Big Tech's earnings are solid, highlighting a trend where AI and advertising thrive amidst President Trump's tariffs, in contrast to consumer-centric firms like Apple. Companies like Alphabet, Amazon, Meta, and Microsoft report positive results and guidance, with Alphabet increasing dividends and authorizing stock buybacks. Conversely, Apple warns of a $900 million charge, reflecting ongoing uncertainty regarding tariffs. Analysts indicate that while Big Tech's cloud and AI sectors navigate these economic challenges well, Apple is striving to mitigate tariff impacts, underscoring the need for long-term clarity from Washington.
"[Management] noted limited direct impact from tariffs on the Q2 profit guide, driven by pre-buying inventory and limited [third-party] seller impact so far (sellers not yet raising prices)," BofA Securities analyst Justin Post wrote in an investor note following Amazon's earnings.
"There remains plenty of uncertainty on the tariff cost impact beyond the June [quarter], but we are assuming a 30% China tariff and 10% tariff for the [rest of the world], with Apple able to partially mitigate these tariffs, resulting in a 45.3% gross margin in the Sept [quarter]," Morgan Stanley's Erik Woodring wrote in an analyst note.
AI and advertising are dodging the impact of President Trump's tariffs, while consumer-focused companies like Apple take the hit.
Big Tech's cloud and AI giants are navigating the current economic environment with relative ease, while Apple is forced to pull as many levers as possible to avoid a damaging blow.
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