Analyst(s): Alex Smith
Publication Date: March 21, 2025
Technology leaders are trying to navigate a fluid tariff environment. Manufacturers are busy diversifying their supply chains to ensure any potential impacts can be circumnavigated. Financial analysts were focused on how leaders were responding to the situation in recent earnings calls and looking for any signs of impact on customer demand or supply costs.
What is Covered in this Article:
- A number of companies across the tech landscape announced earnings in the past few weeks. This includes Best Buy and Ingram Micro, which represent good bellwethers for consumer tech and B2B tech spending, respectively, particularly in the hardware device space.
- They join other technology companies that are working to mitigate any potential impact and demonstrate their contingency plans to the market. Vendors such as Cisco, Dell, Hewlett Packard Enterprise, and NetApp recently talked about their diversified supply chains, which will help to manage against potential rising costs.
- In a month when additional tariffs were announced, these companies were put in positions to share their view on how their businesses would be impacted. The word ‘tariff’ was mentioned 86 times across the six companies’ earnings (including Q&A), highlighting investors’ focus.
- Most companies uniformly highlight that any cost rises that cannot be mitigated will be passed on to customers. These comments fuel concerns about continued inflation.
- Companies involved in large data center rollouts as well as those looking to capitalize on the PC refresh cycle, will be monitoring this tariff situation closely.
The News: A number of companies recently found themselves in the unfortunate position of having an earnings call in a week in which a new round of tariffs was announced. They joined a wide net of CEOs and CFOs who, in addition to covering the mechanics of their respective businesses on these calls, now have to attempt to share their views on a tariff landscape that is changing by the day. Industry leaders have, by and large, landed on the term ‘fluid’ to describe the situation. The reality is that these leaders are just as perplexed about how their businesses will be impacted as everyone else is. Some industries, clearly, are more affected than others.
Tech Leaders Navigate Fluid Tariff Environment
Analyst Take: CEOs Attempt to Predict the Tariff Impacts
The US-imposed tariffs on Mexico, China, and Canada were not selected at random—they are the three largest importers (value-wise) of the United States overall. Their import share is even higher in product areas where the US has large trade deficits, such as crude petroleum, cars, computers, and phones (based on 2023 data, according to the Census Bureau and The Observatory of Economic Complexity).
Best Buy and Ingram Micro were two companies that recently had earnings announcements, and both serve as good microcosms of how certain corners of the technology and consumer electronics sectors could be impacted. As was highlighted in the Best Buy call, China and Mexico remain the Number 1 and 2 sources for products they sell, respectively (even though they do not directly import much inventory). Naturally, a lot of interest from investors centered around the impact of tariffs: it was mentioned 26 times in the Best Buy call and 11 times in the Ingram Micro call. Other technology companies that recently announced earnings that could also feel the impact of looming tariffs include Cisco, Dell, Hewlett Packard Enterprise, and NetApp. In Hewlett Packard Enterprise’s (HPE) call, ‘tariffs’ was mentioned 23 times; in Cisco’s 16 times; in NetApp’s only 6; in Dell’s only 4. But collectively, there are some useful insights that show how hardware vendors and technology resellers are thinking about this topic.
Some clear points were made with regard to managing profitability. HPE, which was the latest of the six companies to report earnings, had included tariff impact in its guide to the investor community. It expects its operating margin in its server business in the second quarter to be at its lowest for the year (in single digits) due to both tariffs directly and the corrective actions being taken to mitigate future impacts. Of all the companies reporting (that are covered in this article), it was most implicit in attributing a headwind of $0.07 earnings per share to tariffs.
The general indication, ultimately, is that whatever cost increases that would land with the company would be passed to the buyer. Statements to this effect from various CEO leaders, have rippled through news cycles with the underlying fear that rising prices would make inflation rear its ugly head again.
But to their credit, many companies are trying to avoid the outcome of raising prices, as HPE has already highlighted. Both Dell and Cisco talked about their world-class supply chains to help limit the impact. Cisco was very implicit in its actions here, including both the 25% Mexico tariffs and the 20% China tariffs in its planning and guidance. It believes that actions that it has already taken in its supply chain will reduce its exposure by around 80%. Likewise, NetApp has reduced its dependency on China to an “immaterial amount.”
Meanwhile, Best Buy and Ingram Micro have a different vantage point, given they are sellers of technology, not makers. Their ability to react is less, and they are reliant on their partnership strategies and selling tactics. Best Buy pointed to promotional activities as one means to try and offset it. Ingram Micro, meanwhile, highlighted some potential opportunities that were being seen in its financing business as a way to help customers.
