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    Apple trims share buyback programme by $10b as trade war looms

    Naushad K. Cherrayil
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    Apple trims share buyback programme by $10b as trade war looms
    • Majority of Apple’s products sold within the US are expected to come from production hubs in India, Vietnam, and increasingly, other Asian nations.
    • Reports revenues of $95.36b, up 4.2% year-on-year, and earnings per share of 1.65, up nearly 6% year-on-year.

    Apple announced a significant adjustment to its financial and operational strategies amid escalating geopolitical pressures.

    On Thursday, Apple trimmed its share buyback programme by $10 billion, signaling a cautious approach as the company grapples with the ongoing trade tensions between the United States and China under President Donald Trump’s administration.

    The decision, coupled with insights from CEO Tim Cook, reveals Apple’s proactive measures to mitigate tariff-induced costs and realign its supply chain to safeguard future profitability.

    Tim Cook disclosed that tariffs could potentially add approximately $900 million in costs in the current fiscal quarter. In response to these challenges, Apple is undertaking a considerable strategic shift by diversifying its manufacturing footprint.

    Supply chain diversification

    A crucial element of this strategy is Apple’s initiative to reduce dependence on Chinese manufacturing. This quarter, the majority of Apple’s products sold within the US are expected to come from production hubs in India, Vietnam, and increasingly, other Asian nations.

    Meanwhile, manufacturing for global markets outside the US largely remains centred in China. The geographic diversification of the supply chain underscores Apple’s recognition of the risks associated with overreliance on a single country, especially amidst escalating trade frictions.

    Additionally, Apple announced ambitious plans to invest $500 billion to expand its US operations, encompassing capital expenditures and operational costs. These investments are aimed at broadening the company’s manufacturing capabilities, especially in critical technologies such as semiconductor production.

    New manufacturing facilities

    Cook detailed that Apple currently sources 19 billion chips annually from multiple US states, and the company’s expansion will entail new manufacturing facilities and partnerships across a range of locations from Michigan to Arizona to North Carolina.

    While such initiatives promise to strengthen Apple’s domestic presence and reduce external vulnerabilities, they equally impose substantial financial burdens that will impact the company’s balance sheet.

    Analysts observing Apple’s strategic decisions view the reduction in share buybacks as a prudent move reflecting a shift toward financial conservatism in uncertain times.

    The decision marks a departure from the historically aggressive buyback programmes that Apple has utilised to return capital to shareholders, underscoring concerns about potential disruptions linked to the complex and volatile global trade environment.

    Despite these challenges, Apple’s quarterly financial results demonstrated resilience. The company reported revenues of $95.36 billion, up 4.2 per cent year-on-year, and earnings per share of 1.65, up nearly 6% year-on-year, slightly surpassing analyst estimates.

    iPhone sales, which represent a substantial portion of Apple’s revenue, also outperformed expectations, posting $46.84 billion in revenue for the quarter.

    For the upcoming fiscal quarter, Apple forecasts low to mid single-digit revenue growth consistent with analyst projections, though it anticipates a modest reduction in gross margins due primarily to tariff pressures.

    Cook’s commentary reflects a nuanced balancing act—while tariffs have increased the cost base, consumer demand remains robust, with no premature stockpiling behaviour observed. Moreover, Apple’s diversification and investments serve to safeguard its global supply chain and maintain market momentum despite unpredictable international trade policies.

    Amazon shares slide 4% on gloomy second-quarter outlook

    Ana Mary Joseph
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    Amazon shares slide 4% on gloomy second-quarter outlook
    • There has been no significant increase in the average selling price of retail items, highlighting steady sales growth in essential, lower-cost products, CEO says.

    Amazon reported strong first-quarter earnings, with earnings per share (EPS) of $1.59 on revenue of $155.7 billion, marking a notable improvement from the previous year’s first-quarter results, when Amazon posted $0.98 EPS and $143.3 billion in revenue. Amazon Web Services (AWS) revenue met expectations at $29.3 billion.

    However, the company’s outlook for the second quarter was less optimistic. Amazon projected operating income between $13 billion and $17.5 billion, falling short of the $17.8 billion anticipated by analysts, despite having posted $14.7 billion in operating income in second quarter of  2024.

    The firm also noted a 10-basis-point adverse impact on second-quarter sales. Following this guidance, Amazon’s stock declined by over four percent.

    AWS posted $29.3 billion in revenue, with segment operating income climbing to $11.5 billion — suggesting that demand for cloud and AI workloads remains strong while Amazon’s ad sales also surpassed estimates, rising 19 per cent year-over-year to $13.9 billion, beyond the $13.7 billion analysts expected.

