Shares of LM Ericsson Telephone plunged 5.04% in Tuesday's intraday trading session, as investors focused on the company's cautious outlook despite beating second-quarter earnings expectations. The Swedish telecommunications equipment maker reported earnings of 1.37 Swedish krona ($0.14) per share, surpassing analyst estimates of 1.10 krona, but fell short on revenue.

While Ericsson's Q2 adjusted gross margin improved to 48.0% from 43.9% year-over-year, the company warned of increased uncertainty ahead. CEO Borje Ekholm cited potential further tariff changes and broader macroeconomic concerns as key factors impacting the outlook. The company expects third-quarter sales growth for its crucial Networks segment to be below the 3-year average seasonality, reflecting higher Q2 IPR revenue from previously unlicensed periods.

Analysts from UBS and Kepler Cheuvreux noted that Ericsson's Q3 sales guidance implies a 5-10% miss compared to current consensus estimates. Additionally, UBS projected that full-year consensus EBIT estimates could decrease by a low- to mid-single digit percentage following the results. The cautious outlook and potential earnings revisions appear to have overshadowed Ericsson's Q2 performance, leading to the significant stock price drop.