Telefonaktiebolaget LM Ericsson's (ERIC) stock soared in premarket trading on Tuesday, surging 6.90% after the Swedish telecommunications equipment giant reported better-than-expected third-quarter earnings, driven by a resurgence in demand for 5G gear in the North American market.

The company reported adjusted core earnings of 7.33 billion Swedish crowns ($701.9 million), surpassing analysts' estimates of 5.75 billion crowns. Net sales declined by 4% year-over-year to 61.8 billion crowns ($5.92 billion), but still beat expectations of 61.6 billion crowns. Ericsson's adjusted gross margin expanded to 46.3% from 39.2% a year earlier, benefiting from a favorable market mix, commercial discipline, and cost reduction actions.

The star performer for Ericsson was the North American market, where sales surged 55% year-over-year to 20.4 billion crowns ($1.95 billion). This growth was fueled by the company's $14 billion contract with AT&T last year, as well as continued investments from other customers in the region. Ericsson's CEO, Börje Ekholm, stated, "We see signs that the overall market is stabilizing with North America, as an early adopter market, returning to growth."

However, the company faced challenges in other markets, with sales declining in double digits in regions outside of North America and Europe. India, which had been a bright spot the previous year, experienced a significant slowdown in spending, although Ericsson secured new contracts from Vodafone Idea and Bharti Airtel.

Looking ahead, Ericsson expects its Networks sales to stabilize year-over-year during the fourth quarter, driven by continued growth in North America. However, the company anticipates further near-term sales pressure in its Enterprise segment as it focuses on profitable segments. To support performance improvement, Ericsson launched a new private 5G enterprise product portfolio in Q3, which remains a key priority.