AI boom drives up costs, Ericsson misses forecasts

Ericsson reported first-quarter profit slightly below expectations as rising semiconductor costs, driven by surging demand for artificial intelligence, put pressure on margins.

The Swedish telecom equipment maker posted an adjusted operating profit of 5.2 billion kronor ($566 million), missing analyst forecasts of 5.4 billion kronor, according to market estimates, News.Az reports, citing Reuters.

Chief executive Börje Ekholm said the company is facing higher input costs, particularly for semiconductors, as global demand for AI infrastructure intensifies.

The surge in AI-related investment has strained chip supply chains, increasing prices for components used across telecom networks and digital infrastructure.

Ericsson reported quarterly sales of 49.3 billion kronor, below expectations of 50.7 billion kronor, reflecting weaker spending in key markets.

North America, one of Ericsson’s most important regions, saw a slowdown in telecom investment, adding further pressure to the company’s performance.

Ericsson remains one of the leading Western suppliers of telecom network equipment, competing closely with Nokia.

The company has been betting heavily on the US market, particularly after securing a major $14 billion contract with AT&T in 2023, which is expected to support long-term growth.

Despite strong demand linked to AI and next-generation networks, rising component costs and uneven telecom spending are creating short-term challenges for the industry.

Ericsson’s results highlight a broader trend: while AI is driving new opportunities, it is also increasing competition for critical hardware, squeezing margins for companies across the technology and telecom sectors.

News.Az 

By Aysel Mammadzada