Ericssonnarrowly misses Q1 profit forecasts as North America unwind

At a glance:

• Adjusted EBITA fell 20% YoY to SEK 5.6 billion, margin down to 11.3% (vs 12.6% in Q1 2025); reported EBITA dropped 73% to SEK 1.8 billion.
• North America, which drove a 20% surge a year earlier, reversed into decline as prior‑year pull‑forward investment unwound, with semiconductor cost pressure linked to AI demand.
• Regional mix showed growth in Europe, MEA, SE Asia, Oceania and India, while Networks revenue fell 8% to SEK 32.9 billion and Cloud Software and Services margins improved.

Earnings performance and regional shifts

Ericsson’s adjusted EBITA fell 20% year‑on‑year to SEK 5.6 billion, taking the margin down to 11.3% from 12.6% a year earlier. On a reported basis the figure dropped 73% to SEK 1.8 billion after restructuring charges. The company’s Networks segment, which accounts for roughly 67% of sales, saw revenue slip 8% to SEK 32.9 billion.

Ericsson’s adjusted gross margin narrowed modestly to 48.1% from 48.5%, but Cloud Software and Services delivered a margin boost thanks to delivery‑efficiency gains. The full‑year 2025 adjusted EBITA margin had reached 18.1% and net income stood at SEK 28.7 billion, showing a multi‑year recovery from the near‑zero result in 2024.

Competitive pressures and cost structure

CEO Börje Ekholm attributed the cost pressure to rising semiconductor prices, which are being pushed higher by AI‑driven demand from hyperscalers. Ericsson is competing for chip supply with the same cloud providers that are building AI infrastructure, a dynamic that is squeezing margins across the sector. The company plans to cut roughly 1,200 jobs in Sweden this year as part of a broader cost‑reduction programme, and restructuring charges are expected to remain a headwind throughout 2026.

Dell’Oro Group research suggests the global radio‑access‑network equipment market will be broadly stable in 2026, with growth expected in mission‑critical communications and enterprise segments where Ericsson is selectively investing. The firm also noted that while the Americas are contracting, the broader regional mix remains supportive, offsetting the decline with gains elsewhere. These dynamics are shaping the company’s strategic focus on higher‑margin software and services.

Outlook and strategic focus

Ekholm emphasized the company’s resilience, stating ‘We are not immune, but we are resilient,’ while acknowledging that the Q1 2026 dip halts the recent margin‑expansion trajectory. The firm expects the North American slowdown to be tempered by continued investment in mission‑critical and enterprise use cases, and it will monitor semiconductor availability closely. Investors will watch how quickly the cost‑cutting measures translate into earnings recovery and whether the software‑led growth can sustain momentum.

The surge in AI workloads is reshaping the telecom equipment landscape, as carriers prioritize cloud‑native RAN solutions that can be monetized through software licences. Ericsson’s repositioning toward Cloud Software and Services is intended to capture that shift, but the transition hinges on securing stable chip supplies and maintaining competitive pricing. Analysts will be tracking quarterly updates for signs of margin stabilization and the impact of the restructuring on the bottom line.