Soaring inflation, a chip shortage, and Russia's invasion of Ukraine led to higher costs resulting in a lower gross margin of 42.1% from 43.4%.
Networks sales grew organically by 6% in Q2, underpinned by market share gains. The gross margin was 45.1%, down from 47.9% a year ago, impacted by lower IPR revenues, increased component and logistics costs, and proactive investments in supply chain resilience.
"IPR licensing revenues were affected by several expiring patent license agreements pending renewal and by 5G license negotiations in the quarter. We are confident in our strong 5G position and leading patent portfolio, positioning us well to conclude pending and future license renewals," commented Börje Ekholm, President & CEO of Ericsson.
With current contracts, revenues from IPR are estimated to be SEK1 billion – SEK1.5 billion in Q3.
Ericsson's Digital Services sales also grew organically by 2% Y/Y with strong growth in the cloud native 5G core.
"We continue to invest in enhancing and expanding our offerings, and we increased R&D in the quarter primarily for Cloud RAN and acceleration of the next-generation Ericsson Silicon (ASICs)," Ekholm added.
Price Action: ERIC shares are down 10.78% at $6.68 during the market session on the last check Thursday.
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