

North America

Sales increased YoY, primarily in Networks, driven by investments in 5G readiness across all major customers. Digital Services sales declined slightly YoY, due to timing of project milestones.

Europe and Latin America

Sales were stable YoY. Continued sales growth in parts of Europe and Latin America was offset by a decline in certain markets. In addition, Managed Services sales declined YoY as a consequence of addressing non-strategic contracts.

Middle East and Africa

Sales declined slightly YoY. Networks sales were negatively impacted by monetary restrictions in a few markets in the Middle East. The decline was partly offset by growth in Digital Services.

Other

Sales declined YoY, mainly in Media Solutions. IPR licensing revenues amounted to SEK 1.8 (2.0) b.

Net sales

Sales as reported increased by 2% YoY. The increase is mainly due to strong growth in North America, driven by investments in 5G readiness. This was partly offset by lower sales in South East Asia, Oceania and India and in the Middle East and North East Asia.

Sales increased by 13% QoQ.

Gross margin

Gross margin increased to 38.8% (34.4%) YoY.

Gross margin was flat QoQ at 38.8%. Higher recognition than deferral of hardware costs impacted gross margin negatively by SEK -0.1 b. QoQ.

Operating margin

Operating margin was flat YoY at 10.9% (10.8%). Restructuring charges were SEK -0.7 (-0.8) b.

Operating margin declined QoQ to 10.9% from 11.8%. The change in net impact from amortization and capitalization of development expenses and from recognition and deferral of hardware costs was SEK 0.2 b. QoQ.

Strategy execution

As presented at the 2017 Capital Markets Day, the target for Networks is to improve the operating margin to 15%-17% by 2020. Three important activities for profitability improvements are to

- invest in R&D to safeguard a leading portfolio

- fully transition the radio unit deliveries to Ericsson Radio System (ERS) for increased competitiveness

- continue to make savings in service delivery and common costs.

The ERS, which was introduced to the market in 2015, has proven to be competitive as well as creating a strong market position. For the first half of 2018, ERS accounted for 84% of total radio unit deliveries. The plan is to have fully transitioned the radio unit deliveries to ERS by the end of 2018.

In the quarter, a divestment of a Spanish fiber service operations, with approximately 600 service engineers, was completed.

Net sales

Sales as reported declined by -11% YoY. Legacy product sales continued to decline in the quarter. New product sales declined YoY, mainly due to lower telecom core sales in North East Asia as a consequence of a contract delay. The demand for our 5G-ready and cloud-native products remains strong with several signed contracts in the quarter.

Sales increased by 22% QoQ driven by software and services, following a seasonally weaker Q1, and by increased sales in large transformation projects.

Gross margin

Gross margin improved to 39.1% (33.2%). Reduced amortization of software release development expenses had a positive impact of SEK 0.3 b. on gross income YoY.

Gross margin declined QoQ to 39.1% from 39.8%.

Operating income (loss)

Operating income (loss) decreased YoY to SEK -2.4 (-2.2) b. Operating expenses decreased despite an impact from higher amortized than capitalized development expenses of SEK -0.4 (0.1) b. and impairment losses on trade receivables of SEK -0.2 (0.0) b. Total restructuring charges of SEK -0.9 (-0.5) b. had a negative impact on operating income YoY.

Operating income (loss) improved QoQ to SEK -2.4 b. from -2.6 b.

Net impact from amortization and capitalization of development expenses

Strategy execution

As presented at the Capital Markets Day 2017, the target is to turn around Digital Services into low single-digit operating margin by 2020. Cost reduction activities were intensified in the quarter across the areas of service delivery, selling and administrative expenses and R&D. These activities will continue, aiming for simplicity and efficiency. While new ways of working are improving R&D efficiency, at the same time investments continue in a portfolio of 5G-ready and cloud-native products in order to defend current market position and prepare Digital Services for future growth.

A key activity for the turnaround is to manage and complete 34 identified critical multi-year customer contracts and to either exit or complete 11 identified non-strategic contracts. The plan is to complete or exit approximately 50% of the 45 contracts in 2018. 16 contracts have been addressed at the end of Q2 2018.

The ongoing digitalization drives opportunities for operators to reduce costs and be more agile by; automating operations, digitally serving and engaging with customers and building programmable core networks. Consequently, operators increasingly invest in the areas where Digital Services provide solutions. Rolling 12 months, however, sales of the new portfolio declined by -14%, mainly due to lower telecom core sales as a consequence of a contract delay in North East Asia. It is not unusual that such sales vary between quarters.

Net sales

Sales as reported decreased by -2% YoY, mainly as a result of contract reviews. Sales in Managed Services IT showed good growth.

Sales as reported increased by 11% QoQ.

Gross margin

Gross margin increased to 12.4% (0.3%) YoY, and sequentially from 8.3%, supported by results of efficiency measures and by reviewed and addressed contracts. In the quarter, positive adjustments of SEK 0.1 b. were made, related to reversal of earlier provisions.

