Ericsson’s Networks Defy AI Chip Squeeze and North America Slump in Q1 Earnings

Ericsson AB posted organic sales growth of 6% in the first quarter of 2026, even as reported revenue tumbled 10% to SEK 49.3 billion. Currency headwinds shaved SEK 7.8 billion off the top line. North America sales dropped. The Networks segment, though, pushed ahead with 7% organic growth to SEK 32.9 billion. That’s two-thirds of group sales right there.

Chief Executive Börje Ekholm didn’t mince words on costs. “We are facing increasing input costs, especially in semiconductors, caused in part by AI demand,” he said in the earnings statement, as reported by The Wall Street Journal. Those chips power everything from base stations to edge devices. AI servers gobble them up too. Prices climb. Ericsson counters with supplier talks, product swaps, efficiency drives.

Adjusted gross margin held at 48.1%, down just 0.4 points from last year. Networks managed 50.4%. Cloud Software and Services improved. But adjusted EBITA fell to SEK 5.6 billion, margin at 11.3%. Restructuring charges hit SEK 3.8 billion, mostly from 1,200 Sweden job cuts announced last year. Net income plunged 79% to SEK 887 million. Free cash flow before M&A surged to SEK 5.9 billion. Solid.

North America faltered after 2025’s tariff-fueled spending binge. Operators consolidated. Investments shifted. Latin America picked up slack. India and Japan boomed—strategic wins for Ericsson. Europe, Middle East, Africa grew too. Broader demand spreads. No longer U.S.-reliant.

And the RAN market? Flattish for 2026, per Dell’Oro Group data cited in earnings. Ericsson aims to outgrow it anyway. Mission-critical private networks. Enterprise private 5G. AI-native radios unveiled at Mobile World Congress. Those extend leads over Nokia, Huawei.

Shares dipped post-earnings. Investors eyed the profit miss—adjusted operating profit at SEK 5.2 billion versus 5.4 billion expected, per Reuters. Rival Nokia shares fell too. Telecom kit makers share pain. But Ericsson approved a SEK 15 billion buyback. Dividend hiked. Net cash at SEK 68.1 billion.

CFO Anders Gylden has details. Networks adjusted EBITDA margin: 13.3%. Rolling four-quarter gross margin stabilized near 50%. Supply chain resilience pays off. Investments from prior years buffer geopolitics, macro storms. Still, AI-driven semi shortages pinch. Q2 guidance: Networks sales track three-year seasonality. Margins 49-51%. Restructuring stays high.

Enterprise segment lost SEK 1.4 billion. Iconectiv divestiture lingers. One-offs hurt. But growth beckons in wireless WAN, private nets, network APIs. Operators upgrade for 6G prep. Ericsson positions there.

Competition sharpens. Nokia reports soon. Huawei locked out of West. Ericsson, Nokia split U.S. deals. China grows internally. India favors Ericsson. Japan too. Diversification works.

Analysts mixed. Seeking Alpha calls it a buy post-selloff. Low 8x EBITDA multiple undervalues software pivot, API potential. Others flag cyclical capex risks. Organic beat matters more.

So where next? Flattish RAN tests resolve. Cost offsets must deliver. North America rebound? Maybe mid-year. Enterprise turnaround key. Cash funds buybacks, R&D. Ericsson grinds through. Networks lead. Growth holds.