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Big Tech Earnings Defy Fears of ‘Worst-Case Scenario’ for Stocks

Isaac LaneSunday, May 4, 2025 9:17 am ET

10min read

The tech sector’s Q1 2025 earnings season has delivered a resounding rebuttal to concerns that rising trade tensions, AI spending overhangs, and macroeconomic slowdowns would trigger a “worst-case scenario” for Big Tech stocks. Despite headwinds from U.S.-China trade policies, delays in AI product launches, and uneven capex trends, apple, Meta, Microsoft, Google, and Amazon all reported robust revenue growth, with their shares broadly rising in after-hours trading. The results highlight how these giants are navigating geopolitical and economic uncertainty through strategic investments in AI, supply chain diversification, and disciplined capital allocation.

The AI Dividend

At the heart of their resilience is the tech giants’ relentless pursuit of AI-driven innovation. While AI delays at Apple (notably a postponed 2025 launch for Siri upgrades) sparked short-term concerns, the broader narrative is one of accelerating adoption. Meta’s standalone AI app now boasts 1 billion monthly users, up from 700 million in early 2025, while Google’s AI-powered search features attract 1.5 billion monthly users. Microsoft and Amazon, meanwhile, are capitalizing on enterprise demand for cloud-based AI tools. AWS’s revenue surged 17% year-over-year to $29.3 billion, with CEO Andy Jassy predicting it could become a “multihundred-billion-dollar business” as companies race to integrate AI into workflows.

This AI-driven growth is reshaping capital expenditure (capex) priorities. shows that while Microsoft’s Q1 capex dipped slightly (to $21.4 billion from $22.5 billion in Q4 2024), it reaffirmed a $85+ billion fiscal year capex target to expand cloud infrastructure. Google’s capex jumped 43% year-over-year to $17.2 billion, and Meta’s full-year capex forecast rose to $64–72 billion, up from $65 billion, as both companies double down on AI data centers.

Navigating Tariff Storms

The sector’s agility in mitigating U.S.-China trade tensions is equally striking. The Biden administration’s 145% tariff on Chinese imports—a holdover from the Trump era—has forced Big Tech to reengineer supply chains. Apple now sources 50% of U.S.-sold iPhones from India, with Vietnam handling other products, while Amazon shifted $4 billion to expand rural delivery networks and reduce reliance on Chinese manufacturing. Even Google’s ad business, which faces “slight headwinds” from tariff-driven inflation in Asia-Pacific markets, managed an 8.5% revenue rise to $66.9 billion.

The financial impact of tariffs is tangible but manageable. Apple projects a $900 million Q2 cost hit, while Meta noted tariff-related hardware export costs contributed to its capex increase. Yet none of the companies signaled a slowdown in AI spending or market share erosion. As Amazon CEO Andy Jassy put it: “We emerge from uncertain eras with more market share.”

Stock Performance and Strategic Contrasts

While all companies reported strong fundamentals, their stock reactions revealed strategic divergences.

Microsoft saw its shares jump 7.6% after Q3 revenue hit $70.2 billion, with CEO Satya Nadella emphasizing disciplined spending: “Cloud and AI are essential inputs for every business.”
Meta rose 4.2% on its 15% revenue surge, driven by AI’s ad revenue lift, even as it warned of ongoing trade-related costs.
Google gained 1.7% despite antitrust litigation risks, buoyed by ad resilience and AI’s 1.5 billion monthly users.
Apple fell 4% initially due to AI delays and tariff costs, but its long-term AI roadmap and India supply chain pivot suggest patience may pay off.

Amazon’s shares dipped 2% despite a 9% revenue rise, reflecting investor concerns over its $24 billion capex surge and the risks of over-investing in infrastructure.

Conclusion: Betting on Tech’s Adaptive Edge

The Q1 results underscore that Big Tech’s dual focus on innovation and operational flexibility has positioned it to weather macro and geopolitical headwinds. While AI delays and trade costs create near-term noise, the sector’s ability to scale AI adoption (evident in Meta’s billion-user milestones and AWS’s 17% revenue growth) and restructure supply chains (Apple’s India shift, Amazon’s rural expansion) suggests its dominance remains intact.

Crucially, the data reveals a sector-wide commitment to AI as an existential imperative. Even Microsoft, which trimmed Q1 capex, reaffirmed its $85 billion fiscal year target—a figure that still represents a 12% annual capex increase. Meanwhile, the $64–72 billion capex range for Meta and Google’s $75 billion annual target highlight an arms race to build AI infrastructure that will likely pay dividends in the next 18–24 months.

For investors, the message is clear: Big Tech’s earnings resilience and strategic bets on AI and supply chain diversification make it a high-conviction sector despite macro challenges. While short-term volatility remains, the companies are proving that the “worst-case scenario” is one they can adapt to—and even profit from.

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