Operating income

Operating income increased to SEK 0.3 (-0.3) b. YoY, due to higher gross margin. Restructuring charges were SEK -0.1 (-0.1) b.

Sequentially, operating income increased due to higher gross margin and higher net sales.

Strategy execution

As part of the focused business strategy, Managed Services has its full attention on turning the business around through addressing low-performing operations and non-strategic contracts as well as improving efficiency in the service delivery process. Investments continue in machine intelligence, automation and analytics in order to further enhance user experience, improve efficiency and better manage the increasingly complex networks of tomorrow.

As presented at the 2017 Capital Markets Day, the ambition for Managed Services is to improve the operating margin to 4%-6% in 2020. In order to focus the business and improve profitability, 42 managed services contracts (out of >300) have been identified for exit, renegotiation or transformation. At the end of Q2 2018, 33 of the 42 contracts have been addressed resulting in an annualized profit improvement of approximately SEK 0.8 b., already fully impacting gross margin.

Net sales

Sales as reported increased by 2% YoY. S. Sales and deliveries started, in the quarter, on a multi-year number portability contract in United States. This contract was awarded to iconectiv in 2015. Sales in Emerging Business continued to grow, driven by IoT.

Sales in the media business (Media Solutions and Red Bee Media) were SEK 1.3 (1.5) b. Media Solutions sales declined YoY, mainly due to lower sales in the discontinued portfolio. Red Bee Media sales declined slightly, mainly due to scope changes in contracts.

Sales increased by 24% QoQ, mainly due to growth in iconectiv, Media Solutions and Red Bee Media.

Gross margin

Gross margin increased YoY to 24.4% (21.3%).

Gross margin increased QoQ to 24.4% from 21.1%.

Operating income (loss)

Operating income improved YoY to SEK -1.3 (-1.5) b. Emerging Business operating income declined YoY, driven by increased investments in line with the strategy.

Results in Media Solutions improved YoY, driven by operational efficiencies, partly offset by costs related to the planned transaction for Media Solutions in Q3 2018.

Operating income declined QoQ to SEK -1.3 from -1.2 b.

Net impact from amortization and capitalization of development expenses

Strategy execution

As outlined at the Capital Markets Day in 2017, the target for segment Emerging Business and Other, including iconectiv, is a break-even result by 2020.

Selective investments will continue in Emerging Business to build a position and grow sales in new areas. Main investments are on IoT, UDN (Unified Delivery Network) and Emodo (mobile advertising and data monetization platform) business. Parts of the portfolio are still in an early phase, with focus on generating sales and scale the business, and do not yet cover the required investments, hence resulting in a negative bottom-line. The acquisition of Vidscale, a subcontractor to the Ericsson UDN business, was completed in the quarter and will lower the operational cost for the business.

For the media solutions business, Ericsson is partnering with One Equity Partners (OEP) and retaining a 49% ownership stake. This allows Ericsson to capture the upside of the business while at the same time taking an active part in the expected consolidation of the industry. Activities are accelerated to complete the transaction as planned during Q3 2018. Additional expenses related to the divestment of the media solutions business is estimated to be SEK -0.3 b. in Q3.

For Red Bee Media, the target is to achieve a sustainable profitable business, by continuing to develop and manage the business as an independent and focused media services entity within Ericsson. Operations and services propositions will be further developed, in line with the Red Bee Media tactical and transformational strategic execution plans.

Operating activities

Cash flow from operating activities was SEK 1.4 (0.0) b., driven by SEK 1.7 b. of positive change in net operating assets. Trade receivables were reduced, mainly due to good collection. Sales of trade receivables continued to trend downwards and were reduced both QoQ and YoY. Trade payables increased, mainly due to seasonal inventory build-up. Cash outlays related to restructuring charges were SEK -0.8 (-1.1) b. in the quarter.

Investing activities

Cash flow from investing activities excluding interest-bearing securities was SEK -2.1 (-1.3) b. M&A activities were SEK -0.4 (0.0) b., related to an acquisition in Emerging Business. Cash flow from investments in property, plant and equipment was SEK -1.0 (-1.0) b. and capitalized development expenses were SEK -0.3 (-0.3) b. Cash flow from interest-bearing securities was SEK 3.7 (-0.7) b. Together, the above items generated a positive cash flow from investing activities of SEK 1.6 (-2.0) b.

Financing activities

Cash flow from financing activities was negative at SEK -3.7 (-8.9) b. Dividends of SEK 3.3 (3.3) b. were paid out. Net change in cash and cash equivalents was SEK 0.4 (-11.5) b.

Post-employments benefits increased in the quarter, to SEK 27.3 b. from SEK 25.6 b., due to decreased interest rates in Sweden and normal service and interest costs partly offset by return on pension assets and higher interest rates in the UK.

The Swedish defined benefit obligation (DBO) has been calculated using a discount rate based on the yields of Swedish government bonds. If the discount rate had been based on Swedish covered mortgage bonds, the DBO would have been approximately SEK 8.5 b. lower as of June 30, 2018.

