Big Tech Powers Through Earnings as Software Drives Stability
Tech’s top dogs might have been battered and bruised by current market headwinds, but they’re still standing strong. AppleAAPL and AmazonAMZN recently delivered stronger-than-expected quarterly results, but they’re casting wary glances at the gathering tariff storm on the horizon. Both tech behemoths are scrambling to adjust their global production networks away from their China-dependent supply chains while warning investors about potential headwinds in the coming quarters.
- Apple forecasts a $900M tariff impact this quarter, with CEO Tim Cook saying the firm is shifting the “majority” of iPhone production for US customers to India and sourcing “almost all” iPads, Macs, and wearables from Vietnam.
- Meanwhile, Amazon forecasts a lower-than-expected $13B in operating income for the coming quarter, with UBS analyst Stephen Ju warning that over 50% of products sold on Amazon’s platform will face some form of tariff-related price increase.
Software to the rescue: Both tech giants have a powerful buffer against hardware challenges — their high-margin software businesses. Apple’s Services division generated $26.6B (~28% of revenue) last quarter — narrowly missing expectations but offering much higher margins than device sales. Meanwhile, Amazon’s AWS cloud business brought in $29.27B (~19% of revenue), even as growth slowed. With manufacturing complications mounting, software strength is providing crucial stability as both navigate the choppy waters of international trade tensions.