Ericsson warns component inflation will squeeze network margins despite resilient Q2

Rising component costs will affect Ericsson’s core mobile networks business in the second half of the year,

The Swedish network equipment vendor reported Q2 sales of £41bn, down six per cent year-on-year, while organic sales slipped one per cent.

CEO Börje Ekholm said the company had already been forced to act to offset higher component prices and warned the impact would become more pronounced over the coming quarters.

“In Q2, we took action to mitigate component cost inflation, As the impact builds in the coming quarters, we will continue to pursue internal measures and pricing actions to help offset the effect.”

He also cautioned that network margins would come under additional pressure in the third quarter as rollout volumes increase.

His comments indicate supply chain inflation is returning as a commercial issue for telecoms infrastructure vendors, potentially increasing the cost of network 5G and AI deployments

Ericsson’s largest business, Mobile Networks, saw reported sales fall eight per cent to £2.55 billion, largely due to weaker intellectual property licensing income and adverse currency movements. Excluding licensing revenues, sales were broadly flat, while adjusted gross margin improved to 50.4 per cent as efficiency programmes offset some of the cost pressures.

Europe, the Middle East and Africa delivered two per cent organic growth, helped by continued 5G investment in parts of the Middle East and Africa, although network modernisation programmes in parts of Europe continued to wind down.

Ericsson said the global radio access network (RAN) market will remain broadly stable during 2026 and forecast stronger-than-normal seasonal growth in networks during the third quarter,