Ericsson: 2Q26 Model Update: Surging component costs a key concern. Market not convinced that co. can offset through contract renegotiation and cost cutting.

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Ericsson: 2Q26 Model Update: Surging component costs a key concern. Market not convinced that co. can offset through contract renegotiation and cost cutting.

J P M O R G A N Europe Equity Research

15 July 2026

Ericsson

2Q26 Model Update: Surging component costs a key Neutral

concern. Market not convinced that co. can offset

ERICb.ST, ERICB SS

through contract renegotiation and cost cutting. Price (14 Jul 26):Skr99.56

Price Target (Jun-27):Skr102.00

• Main market concern is whether the company can renegotiate contracts Neutral

quickly enough or if other cost measures will be enough to offset the

ERIC, ERIC US

changes in input costs: While the weaker gross margin guidance for Networks Price (14 Jul 26):$10.14

in Q3 is a function of the new project rollout costs, Ericsson has flagged input

Price Target (Jun-27):$11.40

costs as gradually more negative in H2 and in the future i.e. FY27. The

company is working on mitigating costs both internally (product substitution,

supply chain actions) and externally (customer discussions to renegotiate European Tech Hardware &

contracts). On the positive side, Ericsson has indicated that on an organic basis Payments

(based on current perimeter and FX) the group opex in FY25 is estimated at Sandeep Deshpande AC

SEK 78bn (vs SEK 81.5bn reported in FY25) and the new IPR deal signed (44-20) 7134-5276

should also be accretive to the group margins (~SEK 500m of additional IPR sandeep.s.deshpande@jpmorgan.com

revenue that should see 90%+ flow through to the bottom line). Additionally, Craig A McDowell

FX should provide a tailwind in the coming quarters. (44-20) 7742-4576

craig.mcdowell@jpmorgan.com

• Changes to estimates. We are adjusting our estimates following the Anthony Girard

company’s 2Q26 print and outlook.