Ericsson shares slump after revealing rising component cost increases.
Ericsson shares on Tuesday saw their worst reaction to earnings in nearly three years after the telecom-equipment maker revealed that rising component costs were eating away at margins - likely the huge surge in memory-chip prices.
Ericsson $(ERIC)$, in its earnings release and in a conference call with analysts, didn't specifically blame the rising chip prices that have propelled the share prices of Samsung Electronics (KR:005930), SK Hynix $(SKHY)$ and Micron Technology $(MU)$ higher.
But Deutsche Bank analyst Janardan Menon specifically asked about rising dynamic random-access memory prices - and the fact that Ericsson's Chinese equipment rivals can source memory chips from Chinese suppliers at lower costs.
"And there may be, as you say, a little bit lower cost inflation in the Chinese ecosystem. And as you know, we cannot rely on that ecosystem to export to a number of countries we're in. That forces us to look at the product design in a different way," said CEO Börje Ekholm, who last month announced he was retiring.
Ericsson reported a 7% decline in adjusted earnings before interest, tax and amortization to 6.88 billion Swedish crowns ($710 million), as revenue fell 6% to 52.69 billion crowns.
The earnings actually beat analyst estimates while revenue was 2% below consensus, according to UBS. But the analysts said Ericsson's outlook implies a low single-digit percentage downgrade to 2026 earnings-per-share estimates and low- to mid-single-digit percentage reductions to 2027.
Ericsson shares (SE:ERIC.B) fell 8% in Stockholm, its worst earnings-day performance since the 9% slide after it reported results in Oct. 2023, according to FactSet.
Ericsson said it will pursue "internal measures and pricing actions" to offset the component cost inflation.
-Steve Goldstein
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 14, 2026 06:19 ET (10:19 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.