The rising costs of AI are beginning to have a visible impact on Ericsson’s results. The Swedish network equipment supplier reported first-quarter profits that fell short of analysts’ expectations, with more expensive chips playing a major role.
Global demand for AI solutions is driving up semiconductor prices. According to CEO Börje Ekholm, this directly translates into higher procurement costs. Suppliers are passing on these increases, putting pressure on margins.
Ericsson is trying to limit that impact by collaborating more closely with suppliers. CFO Lars Sandström also indicates that customers will have to absorb part of the additional costs. This shifts some of the financial pressure toward the entire supply chain.
North American market shows a dip after a strong period
In addition to rising costs, weaker demand in North America is also contributing to the disappointing figures. In that region, revenue declined slightly compared to a year earlier, when telecom companies were actually making additional investments. According to Sandström, that earlier growth was partly temporary and influenced by external factors such as trade measures, while underlying demand remains stable.
Ericsson remains strongly focused on the U.S. market nonetheless. The company previously secured a major deal there with AT&T, which should help offset disappointing investments in other regions. At the same time, the figures show that growth is not a given in the current climate, Reuters notes.
Strategy focused on resilience and cost control
Ekholm emphasizes that Ericsson has deliberately focused on strengthening its foundation in recent years. Growth in underlying revenue and a stable cash flow should demonstrate that this approach works, even in a turbulent market.
A key part of that strategy is diversifying and strengthening the supply chain. This allows the company to continue delivering despite geopolitical tensions and economic uncertainty. At the same time, Ekholm acknowledges that costs are rising within that very chain, partly due to the sustained demand for AI-related components.
To mitigate this pressure, Ericsson is focusing on efficiency improvements and alternatives in component usage. Looking ahead, the company expects little growth in the market for radio access networks, but it anticipates outperforming the market itself, thanks in part to its position in mission-critical networks and enterprise solutions.