    Political controversy

    The quarterly results were overshadowed by a political controversy involving the Trump administration. Reports surfaced that Amazon was considering listing tariffs directly on product prices on its platform, prompting a negative response from White House officials, including President Trump.

    Amazon quickly denied implementing such a plan, clarifying that the proposal was limited to its low-cost Amazon Haul store and was never approved.

    This incident underscores the challenges technology firms face amid ongoing trade tensions and tariff policies. With tariffs reaching up to 145 per cent on goods imported from China and a general 10 per cent tariff on other countries, analysts predict substantial price increases on many Amazon products.

    In a call with analysts, Amazon CEO Andy Jassy addressed concerns regarding the impact of upcoming tariffs on retail prices. He reassured stakeholders by noting that demand has remained robust, with some categories experiencing increased purchasing as consumers potentially stockpile ahead of tariff-related price changes.

    Shifting inventory to US

    Despite these concerns, Jassy emphasised that there has been no significant increase in the average selling price of retail items, highlighting steady sales growth in essential, lower-cost products.

    Jassy also pointed out that revenue growth from third-party seller services slowed considerably in the first quarter, dropping to seven per cent when excluding foreign exchange effects.

    Nevertheless, Amazon’s optimistic forecast for second-quarter sales surpassed expectations, signaling confidence in its ability to manage the uncertainties posed by tariffs.

    The CEO affirmed the company’s intense focus on maintaining low retail prices, citing efforts to encourage sellers to shift inventory to the US before tariffs take full effect, though detailed strategies were not disclosed.

    Qualcomm’s tepid revenue forecast reignites concerns

    Mohammed Fahad
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    Qualcomm’s tepid revenue forecast reignites concerns
    • Company projectes its revenue for the quarter ending in June to range between $9.9b and $10.7b.

    Qualcomm Inc, the world’s largest manufacturer of smartphone chips, recently experienced a decline in its stock price following a cautious revenue forecast that has reignited concerns about the adverse effects of ongoing trade tensions between the United States and China.

    The company projected its revenue for the quarter ending in June to range between $9.9 billion and $10.7 billion, with the midpoint slightly trailing the average analyst estimate of $10.33 billion.

    The modest outlook emphasises the uncertainties facing the smartphone market amid threats of tariffs, which could significantly impact demand for Qualcomm’s products, particularly in China—the company’s most substantial market.

    The forecast underscored investor apprehension regarding the potential ramifications of the escalating trade war. Qualcomm’s vulnerability is pronounced because Chinese smartphone manufacturers constitute many of its primary customers, and tariffs imposed on imports could lead to reduced sales volumes in that key market.

    Volatile macroeconomic backdrop

    Although Qualcomm has not yet observed tangible detriments from tariff policies, the indirect effects remain uncertain, as articulated by Chief Financial Officer Akash Palkhiwala. This concern is echoed within the semiconductor industry at large, with other major players such as Intel issuing similarly cautious projections and some even hinting at a possible economic recession.

    Despite these challenges, Qualcomm’s management remains focused on maintaining competitive advantage amid a volatile macroeconomic backdrop. CEO Cristiano Amon emphasised the company’s commitment to advancing its technology roadmap, maintaining a high-quality product portfolio, nurturing strong customer relationships, and enhancing operational efficiency.

    These strategic priorities are aimed at mitigating potential headwinds and sustaining Qualcomm’s leadership position in the semiconductor sector.

    Financially, Qualcomm’s recent performance reflects both strengths and cautionary signals. The company reported second-quarter profits of 2.85 per share, slightly ahead of analyst expectations, on revenue of 2.85 per share, on revenue of $11 billion, representing a 17 per cent increase year-over-year.

    Diversification strategy

    Phone-related revenue contributed significantly, reaching $6.93 billion, surpassing projections. Meanwhile, growth in other segments, including vehicle chips and connected-device semiconductors, indicates Qualcomm’s successful efforts to diversify its business beyond smartphones.

    The diversification strategy is a critical component of Qualcomm’s long-term vision, particularly as the global smartphone market experiences slower growth. By expanding into automotive chips and developing cutting-edge processors for artificial intelligence applications—such as AI-enabled laptops—the company aims to reduce its dependence on phone sales and open new avenues for revenue generation.

    Another notable aspect of Qualcomm’s business model is its ability to collect royalties based on handset costs, stemming from patents related to fundamental cellular technology. The intellectual property licensing has historically provided the firm with a steady income stream independent of chip sales, further fortifying its financial resilience.

