Ericsson (ERIC) Shares Decline Following Q1 Profit Shortfall Amid Currency Challenges

TLDR

• Ericsson reported Q1 2026 adjusted operating profit of SEK 5.2 billion, falling short of the SEK 5.4 billion analyst projection.
• Net sales decreased by 10% year-over-year to SEK 49.3 billion, impacted by SEK 7.8 billion in currency headwinds.
• Rising semiconductor costs, driven by AI demand, are putting pressure on profit margins.
• Sales in North America experienced a mid-single-digit percentage decline compared to a strong performance in the previous year.
• Despite the financial shortfall, the board authorized an increased dividend and a SEK 15 billion share buyback program.

(SeaPRwire) –   Ericsson’s first-quarter 2026 financial results, released on Friday, did not meet expectations, causing its Stockholm-listed shares to drop approximately 1.6% in early trading. In U.S. premarket trading, the stock saw a 3% decrease, reaching $11.79.

Telefonaktiebolaget LM Ericsson (publ), ERIC

The company’s adjusted operating profit was SEK 5.2 billion ($566 million), which was less than the SEK 5.4 billion anticipated by analysts. Net sales declined by 10% year-over-year to SEK 49.3 billion, falling below the estimated SEK 50.7 billion.

While the headline figures appear unfavorable, the underlying situation is more complex.

#ERICSSON Q1 PROFITS CRATER 79% AMID RESTRUCTURING AND AI COSTS

Ericsson (ERIC) reported a sharp 79% decline in Q1 2026 net income, falling to SEK 887 million from SEK 4.22 billion a year earlier.

The profit collapse was primarily driven by a massive SEK 3.8 billion…

— Markets Today (@marketsday) April 17, 2026

Ericsson actually achieved 6% organic sales growth across all three of its business segments. The appreciation of the Swedish krona was the primary factor negatively impacting reported revenue, with currency effects alone creating a SEK 7.8 billion headwind.

Earnings per share (EPS) stood at $0.0285, significantly missing the analyst forecast of $0.1152. CFO Lars Sandström attributed this discrepancy primarily to currency translation effects.

CEO Börje Ekholm highlighted another contributing factor: artificial intelligence (AI). The increasing demand for AI infrastructure is leading to higher semiconductor prices, thereby increasing the input costs for Ericsson’s equipment business. “We are working together with our suppliers to mitigate this,” Sandström stated. “But also, we will need to work with our customers to share the burden.”

North America Weakness Weighs

North America, Ericsson’s most significant market, presented a challenge during the quarter. Sales in the region decreased by a mid-single-digit percentage, contrasting with a strong Q1 2025 that benefited from pre-tariff purchases.

Sandström indicated that the underlying market conditions in the region remain robust. Ericsson holds a substantial position in the U.S. market, reinforced by its $14 billion AT&T deal finalized in 2023.

J.P. Morgan characterized the results as “soft to in-line” and suggested a potential impact on Nokia, whose shares fell 1.5% in Helsinki trading on Friday.

Buyback and Cash Flow Offer Some Comfort

Despite the missed estimates, Ericsson’s cash generation remained strong. Free cash flow before mergers and acquisitions (M&A) amounted to SEK 5.9 billion, and the company’s net cash position improved to SEK 68.1 billion.

The board’s approval of both a dividend increase and a SEK 15 billion share buyback program signals management’s confidence in the company’s balance sheet, even amidst current market volatility.

Adjusted gross margins were maintained at 48.1%. The Networks segment, Ericsson’s core business, reported 7% organic growth with an adjusted earnings before interest, taxes, and amortization (EBITA) margin of 19%.

For the second quarter of 2026, management projects Networks sales growth to align with the three-year average seasonality. Networks gross margins are anticipated to be between 49% and 51%. The company also noted the expectation of elevated restructuring charges throughout 2026.

Ericsson’s 52-week trading range is between $7.16 and $12.19. At $11.79, the stock was trading near the upper end of this range prior to Friday’s results announcement.