The Worst is Yet to Come
Wall Street has been eagerly awaiting the latest quarterly reports from Amazon and Apple, eager to assess the impact of President Trump’s trade war on these tech giants, often termed the ‘Magnificent Seven’. Despite the looming threat of tariffs, the immediate effect on these companies was less severe than anticipated. Nevertheless, future quarters may present significant challenges, illustrating that even the mightiest corporations cannot completely shield themselves from the repercussions of global trade disruptions.
The Highlights:
- Apple surpassed analyst expectations with a reported profit of $24.78 billion and sales totaling $95.36 billion.
- Amazon also outperformed forecasts, reporting an operating income of $18.4 billion and revenues of $155.7 billion.
In the recently concluded quarter, fears about tariffs were on the rise. However, Tim Cook, Apple’s CEO, noted no noticeable shift in consumer behavior regarding iPhone purchases despite potential price increases due to tariffs. Amazon’s CEO, Andy Jassy, observed “heightened buying” of certain products, potentially in anticipation of tariff-related price hikes.
The Future Looks Grimmer. Cook highlighted that, despite securing exemptions from tariffs on Chinese-made iPhones through direct discussions with President Trump, Apple might still face up to $900 million in costs in the upcoming quarter due to import duties—assuming no additional tariffs are introduced. (Notably, the term “tariff” was mentioned 27 times during Apple’s earnings call with analysts.) Jassy expressed uncertainty by stating, “None of us can predict exactly where tariffs will stabilize or when.” (The term “tariff” appeared 17 times in the Amazon call.)
Additional Challenges Ahead. Apple’s services division, traditionally a strong performer, faces new hurdles. A recent federal court decision requires Apple to cease collecting commissions from certain app sales, a ruling the company is currently appealing. Furthermore, Apple risks losing a substantial portion of the $20 billion annually paid by Google for default search engine status on the Safari browser, should the Department of Justice succeed in enforcing stringent antitrust measures against Google.
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