Ericsson shares have dropped 13.8% over the past three months, prompting investors to assess whether this represents a buying opportunity. The Swedish telecom equipment maker faces headwinds from cautious carrier capital spending and uneven demand across regions. Second-quarter sales declined 6% year-over-year to SEK 52.7 billion, with organic sales falling 1%. Lower intellectual property licensing revenues contributed to the decline following a one-off benefit in the prior year. Despite revenue pressures, Ericsson maintained profitability through cost discipline. Adjusted gross margin improved to 48.4% from 48.0% a year earlier, supported by operational execution and stronger performance in its Mobile Networks business. The company continues investing in 5G infrastructure, network slicing, and AI-driven connectivity solutions. However, competitive pricing and measured carrier spending on network deployments may constrain near-term growth as operators focus on returns from existing 5G investments.

Ericsson's shares plunged 12% on 14 January after the company warned that rising memory chip costs will pressure future margins. The telecom equipment maker now competes with AI data centres for DRAM chips, as three suppliers — SK Hynix, Samsung, and Micron — control over 95% of global production. Second-quarter results met expectations, with adjusted earnings per share of SEK 1.22 and gross margin rising to 48.4%. However, free cash flow fell to SEK 0.4 billion from SEK 2.6 billion year-on-year due to inventory buildup. Management forecast third-quarter gross margins of 48–50%, down from second-quarter levels, citing component inflation through 2026 and into 2027. Ericsson now trades at 14.45 times forward earnings. Jefferies maintained a Hold rating with a SEK 98 target price.