By Dominic Chopping

STOCKHOLM--Ericsson expects networks growth despite reporting a sales drop in North America in the first quarter and warning that the cost of components is rising.

The Swedish telecommunications-equipment company said Friday that its key networks business posted organic sales growth of 7% in the quarter, when lower sales in North America were offset by growth in most other regions.

The company continues to expect a flattish networks market this year, but it said it is confident in its ability to outpace the sector.

The networks unit registered sales growth across Europe, the Middle East and Africa, driven by network modernization as well as 5G launches and rollouts. It also saw higher deliveries in India and Japan, while North America sales dropped following strong network investments and some short-term reallocation of customer spend in the region last year.

It reported an adjusted gross margin in the networks unit of 50.4%, in line with its guided 49% to 51% range, and said the margin is expected to land within a 49% to 51% range in the second quarter.

Second-quarter sales growth at the unit is expected to be broadly similar to three-year average seasonality of 4% growth, it added.

However, the company continued to point to increased uncertainty surrounding the outlook and in broader macroeconomic and geopolitical environment.

Chief Executive Borje Ekholm said the company's previous investments in building a strong and diversified supply chain have helped it deliver consistently for customers through geopolitical and macroeconomic uncertainties, but cautioned that component prices were rising.

"We are facing increasing input costs, especially in semiconductors, caused in part by AI demand. Our ambition is to offset these challenges, by working closely with customers and suppliers, and through product substitution and efficiency actions."

The company reported first-quarter earnings before interest and taxes of 1.44 billion Swedish kronor ($156.7 million), down from 5.93 billion kronor a year earlier, as currency headwinds and restructuring charges from previously announced job cuts in Sweden weighed.

Sales fell 10% to 49.33 billion kronor, versus the 50.92 billion kronor FactSet estimate, while the group's gross margin fell to 47.2% from 48.2%.

Ericsson said late Thursday that from next week it would start a 15 billion kronor share buyback program that was proposed earlier this year.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

April 17, 2026 02:17 ET (06:17 GMT)

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