The Swedish telecoms equipment maker narrowly missed profit forecasts, with adjusted EBITA falling 20% year-on-year to SEK 5.6 billion.
North America, which drove a 20%+ surge in Q1 2025, declined sharply as prior-year pull-forward investment unwinds. CEO Ekholm blames rising semiconductor input costs, partly driven by AI demand.
Ericsson reported a sharp fall in profitability for the first quarter of 2026 on Thursday, as the North American market that propelled the Swedish telecoms equipment maker’s results a year ago shifted into reverse.
Adjusted earnings before interest, tax and amortisation, EBITA, Ericsson’s preferred measure of underlying profitability, fell 20% year-on-year to SEK 5.6 billion, with a margin of 11.3% against 12.6% in Q1 2025, slightly missing analyst expectations.
On a reported basis, which includes restructuring charges related to ongoing headcount reductions, EBITA fell 73% to SEK 1.8 billion.
Networks, Ericsson’s largest business segment at around 67% of group sales, saw revenue fall 8% on a reported basis to SEK 32.9 billion. The Americas region declined after several quarters of elevated investment by US telecoms operators that had boosted Ericsson’s results through 2025 unwound, compounded by operator consolidation effects in the market.
The Q1 2025 comparison was particularly demanding: a year ago the Americas had grown 26% year-on-year, with North America alone up 20%, driven by selective network investment from large US customers. The same operators reduced spending in the more recent quarter.
Adjusted gross margin narrowed modestly to 48.1% from 48.5% in Q1 2025, as cost pressure in the Networks segment, where margin edged down due to supply chain actions, was partly offset by an improved performance in Cloud Software and Services, where margins rose on delivery efficiency gains.
CEO Börje Ekholm was direct about the source of the cost pressure:
“We are facing increasing input costs, especially in semiconductors, caused in part by AI demand,” he said in a statement accompanying the results.
Ericsson, like other hardware-heavy technology companies, is competing for semiconductor supply with hyperscalers building AI infrastructure, pushing component prices higher.
The results also reflect the continued impact of Ericsson’s restructuring programme. The company announced plans to cut around 1,200 jobs in Sweden in 2025 as part of ongoing efforts to reduce its cost base, and elevated restructuring charges were already flagged as an expected headwind for 2026 following those announcements.
The company said it expects the global radio access network equipment market to remain broadly stable in 2026, citing data from research firm Dell’Oro Group, with growth anticipated in mission-critical communications and enterprise segments where Ericsson has been selectively investing.
Beyond North America, the regional picture was more encouraging. Sales grew in Europe, the Middle East and Africa, in South East Asia, Oceania and India, and in North East Asia, partially offsetting the Americas decline.
Cloud Software and Services, the segment Ekholm has been repositioning as a higher-margin, software-led growth engine, improved its margins on better delivery efficiency.
For the full year 2025, Ericsson’s adjusted EBITA margin reached 18.1% and net income was SEK 28.7 billion, reflecting a multi-year recovery from the nadir of 2024 when the company’s net income was just SEK 0.4 billion.
The Q1 2026 dip brings that margin expansion run to a temporary halt, though Ekholm sought to emphasise resilience: “We are not immune, but we are resilient.”
Stephan is the sports journalist for the Maple Grove Report.
