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(Sharecast News) - Shares in Ericsson fell sharply on Tuesday, after the Swedish telecoms equipment specialist posted below forecast quarterly sales and flagged rising cost inflation.
Adjusted earnings before interest and tax fell to 6.52bn Swedish crowns (500m) in the second quarter, down 7% but ahead of analyst forecasts for SEK6.42bn. However, net revenues missed expectations for SEK53.6bn, falling 6% to SEK52.7bn. Organic sales dipped 1%.
Outgoing chief executive Borje Ekholm said the results "underscore the strength of our portfolio and disciplined execution", including a 2-percentage point rise in the adjusted gross margin, to 48%. But he acknowledged that costs were building.
He said: "In the second-quarter, 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 hep offset the effect. We also expect some pressure on networks adjusted gross margin in third quarter due to higher volumes or network rollout projects."
The rapid rollout of artificial intelligence has seen component costs spike. Chief financial officer Lars Sandstrom told Reuters: "The whole AI build out is putting quite the pressure on the whole industry, including us." Apart from memory prices, it was also affecting the custom chips Ericsson uses in building telecom infrastructure, he added.
Ericsson announced last month that Ekholm, 63, who has held the top job since 2017, would step down in September. He is being replaced by current executive vice president Per Narvinger.
As at 1130 BST, the Stockholm-listed stock had shed 8%.
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