The average maturity of long-term borrowings as of June 30, 2018, was 3.9 years, a decrease from 4.5 years 12 months earlier.

A credit facility agreement of EUR 250 million was signed with the European Investment Bank (EIB) in the quarter but has not yet been disbursed. The credit facility will mature five years after disbursement.

Debt maturity profile, Parent Company

SEK b.

Ericsson’s Nomination Committee appointed

On April 26, 2018, Ericsson announced that the Nomination Committee for the Annual General Meeting 2019 had been appointed in accordance with the Instruction for the Nomination Committee, resolved by the Annual General Meeting 2012. The Nomination Committee consists of: Johan Forssell, Investor AB; Bengt Kjell, AB Industrivärden and Svenska Handelsbankens Pensionsstiftelse; Christer Gardell, Cevian Capital Partners Limited; Anders Oscarsson, AMF Försäkring och Fonder and Ronnie Leten, the Chairman of the Board of Directors. Johan Forssell is the Chairman of the Nomination Committee.

Ericsson signs credit facility agreement with the European Investment Bank

On May 31, 2018, Ericsson announced that it has signed a credit facility of EUR 250 million with the European Investment Bank (EIB). The funding will support research and development activities for 5G and is in line with Ericsson’s focused business strategy. The credit facility will mature five years after disbursement.

POST-CLOSING EVENTS

Ericsson to divest its field services business in Sweden to Transtema Group

On July 11, 2018, Ericsson announced that it has signed an agreement with the Swedish company Transtema Group AB to divest Ericsson Local Services AB (LSS), a subsidiary of Ericsson supplying field service operations and maintenance of fixed and mobile networks in Sweden. This divestment is in line with Ericsson’s business strategy. The transaction is expected to close in the third quarter of 2018 and is subject to customary closing conditions, including regulatory approvals.

DISCLOSURE PURSUANT TO SECTION 219 OF THE IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT OF 2012 (ITRA)

During the second quarter of 2018, Ericsson made sales of communications infrastructure related products and services in Iran to Mobile Communication Company of Iran and MTNIrancell, which generated gross revenues (reported as net sales) of approximately SEK 7 million. Ericsson does not normally allocate quarterly net profit (reported as net income) on a country-by-country or activity-by-activity basis, other than as set forth in Ericsson’s consolidated financial statements prepared in accordance with IFRS as issued by the IASB. However, Ericsson has estimated that its operating income (income before taxes and financial net) from such sales, after internal cost allocation, during the second quarter of 2018 would be substantially lower than such gross revenues. Ericsson continuously monitors the international developments as they relate to Iran and its government. While it is under the current circumstances very difficult to comment on possible future engagements, Ericsson always strives to honor its engagements with existing customers in compliance with applicable export controls, sanctions and other laws, rules and regulations

Ericsson’s operational and financial risk factors and uncertainties are described in our Annual Report 2017. Risk factors and uncertainties in focus short term for the Parent Company and the Ericsson Group include, but are not limited to:

Ericsson stringently monitors the compliance with all relevant trade regulations and trade embargoes applicable to dealings with customers operating in countries where there are trade restrictions or trade restrictions are discussed. Ericsson operates globally in accordance with Group policies and directives for business ethics and conduct and has a dedicated anti-corruption program. However, in some of the countries where the company operates, corruption risks can be high and compliance failure could have a material adverse impact on our business, financial condition and brand.

This report has not been reviewed by Telefonaktiebolaget LM Ericsson’s auditors.

Date for next report: October 18, 2018

For further information, please contact:

Carl Mellander Senior Vice President, Chief Financial Officer Phone: +46 10 713 89 70

E-mail: investor.relations@ericsson.com or media.relations@ericsson.com

Helena Norrman, Senior Vice President, Chief Marketing and Communications Officer

Phone: +46 10 719 34 72

E-mail: investor.relations@ericsson.com or media.relations@ericsson.com

Telefonaktiebolaget LM Ericsson

Org. number: 556016-0680

Torshamnsgatan 21

SE-164 83 Stockholm

Phone: +46 10 719 00 00

www.ericsson.com

This report includes forward-looking statements, including statements reflecting management’s current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, including, in particular the following:

The words “believe,” “expect,” “foresee,” “anticipate,” “assume,” “intend,” “likely,” “projects,” “may,” “could,” “plan,” “estimate,” “forecast,” “will,” “should,” “would,” “predict,” “aim,” “ambition,” “seek,” “potential,” “target,” “might,” “continue,” or, in each case, their negative or variations, and similar words or expressions are used to identify forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.

We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Important factors that could affect whether and to what extent any of our forward-looking statements materialize include, but are not limited to, the factors described in the section “Risk Factors”, and in “Risk Factors” in the Annual Report 2017.

These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events, whether as a result of new information, future events or otherwise, except as required by applicable law or stock exchange regulation.