LM Ericsson Telephone (ERIC) saw its shares plummet 7.85% in recent trading following the release of its second-quarter 2026 results, which fell short of market expectations.

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 M&A collapsed by 85%.

The company cautioned about rising component costs, particularly for semiconductors, driven in part by surging artificial-intelligence demand, which is squeezing profitability. Furthermore, Ericsson guided for a lower adjusted gross margin in its key networks business for the third quarter, projecting a range of 48% to 50% compared to 50.4% in Q2, citing higher volumes of network rollout projects and ongoing cost pressures.