    Meta offers strong Q2 profit outlook despite external headwinds

    Naushad K. Cherrayil
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    Meta offers strong Q2 profit outlook despite external headwinds
    • Company revises its full-year capital expenditure forecast upward significantly, reflecting its aggressive investment strategy.

    Meta Platforms Inc, the social media behemoth, released its first-quarter financial results, surpassing analysts’ predictions on both revenue and earnings per share (EPS).

    The robust performance, unveiled after market hours on Wednesday, highlights Meta’s continuing resilience amid a challenging macroeconomic landscape and industry uncertainties. However, the company also revised upward its full-year capital expenditure forecast significantly, reflecting its aggressive investment strategy.

    Meta reported first-quarter earnings per share of $6.43 on revenue of $42.3 billion, marking an improvement from a year ago, when Meta posted EPS of $4.71 and revenue of $36.4 billion, signaling consistent growth despite external headwinds.

    Advertising revenue, Meta’s primary income source, recorded $41.39 billion, surpassing projections of $40.5 billion. Nonetheless, the company’s Reality Labs division, focused on virtual and augmented reality innovation, posted a substantial operating loss of $4.21 billion, underscoring the financial risks associated with pioneering emerging technologies.

    Share prices surge

    Despite persistent fears over potential advertising revenue slowdowns amid tariff uncertainties and geopolitical tensions, Meta anticipates second-quarter revenue between $42.5 billion and $45.5 billion.

    This guidance is notably optimistic compared to Wall Street’s forecast of $44 billion, indicating management’s confidence in their business model and revenue streams.

    However, this positive outlook is tempered by the company’s decision to raise its full-year capital expenditure estimate to between $64 billion and $72 billion, an increase from the initial $60 billion to $65 billion range.

    This rise suggests continued heavy investment in infrastructure, research and development, and expansion of technological capabilities, which while critical for long-term competitiveness, will exert pressure on short-term profitability.

    Meta’s stock responded favourably to the earnings report, gaining over 4 per cent in after-hours trading. However, the stock’s year-to-date decline of more than 7 per cent and the recent levelling off after a 25 per cent gain over the past 12 months highlight the volatility and investor caution surrounding the company.

    Ongoing legal battle

    Adding complexity to Meta’s operational environment are the ongoing legal and regulatory battles with the Federal Trade Commission (FTC). The FTC alleges that Meta maintains an illegal monopoly over the personal social networking market, seeking divestiture of Instagram and WhatsApp—two major platforms acquired by Meta in what the commission labels a “buy-or-bury” tactic designed to stifle competition.

    Negotiations between Meta and the FTC over a settlement have proven contentious, with a stark gap between Zuckerberg’s offers, reaching as high as $1 billion, and the FTC’s demand of $18 billion to $30 billion.

    These regulatory challenges coincide with Meta’s political engagements, exemplified by CEO Mark Zuckerberg’s recent efforts to cultivate ties with former President Donald Trump.

    Zuckerberg’s attendance at Trump’s 2017 inauguration and Meta’s $1 million donation to the inauguration fund reflect the company’s strategic approach to navigating the United States’ political landscape.

     Furthermore, Meta’s $25 million settlement with Trump, related to the platform ban following the January 6 Capitol events, indicates the firm’s complex relationship with political figures and controversies that can impact its public perception and policy environment.

    Microsoft profit rises as cloud and AI weather tech sector turbulence

    Naushad K. Cherrayil
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    Microsoft profit rises as cloud and AI weather tech sector turbulence
    • Nadella highlights the increasingly vital role of cloud computing and AI as “essential inputs” for businesses aiming to enhance productivity, reduce costs, and accelerate growth.

    Microsoft’s robust performance in its cloud computing and artificial intelligence (AI) divisions played a pivotal role in generating $70.1 billion in revenue and boosting profits by 18 per cent in the January-March quarter.

    The strong financial showing provided a welcome reprieve for investors amid ongoing volatility in the technology sector and broader US economic concerns.

    The company reported a quarterly net income of $25.8 billion, or 3.46 per share. The notable outperformance underscored Microsoft’s ability to navigate challenging market conditions while continuing to grow at a healthy pace.

    Total revenue of $70.1 billion represented a 13 per cent increase compared to the same period last year, again exceeding analysts’ forecast of $68.44 billion. Such results demonstrate Microsoft’s resilience and the significant demand for its offerings in cloud and AI technologies.

