Stock Track | Ericsson Plummets 10.37% on Q2 Earnings Miss, Rising AI Chip Costs and Weak Margin Guidance

Stock Track07-14

Shares of LM Ericsson Telephone (ERIC) plummeted 10.37% intraday on Tuesday, following the release of its second-quarter 2026 financial results that fell short of market expectations and included a cautious outlook for profitability.

The telecommunications equipment maker reported a 6.1% year-over-year decline in net sales to SEK 52.69 billion, missing analyst estimates. Net income dropped 12% to SEK 4.1 billion, while free cash flow before mergers and acquisitions collapsed by 85%. The company also warned of increasing margin pressure in its core networks business.

Management cited multiple headwinds, most notably rising component costs driven by surging artificial-intelligence demand that is crowding out supply and pushing up prices for semiconductors, memory chips, and ASICs. Ericsson guided for a lower adjusted gross margin in its key networks segment for the third quarter, projecting a range of 48% to 50%, down from 50.4% in the second quarter. Analysts noted that slowing 5G investment in the North American market and the likelihood of consensus earnings downgrades further weighed on investor sentiment.

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