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Ericsson stock drops after warning of higher memory chip costs
Ericsson said free cash flow before M&A fell to SEK 0.4 billion due to higher inventories ahead of scheduled third quarter deliveries.
Ericsson’s shares suffered their worst single-day move in nearly three years after the company warned that rising component costs, especially memory chips, will weigh on future margins, according to Yahoo Finance. The stock fell about 12% on July 14 to its lowest level since February.
The outlet linked the market reaction to forward-looking guidance rather than a deterioration in current execution. Ericsson’s Q2 2026 adjusted EPS came in at SEK 1.22, roughly in line with expectations, and adjusted gross margin rose to 48.4% year over year after normalization for a prior-period IPR licensing settlement.
Even so, reported net sales declined 6% to SEK 52.7 billion, missing the SEK 53.71 billion forecast. Organic sales excluding currency and one-offs were essentially flat, while investors focused on guidance and cash flow.
Yahoo Finance also said Ericsson forecast Q3 Networks adjusted gross margin in a 48% to 50% range, down slightly from Q2, citing a higher mix of lower-margin rollout projects and component inflation that it expects to develop gradually during the second half of 2026 and into 2027. The company projected free cash flow before M&A at SEK 0.4 billion, down from SEK 2.6 billion a year ago, driven by increased inventories built ahead of third quarter deliveries.