Apple and Amazon pocket profits of 42 billion, but fear blizzard of duties

The stakes for Apple are certainly high: several analysts are revising the company's profit outlook downwards (by 15%) due to escalating trade tensions, if there are no political breakthroughs. And they point out that even diverting the entire current production of iPhones to India is estimated to cover no more than half of US demand, which is complex because part of that production is destined for the domestic Indian market and because expanding or building new manufacturing operations takes time, with India's logistics and production networks considered to be far inferior to China's.

Apple meanwhile reported sales increases of 5 per cent to 95 billion in the quarter between January and March. Profits were 24.8 billion, themselves up about 5 per cent. Revenues from its flagship product, the iPhone, rose 2 per cent to 46.8 billion, helped by the debut of a simplified version of its latest model, the iPhone 16e. However, the Chinese market continued to contract for Apple, with a drop of about 2% to 16 billion for local brands, and the Chinese market remains the third-largest sales market after the US and Europe. The group's services business grew by a solid 12 per cent to EUR 26.6 billion.

Among other challenges unnerving observers are recession risks in the US, which could hurt Apple's purchases of the most expensive gadgets driving its profits. Annual payments of 10 billion from Google to be the default search engine on Apple's browser were rejected by antitrust and could therefore evaporate. A federal judge also found Apple in violation of a ruling on unfair practices in its App Store, referring the case, which stemmed from an appeal by Epic Games, for possible criminal investigation. Apple has filed an appeal. The company also continues to appear behind on the artificial intelligence frontier.

Amazon showed similar resilience today in its accounts combined with clouds on the horizon. It posted a 9% increase in sales to 155.7 billion. Profits were 17.1 billion. Jassy indicated that so far, the average prices of products sold on its e-commerce platform have not changed significantly, nor has demand decreased. However, shocks have surfaced, such as 'concentrated purchases in certain categories, which could indicate stockpiling prior to the impact of duties'.

Other businesses showed strength without shining too brightly. The Amazon Web Services division, the king of cloud computing and a pillar of profitability, grew 17% to 29.3 billion, but still fell slightly short of forecasts. Advertising revenue rose 18%, better than expected.

Looking at the current quarter, the group anticipated revenues between 159 billion and 164 billion and operating profits between 13 billion and 17.5 billion, ranges considered conservative because, at the lower end, they disappoint previous analysts' estimates. As much as 60 per cent of Amazon's e-commerce comes from external sellers, third parties who rely on products often made in China and who to date seem to have taken on substantial duty costs so as not to be penalised by Amazon wanting to avoid erosion of its business. But as duties increase, such pressures on third parties may become more and more controversial. Amazon has also indicated that it is prepared for multiple scenarios on the tariff front and has stockpiled products to be able to handle their mpact. Future budget nuers will become a test of this ability closely watched by investors.

The Amazon and Apple results join the already released results of Microsoft and Meta, which reported financial statements considered more positive by Wall Street. Taken together, the four Big Tech companies still showed how resilient their businesses are in an era fraught with unknowns. These unknowns, however, have not vanished and may even get worse.