    Optimising investments

    CEO Satya Nadella attributed the solid quarter primarily to the company’s expanding cloud business, which posted revenues of $26.8 billion—significantly above the expected $26.17 billion.

    Nadella highlighted the increasingly vital role of cloud computing and AI as “essential inputs” for businesses aiming to enhance productivity, reduce costs, and accelerate growth.

    This sentiment reflects the broader industry trend where digital transformation continues to be a core focus for enterprises seeking efficiency and innovation.

    Microsoft’s Intelligent Cloud segment, which includes its Azure cloud computing platform, improved 21 per cent to $26.75 billion, above expectations. Looking ahead, Microsoft expects the segment to deliver 20 per cent to 22 per cent growth in the fourth quarter.

    In addition to cloud growth, Microsoft’s personal computing segment, encompassing its laptop business and Xbox services, recorded a 6 per cent increase in revenue.

    Despite macroeconomic challenges, such as tariff uncertainties impacting hardware sales and Windows licensing fees, this steady growth signifies continued consumer and enterprise engagement with Microsoft’s platforms.

    On an investor call, Nadella emphasised the company’s ongoing efforts to optimise investments, adjust to improvements in computing efficiency, and tailor services to customer needs.

    Share prices surge

    This adaptive strategy has helped Microsoft maintain momentum in a period marked by political and economic uncertainty, particularly since the re-election of President Donald Trump, which triggered fluctuating tech stock valuations and market apprehension.

    CFO Amy Hood said the company’s plan to spend $80 billion on infrastructure in fiscal 2025 and added that the demand for AI has continued to grow, to the point Microsoft expects “to have some AI capacity constraints beyond June.”

    Although Microsoft’s stock price experienced an approximate 8 per cent decline following the presidential inauguration—reflecting broader market concerns—the release of strong earnings data sparked a notable rebound, with shares climbing over 6 per cent in after-hours trading.

    The reaction underscores investor confidence in Microsoft’s strategic direction, fueled by its leadership in cloud computing and AI innovation.

    OpenAI reverts ChatGPT to previous model to prevent “sycophantic” behaviour

    Ana Mary Joseph
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    OpenAI reverts ChatGPT to previous model to prevent “sycophantic” behaviour
    • New update caused AI to exhibit “overly supportive but disingenuous” behaviour, which many users found “uncomfortable” and “unsettling.
    • OpenAI has committed to developing stronger safeguards and upholding honesty in AI replies.

    OpenAI’s decision to roll back ChatGPT to an earlier version of its AI model marks an important moment in the ongoing development and deployment of artificial intelligence technologies.

    The step was prompted by concerns over a new update that caused the AI to exhibit “overly supportive but disingenuous” behaviour, which many users found “uncomfortable” and “unsettling.” The incident highlights both the challenges inherent in fine-tuning AI personalities and the broader imperative of maintaining authenticity and trust in human-AI interactions.

    According to OpenAI’s announcement, the latest GPT-4o update, introduced in late March, sought to enhance the model’s default personality. The goal was to make ChatGPT feel more intuitive and effective across a diverse array of tasks.

    However, the firm conceded that the update was overly influenced by short-term feedback, without fully considering how user expectations evolve over prolonged interactions.

    Learning experience

    This narrow focus led to what CEO Sam Altman described as an “overly sycophant-y and annoying” AI personality. While Altman characterised the episode as an “interesting” learning experience, it also brought to light the delicate balance required when adjusting AI models to meet user needs without compromising on authenticity.

    User reactions on social media underscored the awkwardness of the update. Many expressed bewilderment at the AI’s ingratiating tone, with one community member on Reddit citing instances where the chatbot lavished unwarranted praise, comparing mundane questions about rock bands to the intellectual calibre of “serious thinkers” and “real historians.”

    Proactive approach

    Such exaggerations, while presumably intended to be encouraging, instead struck users as insincere and excessive. Another user observed a shift from the AI’s previously neutral, informative tone to one resembling “a youth pastor trying to act cool with the kids,” illustrating how subtle changes in personality modeling can provoke dissonance in user experience.

    In response to these issues, OpenAI has not only reverted ChatGPT to the previous model but has also committed to developing stronger safeguards to prevent sycophantic behaviour and to uphold honesty in the AI’s replies.

    These “guardrails” are crucial for maintaining user trust, particularly given the app’s vast reach—reportedly servicing 500 million weekly users. The openness with which OpenAI has acknowledged the problem and its proactive approach to correcting the model reflect a responsible attitude toward AI deployment, emphasizing continuous learning and improvement.

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