Garmin held its Q1 2025 earnings name this week, and like most different tech manufacturers, it needed to tackle the looming specter of tariffs whereas boasting about its record-setting earnings. And its future plans are illuminating, each for Garmin followers and tech nerds usually.
Garmin earned $1.54 billion final quarter, an 11% enhance pushed primarily by its “Out of doors” and “Auto” segments, with a “document” $330 million working revenue. And but its shares dipped by about 10% as a result of this earnings report.
Traders appear spooked by Garmin’s tariff outlook, even because the CEO, Cliff Pemble, assured that Garmin is not anxious and has a plan to offset them.
I am going to break down Garmin’s anti-tariff technique and the way it might have an effect on future Garmin watches, however my foremost takeaway from per week of earnings calls — together with Garmin, Meta, Samsung, and others — is that the impression of appeasing shareholders will transcend larger costs.
How Garmin will counterbalance tariffs
“Larger tariffs and extra advanced commerce constructions will probably be a traditional a part of enterprise going ahead,” Pemble warned at the beginning of the earnings name.
1 / 4 of Garmin’s U.S. income comes from merchandise assembled in Taiwan, with a ten% baseline tariff as soon as the momentary exemption expires. Whereas they do not use a “vital quantity of fabric” from China, reciprocal tariffs will “weaken the U.S. greenback,” which makes up 60% of their earnings.
Garmin’s CFO says that of the “estimated $100 million of elevated prices from tariffs” in 2025, they are going to be “principally offset by anticipated favorable overseas forex impacts and deliberate mitigations.” To the primary level, Garmin believes that non-U.S. greenback currencies will strengthen, so its 40% of EMEA and Asia enterprise can have inflated worth.
Nonetheless, it is a lot much less particular about its “mitigation” plans. Pemble says that Garmin is “pursuing mitigations, a few of which have already been established, whereas others will take extra time. We aren’t ruling something out, and we intend to be strategic and selective with these actions.”
Pemble refused to say what these mitigations are (or will probably be), however it’s not exhausting to surmise.
Garmin’s ‘mitigations’ are hiding in plain sight
Garmin Join Plus, for all its unfavourable press and buyer outrage, is an instance of profitable “mitigation” that is already begun. A subscription provides Garmin a brand new income supply, making post-launch updates extra worthwhile as they more and more fall behind a paywall.
Through the earnings name, Pemble stated that the AI growth made it the “proper time” to launch Join Plus, that “the response has been optimistic,” and that “it is a long-term factor for us, a vital a part of our Health phase going ahead.”
I am not so positive in regards to the optimistic response, however Garmin prospects would most likely desire this optionally available nickel-and-dime answer to squeeze out more cash over larger watch costs.
I doubt it is a coincidence that Garmin upped its Health “income development estimate” from 10% to fifteen% after only one quarter, so rapidly after the Join Plus launch and with no new main merchandise in addition to the Vivoactive 6, which made few upgrades over its predecessor.
The Out of doors class had Garmin’s greatest YoY income enhance with $72.3 million. The Garmin Fenix 8‘s continued recognition is the principle purpose, however the brand new Intuition 3 was one other issue; it added an AMOLED show and higher battery life however in any other case saved to the established order with older sensors and few characteristic adjustments for a excessive worth.
Garmin’s 2025 technique with the Intuition 3 and Vivoactive 6 reveals Garmin’s extra refined, in-progress technique: sticking to a constant launch schedule whereas providing fewer enhancements per technology, so it may tempt prospects to improve extra typically with out worrying about vital innovation.
The truth that Garmin hasn’t given its newest watches the Elevate v5 sensor appears like proof of this method. Garmin counts on its model energy and in style coaching instruments to tempt folks sufficient that they ignore Garmin’s flaws, mitigating the necessity to supply a extra aggressive product.
Some Garmin watches might get dearer
“All the pieces is on the desk,” Pemble stated when requested about elevated Garmin watch pricing to mitigate tariffs. However that does not imply each Garmin watch will probably be dearer.
“We’re evaluating pricing not broadly, however particularly in context of every market and product line,” Pemble defined. “There are circumstances the place undoubtedly, there’s room to have completely different pricing, and there is different circumstances [where] it is extra aggressive and tough to extend costs. So we’re managing it case by case.”
The Vivoactive 6, for example, stayed reasonably priced at $299, whereas the Fenix 8 was $200 dearer. My guess is that Garmin will upcharge its premium-tier fashions as a result of it already is aware of prospects pays above market fee, whereas the mainstream Venus and Forerunners keep low to compete with different health watch manufacturers.
It is also tried promoting extra funds “E” fashions just like the Fenix E and Intuition E that lower main options, like an Apple Watch SE or Galaxy Watch FE. Promoting extra merchandise, from premium to funds, is one other method Large Tech manufacturers try to fight tariffs.
Look to Large Tech for Garmin’s future technique
Simply this week, Meta warned shareholders that tariffs might dip Asia-based advert gross sales as much as billions of {dollars}, whereas Samsung’s Q1 earnings defined how tariffs brought about a “slowdown in development” and can set off declining smartphone demand.
Like Garmin, these Large Tech manufacturers tried to assuage shareholders with their plans to counterbalance tariff results. Samsung will “maintain profitability” with the upcoming Galaxy S25 Edge, whereas Meta will depend on Meta AI and Ray-Ban glasses to “offset” losses.
Mainly, these firms plan to turn into extra “environment friendly” and reprioritize their product classes to new, untapped areas. And the larger the model, the extra tariff harm they’re going to should mitigate.
*APPLE ESTIMATES $900 MILLION IN COST INCREASES ON TARIFFS IN Q3Could 1, 2025
Garmin might simply deal with that second technique. It already began this development with Join+; the following step is extra LTE watches, primarily based on a latest Fenix 8 LTE leak.
Some Garmin followers have begged for a Whoop-style band for years, and whereas Garmin is unenthusiastic about good rings, that would at all times change. Heck, Garmin might even revive its defunct Varia Imaginative and prescient lineup as health AR glasses, one other rising development.
The purpose is, Garmin sells 100 completely different merchandise a 12 months; what’s a couple of extra? It might resolve to step exterior its consolation zone and rush out new product classes it could have ignored in a pre-tariff world, merely to search out new sources of income.
