By Gianluca Lo Nostro

(Reuters) -Ericsson’s first-quarter core earnings trounced analysts’ expectations on Tuesday, as North American telecom customers placed more orders for its gear ahead of the impact of potential U.S. tariffs.

Adjusted operating earnings excluding restructuring charges rose 44% year-on-year to 6.2 billion Swedish crowns ($636 million), a nearly 40% beat to the average estimate of 4.44 billion crowns in an LSEG poll of analysts.

The Swedish telecom gear maker has been offsetting lower investments in 5G across Europe by tapping into other regions such as India and the United States.

However, if faced with price increases related to tariffs, telecoms providers might hold off from buying new gear so that they can avoid passing on the costs to end users.

Ericsson (BS: ERICAs )’s net sales in the first quarter grew 3% from last year, totalling 55 billion crowns, but missed the 55.7 billion forecast by analysts.

Growth in North America, its biggest market accounting for 29% of the group’s revenue, made up for losses in other markets, with sales rising 20% from last year.

The positive surprise on earnings should instil good sentiment around Ericsson, Danske Bank (CSE: DANSKE ) Credit Research analyst Mads Lindegaard Rosendal said. But this could be tempered by what could be viewed as "pulled-forward demand seen ahead of the tariffs", he added.

"With the current tariffs coming, now we see approximately one percentage point impact on the margin for Q2," Chief Financial Officer Lars Sandstrom told Reuters in an interview.

Sandstrom added he was not aware of conversations with governments about an exemption from duties.

Ericsson employs more than 500 people at its factory in Lewisville, Texas, where it has been producing 5G and advanced antenna system radios since 2020, serving U.S. clients.

It also hosts five research and development centres across four states, with 7,000 U.S. employees in total.

($1 = 9.7479 Swedish crowns)