Business leaders have mostly been less forthcoming on the potential impact on the demand side of the equation. Dell, for example, is expecting around 8% growth in its fiscal 2026 due to AI-driven data center projects and a broader PC refresh cycle. Dell executives, however, were coy about the specific tariff implications on demand. Overall, there remains optimism in technology about the specific interests in AI and digital transformation, despite some of the macroeconomic conditions. It is also worth highlighting that many of these companies have significant international businesses. At the same time, the US is the largest market for all three, so policies impacting domestic buying will have a somewhat muted impact. Only Best Buy, which generates the vast majority of its sales in the US, directly correlated tariffs with a negative impact on its sales to the degree of 1%. However, this was before the additional 10% tariff levied on China, and also reflects consumer spending rather than business.
Uncertainty Is the New Operating Norm
Many leaders are quick to highlight that they have seasoned supply chain teams and have been through similar cycles before. But a few would have navigated such widespread tariffs – all of us are in uncharted territory. Following the pandemic, as well as the last ‘trade war’ with China, many technology companies shifted supply chains to Mexico. NetApp, for example, has a location in Mexico that it builds products from. In fact, Mexico overall surpassed China as the largest importer of goods to the US in the last few years. Unfortunately, that mitigation strategy has not necessarily created a favorable situation in this current climate. However, most vendors have learned from previous years that a dynamic and flexible supply chain is critical.
Although it was generally expected that the current US administration would levy tariffs, the full scope and scale of them was hard to predict. For example, in a recent Futurum survey of over 700 technology partners, only 23% cited ‘supply chain challenges’ as one of the top three challenges to face in 2025 (ranking as the seventh biggest challenge to face out of ten given options).
Even following the latest tariff announcements, the situation remains ‘fluid.’ Delays have already been granted for the automobile sector less than 48 hours after coming into effect. Following that, another round of delays was granted for goods covered within the United States-Mexico-Canada Agreement (USMCA). This follows strong lobbying from major US car manufacturers as well as others. It is likely that other major retailers and technology companies will be making similar pleas to the administration. Best Buy executives, for example, cited the importance of working with industry partners such as the National Retail Federation.
The technology industry has navigated recent ‘trade wars,’ although this current one appears to be of a different magnitude. This is naturally a hardware-centric issue. Large capital expenditure projects, particularly those centered around AI, may be delayed or elongated. The expected PC refresh cycle, driven by the upcoming end of support for Windows 10 and the timely arrival of AI-PCs, may also be impacted. Companies exposed to these sectors of the technology economy will be monitoring the tariff situation closely. The digital part of the economy, clearly, will see less direct impacts. The word ‘tariff’ wasn’t mentioned once in the Elastic or MongoDB earnings calls that also happened this week.
Overall, businesses can never fully plan for the macroeconomic environment, and that is certainly the case now. Leaders can take comfort from the fact that everyone is navigating these challenges. Transparency around supply chains, presenting different financing options, and exploring promotional activities are just a few of the ways in which businesses can try and navigate this fluid landscape.
What to Watch:
- The tariff environment remains fluid as the US administration announces plans and subsequent delays while impacted countries do the same in their attempts to retaliate.
- Technology companies continue to diversify their supply chains, setting up operations in more markets in hopes of mitigating any potential impacts.
- Tariffs will remain a talking point on earnings calls, with future ones expected to unveil more about the impact in the second quarter and expectations on overall 2025 results.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other insights from The Futurum Group:
HPE Q1 FY 2025: Server Boom Fuels Revenue Jump, But Margins Pressured
Cisco Q2 FY 2025 Earnings Benefit from AI Infrastructure & Security Growth
Dell Q4 FY 2025 Earnings Show Strong AI Momentum, ISG Revenue Up 22% YoY
NetApp Revenue Grows 2%, Driven by Key All-Flash and Storage-as-a-Service Offerings
Author Information
Alex is Vice President & Practice Lead, Channels & Go-to-Market at the Futurum Group. He is responsible for establishing and maintaining the Channels Research program as part of the overall Futurum GTM and Channels Practice. This includes overseeing the channel data rollout in the Futurum Intelligence Platform, primary research activities such as research boards and surveys, delivering thought-leading research reports, and advising clients on their indirect go-to-market strategies. Alex also supports the overall operations of the Futurum Research Business Unit, including P&L segmentation, sales and marketing alignment, and budget planning.
Prior to joining Futurum, Alex was VP of Channels & Enterprise Research at Canalys where he led a multi-million dollar research organization with more than 20 analysts. He played an integral role in helping the Canalys research organization migrate into Omdia after having been acquired in 2023. He is an accomplished research leader, as well as an expert in indirect go-to-market strategies. He has delivered numerous keynotes at partner-facing conferences.
Alex is based in Portland, Oregon, but has lived in numerous places, including California, Canada, Saudi Arabia, Thailand, and the UK. He has a Bachelor in Commerce and Finance Major from Dalhousie University, Halifax Canada.
