Four global lessons from earnings week

Earnings calls used to be the exclusive domain of cigar-chomping capitalists, perhaps yelling “sell” at some quivering underling off-camera while an old-school ticker-tape hums.

But we can confirm cigar-chomping diplomats also now follow this stuff — or should. If you’re willing to sift through the euphemisms and spin, these corporate events are full of insights into how influential people see the world and what might be coming next. 

So, here are four of the most intriguing quotes from the latest Q4 earnings calls: 

1. “At Tesla, we’re making sure that we can continue to manufacture our stuff even in the event of geopolitical tensions rising to very high levels” – Elon Musk, Tesla 

Tesla’s earnings report for 2024 missed forecasts, with revenue up 1% and profits down. But while Tesla stocks initially dipped on the news, they then did something odd: they went back up. It’s a bet that Musk can execute on his self-driving and robocab vision.

And while that’s an interesting reminder of the pace at which tech continues to disrupt (or try to disrupt) inherently geopolitical industries like auto and energy, we were more interested in one of Musk’s lines towards the end of Tesla’s earnings call, when he pledged to continue EV production no matter what the world might throw. 

His comments come just weeks after Tesla completed its second mega-factory on the outskirts of Shanghai, and just hours before 1 February, the Trump Administration’s mooted deadline to impose additional 10% tariff on all China-made goods. 

While Musk’s initial Shanghai play was as a low-cost way to ramp up manufacturing, it’s also now looking more like a way to localise production in the world’s largest EV market and thereby duck escalating US-China tariffs. So rather than diversifying away from China, he’s doubling down. Realistically, that’ll also risk Musk — a Trump backer and confidant — becoming even more vulnerable to pressure from Beijing. And speaking of which…

2. “Taiwan will always be first” – C.C Wei, TSMC

Across the Taiwan Strait, the democratic island just relaxed a rule against its chipmakers building overseas fabs with its latest domestic tech. 

The law has long guarded Taiwan’s tech edge, which in turn pays economic and security dividends. But the thinking has shifted as TSMC, Taiwan’s main chip giant, has explored building new fabs in the US, Japan, and Germany — it’s partly a response to Western pleas for help to secure their chip supplies. It’s also partly just smart diversification.

But while there’s always been a fear that eroding the West’s dependence on Taiwan could weaken the West’s support for Taiwan (which China continues to threaten), TSMC’s CEO revealed some of his thinking on that front during the company’s latest earnings call: “the initial phase of the ramping-up always comes from the fab close to R&D”. And guess where TSMC’s R&D happens? Yes, in Taiwan. Ie, even when TSMC makes chips abroad, it’s still merely rolling something out that’s really been pioneered in Taiwan. 

3. “We continue to work with the regulators and will release it as soon as we can” – Tim Cook, Apple

Which regulators, Timbo? He’s talking about the ones in Beijing. That’s because, while Apple recorded 4% revenue growth, dig deeper and you’ll see some interesting nuance.

The big one for us is the 11.1% decline in Apple’s China sales, which Cook partly attributes above to the fact that China’s regulators haven’t yet green-lit sales of Apple’s new suite of AI products, which are driving sales elsewhere. It’s a reminder how governments can really hit your bottom line. But yes, governments can also boost it: Apple is hoping to benefit from a new Beijing subsidy targeting consumer electronics.

4. “I am confident of the 156, and I think it will come from strong demand from the U.S. government and from our international partners” – James Taiclet, CEO, Lockheed Martin

156, you say? That’s the number of F-35 fighter jets Lockheed aims to keep producing each year. But shares in Lockheed Martin fell this week after the company announced lower profits, partly due to questions around the feasibility of that 156 number.

With all the wars and rumours of wars, you might think these are boom times for defence players. And yes, they are — global defence spending keeps smashing its own records.  

So what’s going on? The issue for Lockheed is that a) it’s struggling to keep up with demand (particularly its F-35 software upgrade), and b) some also question the durability of that demand.

But the Lockheed CEO is bullish on ironing out the supply issues, and is confident F-35 demand will persist: “part of deterrence theory is that you have to have the capability to make the adversary reconsider an adverse action against you.” 

INTRIGUE’S TAKE

So there you have it, folks — whether you’re selling some sweet wheels, a cool phone, an angel of death deterrence, or the high-tech chips that power them all, you’re now bumping up against some pretty similar issues: costs, supply chains, government decisions, and wars.

Also worth noting:

• The US government approved the sale of 32 F-35 jets to NATO ally Romania last September, in a deal worth over $7B.
• And while we’re talking about the F-35, Lockheed’s CEO also flagged the jet can now control eight unmanned drones, and that the world’s top drone producer (China) is also boosting investment in its own answer to the F-35. It’s an interesting — if unsurprising — answer to speculation about the F-35’s future.