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Thanks for reading The Briefing, our nightly column where we break down the day’s news. If you like what you see, I encourage you to subscribe to our reporting here.
Greetings! What a buzzkill. After Wednesday’s robust results from Meta Platforms and Microsoft, sparking Thursday’s tech stock rally, we came down to earth with results from Apple and Amazon Thursday evening. The numbers were pretty much par for the course for two companies whose high-growth days are in the past—5% top-line growth for Apple and 9% for Amazon (details are here and here). But of course, the March quarter is ancient history. All anyone cares about is how President Donald Trump’s tariffs will affect both companies. Both Amazon CEO Andy Jassy and Apple CEO Tim Cook said it was difficult to be sure. That’s possibly the understatement of the year given Trump’s numerous twists and turns on tariffs. (For more on Jassy’s comments, see below.) Still, we got some details from Cook, who estimated that tariffs would lift Apple’s costs in the June quarter by $900 million, which is surprisingly low given that its quarterly costs of sales is around $50 billion. Don’t get excited: Cook made clear this number wasn’t indicative of future quarters. Apple has done what it can to reduce the short-term impact of tariffs. For instance, Cook said most of the iPhones sold in the U.S. in the current quarter will come from India-based factories, while most of the iPads and other Apple hardware will come from Vietnam. Whether it can keep that up over the long term is the multibillion-dollar question. Let’s not forget, though, that while tariffs are top of mind for investors right now, Apple faces some other big threats to its business. We got a reminder of one on Wednesday night, when a judge in Northern California absolutely excoriated the company’s response to an injunction requiring it to loosen some of the rules at its App Store, in a case brought by Epic Games. The judge accused Apple of deliberately ignoring the injunction and suggested it had engaged in a “cover-up,” even referring the company and a finance executive to prosecutors for investigation into criminal contempt. “We strongly disagree,” Cook said. The revenue impact of this ruling may be limited to a few hundred million dollars, but the judge’s criticisms aren’t exactly consistent with the company’s brand. The bigger worry may be what’s playing out in a Washington courthouse in the Justice Department’s antitrust case against Google. The court is hearing arguments about how Google’s operations should be overhauled to fix its illegal search monopoly. One potential remedy—ending Google's payments to phone makers and others to guarantee distribution for Google search—would cut off $20 billion in annual payments to Apple. That’s a big number, given that it likely goes almost totally to the bottom line. Cook declined to comment about that legal issue on the call. But when you consider that—along with legal and regulatory threats to the App Store, the impact of tariffs on sales and the fact that sales of the iPhone are already barely growing—the future seems extremely clouded for America’s richest company. Meanwhile, you might think Amazon—which sells a bunch of items from China—was also quite exposed to tariffs. But on Thursday night, Andy Jassy’s message was no, the company isn’t “uniquely susceptible” to tariffs. The Amazon CEO made the case that the sheer number of the merchants selling on its marketplace—more than 2 million—will help Amazon weather the tariff regime. Sellers that raise prices will be undercut by others that are less exposed to tariffs or that choose to eat the costs. “They’re not all going to take the same strategy if there ends up being higher tariffs,” Jassy said of outside sellers, which make up most of the company’s e-commerce sales. Exactly how it will play out, though, is unknown. Jassy said most merchants haven’t raised prices yet, and many merchants pulled imports forward to get ahead of tariffs. (He also noted that Amazon did the same with the goods it stocks and sells itself.) Assuming Trump doesn’t fully walk back tariffs on China and other countries, those tactics won’t work forever. And when merchants start hurting, so will Amazon, even if it does have advantages compared to some other retailers.—Theo Wayt • A lawyer for OpenAI has sent a letter to a group that opposes the ChatGPT maker’s conversion to a for-profit structure, asking for a disclosure of its funding sources, according to a copy of the letter viewed by The Information. • Roku is buying Frndly TV, a subscription video-streaming service that offers live cable TV channels including A&E, Hallmark and Lifetime, for $185 million in cash. Roku also reported earnings for the quarter. Details are here. • Microsoft is increasing the cost of its Xbox consoles, controllers and some games as tariffs imposed by President Trump drive up the cost of electronics manufacturing. Though it did not explicitly mention tariffs, Microsoft said in a statement that the cost increases, which amount to a more than 20% markup for its most popular Xbox models, are due to “market conditions and the rising cost of development.” • Reddit’s stock surged more than 20% in after-hours trading, as the company reported 61% increase in revenue to $392.4 million. • Airbnb reported 6% higher revenue for the first quarter but lower profits, thanks to higher stock compensation costs from increased head count. • Instacart increased revenue 9.4% in the first quarter, but net income fell 18%. AI Agenda by Stephanie Palazzolo separates hype from reality and explains how AI is transforming industries. 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