Ericsson Faces Profit Decline Amid Rising AI Costs

Ericsson, the Swedish telecommunications giant, reported disappointing first-quarter earnings on April 17, 2026, with profits falling significantly short of market expectations. The company recorded adjusted earnings before interest, taxes, and amortization of 5.6 billion kronor, a 20 percent decline from the previous year, and below the 5.8 billion kronor average forecast by analysts. Net sales also dropped 10 percent year-on-year to 49.3 billion kronor ($5.4 billion), with net income plummeting 79 percent to 887 million kronor. The decline was attributed to escalating semiconductor costs driven by rising demand for artificial intelligence (AI) solutions, alongside negative currency impacts and restructuring costs.

Ericsson Misses Quarterly Profit Targets Amid High Chip Costs

The surge in AI-related demand has significantly increased semiconductor prices, directly affecting Ericsson's procurement costs. CEO Börje Ekholm noted that suppliers are passing these increased costs onto Ericsson, which is consequently putting pressure on the company's profit margins. CFO Lars Sandström indicated that customers may also need to absorb some of these additional costs, thereby shifting financial pressure throughout the supply chain. This situation is compounded by a decline in demand in North America, where revenue has decreased compared to a previous period of heightened investment.

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In response to these challenges, Ericsson is implementing efficiency measures and collaborating closely with suppliers to mitigate the impact of rising costs. The company has also initiated a 15 billion-kronor share buyback program, marking its first-ever buyback initiative aimed at returning value to shareholders. Despite the earnings miss, Ericsson remains focused on the U.S. market, highlighted by a significant $14 billion wireless network modernization contract with AT&T. Ekholm emphasized the importance of strengthening the company's foundation through diversification and resilience in its supply chain, which is crucial in navigating geopolitical and economic uncertainties.

Ericsson Misses Quarterly Profit Targets Amid High Chip Costs

Critics have pointed out that the rising costs associated with AI could hinder Ericsson's competitiveness in the global market. The company has acknowledged that the market for radio access networks is expected to remain flat, but it anticipates outperforming the overall market due to its strong position in mission-critical networks and enterprise solutions.

AI is driving up costs and putting pressure on Ericsson’s profits

• “We are facing increasing input costs, especially in semiconductors,” — Börje Ekholm, CEO

Ericsson Misses Quarterly Profit Targets Amid High Chip Costs

• “Our ambition is to offset these challenges, by working closely with customers and suppliers, and through product substitution and efficiency actions,” — Börje Ekholm, CEO

Ericsson Misses Quarterly Profit Targets Amid High Chip Costs

While Ericsson's reports indicate a significant downturn in profits and revenue, some analysts suggest that the company's strategic focus on the U.S. market and its initiatives to strengthen supply chains may provide a buffer against these challenges. However, the extent to which these strategies will effectively counterbalance rising costs remains uncertain.

AI is driving up costs and putting pressure on Ericsson’s profits