Ericsson (ERIC) Stock Falls After Q1 Profit Misses Estimates on Currency Headwinds

TLDR

• Ericsson posted Q1 2026 adjusted operating profit of SEK 5.2 billion, below the SEK 5.4 billion analyst estimate
• Net sales fell 10% year-over-year to SEK 49.3 billion, hurt by currency headwinds of SEK 7.8 billion
• AI-driven demand is pushing up semiconductor costs, squeezing margins
• North America sales dropped by a mid-single-digit percentage versus a strong year-ago quarter
• The board approved a dividend increase and a SEK 15 billion buyback despite the miss

Ericsson reported Q1 2026 results on Friday that came in below expectations, sending its Stockholm-listed stock down around 1.6% in early trading. In U.S. premarket, the stock fell 3% to $11.79.

Telefonaktiebolaget LM Ericsson (publ), ERIC

Adjusted operating profit came in at SEK 5.2 billion ($566 million), short of the SEK 5.4 billion analysts had penciled in. Net sales dropped 10% year-over-year to SEK 49.3 billion, below the SEK 50.7 billion estimate.

The headline numbers look rough, but the story underneath is a bit more nuanced.

Ericsson actually delivered 6% organic sales growth across all three of its business segments. It was the strength of the Swedish krona that did most of the damage — currency effects alone created a SEK 7.8 billion headwind on reported revenue.

EPS came in at $0.0285, missing the $0.1152 analyst forecast by a wide margin. CFO Lars Sandström pointed to currency translation as the primary driver of that gap.

North America Weakness Weighs

North America, Ericsson’s most important market, was a drag in the quarter. Sales in the region fell by a mid-single-digit percentage, compared to a strong Q1 2025 that had been boosted by tariff-related front-loading.

Sandström said underlying conditions in the region remain solid. Ericsson holds a major position in the U.S. market following its $14 billion AT&T deal signed in 2023.

J.P. Morgan described the results as “soft to in-line” and flagged a potential read-across to Nokia, which fell 1.5% in Helsinki trading on Friday.

Buyback and Cash Flow Offer Some Comfort

Despite the miss, Ericsson’s cash generation held up well. Free cash flow before M&A came in at SEK 5.9 billion, and the net cash position strengthened to SEK 68.1 billion.

The board approved both a dividend increase and a SEK 15 billion share buyback program — a signal that management is comfortable with the balance sheet even as near-term conditions remain choppy.

Adjusted gross margins held at 48.1%. The Networks segment, Ericsson’s core business, delivered 7% organic growth with an adjusted EBITA margin of 19%.

For Q2 2026, management guided for Networks sales growth in line with three-year average seasonality. Networks gross margins are expected to land between 49% and 51%. The company also flagged elevated restructuring charges throughout 2026.

Ericsson’s 52-week range sits between $7.16 and $12.19. At $11.79, the stock was trading near the top of that range heading into Friday’s results.

The post Ericsson (ERIC) Stock Falls After Q1 Profit Misses Estimates on Currency Headwinds appeared first on CoinCentral.