Ericsson profit misses estimates as AI drives chip costs higher

Ericsson’s first-quarter earnings showed how the AI boom is now reaching beyond chipmakers and cloud groups into the telecom supply chain. The Swedish network-equipment maker reported adjusted operating profit of 5.2 billion kronor, below the 5.4 billion kronor analysts expected, while sales came in at 49.3 billion kronor versus a 50.7 billion kronor forecast. Revenue also slipped from 55.0 billion kronor a year earlier, even as organic sales rose 6% year over year.

Chief executive Börje Ekholm said the company was seeing higher input costs, especially in semiconductors, because of artificial intelligence demand. That is the central tension in Ericsson’s results: AI is helping drive network modernization and heavier traffic loads, yet it is also making the chips and components inside telecom gear more expensive. The company is trying to ride that same cycle with AI-native radios announced at Mobile World Congress 2026, but the near-term effect is a tighter cost base.

Ericsson’s own materials showed a mixed but still cash-generative quarter. Adjusted EBITA was 5.6 billion kronor, reported EBITA was 1.8 billion kronor after 3.8 billion kronor of restructuring charges, and adjusted gross margin was 48.1%, compared with a reported gross margin of 47.2%. Free cash flow before mergers and acquisitions reached 5.9 billion kronor, and net cash stood at 68.1 billion kronor at the end of the period. The board also approved a share buyback program of up to 15 billion kronor, set to begin on April 23, 2026.

North America remained a critical pressure point. Ericsson said sales in the region were lower because of accelerated network investments in the prior-year period, tariff uncertainty, and a short-term reallocation of customer spend. That matters far beyond one geography: the United States is Ericsson’s biggest strategic market, and the company has staked much of its future on long-cycle carrier upgrades and enterprise network spending.

That exposure was deepened by Ericsson’s roughly $14 billion, five-year agreement with AT&T announced in December 2023, the largest deal in Ericsson’s history. AT&T said at the time that 70% of its wireless network traffic would flow across open-capable platforms by late 2026. For Ericsson, that makes U.S. buildouts both an opportunity and a risk, especially as the AI buildout reshapes component prices across the broader economy. The quarter did not signal a break in demand, but it did show that AI enthusiasm is already creating knock-on cost pressures for established suppliers well outside the semiconductor industry.