Garmin’s Q1 2025 Earnings Unveil Tactics to Mitigate Tariff Costs Through Connect Plus and Product Development
Garmin, the distinguished GPS and wearable tech firm, recently conducted its Q1 2025 earnings conference, showcasing not only robust financial results but also an anticipatory strategy to address escalating tariff expenses. The company reported a remarkable $1.54 billion in revenue—an 11% increase compared to the previous year—yet investors displayed caution, as shares fell by around 10% amid concerns regarding the long-term consequences of tariffs on Garmin’s financial performance.
In spite of market unease, Garmin CEO Cliff Pemble conveyed optimism, stressing that the company is actively taking steps to lessen the financial impact of tariffs. A pivotal element of this approach is Garmin Connect Plus, a subscription service that is swiftly emerging as a key aspect of the company’s revenue diversification strategy.
Addressing the Tariff Challenge
Tariffs have increasingly become a complicated and inescapable factor in global trade, particularly for technology firms with international supply networks. Garmin faces similar challenges. Pemble indicated that roughly 25% of Garmin’s U.S. revenue comes from products assembled in Taiwan, which will be subject to a 10% tariff once temporary exemptions lapse. Although Garmin obtains few materials from China directly, the overall repercussions of reciprocal tariffs and a depreciated U.S. dollar—utilized in 60% of its transactions—present a significant hurdle.
Garmin’s CFO projected that tariffs might elevate costs by $100 million in 2025. Nevertheless, the company anticipates offsetting most of this through favorable foreign currency exchange rates and strategic countermeasures.
Connect Plus: A Tactical Mitigation Instrument
While Garmin has not revealed all the details of its mitigation efforts, one integral component is already operational: Garmin Connect Plus. Debuting amid the surge of AI, Connect Plus is a subscription service that provides enhanced features including Active Intelligence, personalized coaching, and exclusive workouts.
Although the service has garnered mixed feedback from users—some expressing hesitation over paywalls for previously complimentary features—Connect Plus signifies a considerable shift in Garmin’s business model. By monetizing software and services post-purchase, Garmin can cultivate recurring revenue that softens the effects of hardware-related tariffs.
Pemble highlighted during the earnings call that Connect Plus is a “long-term” initiative and an “extremely crucial part” of Garmin’s fitness division. The company’s choice to revise its fitness revenue growth forecast from 10% to 15% shortly after launching Connect Plus underscores its financial promise.
Subtle Changes in Product Strategy
In addition to Connect Plus, Garmin seems to be embracing a more refined approach to product development. The recent introductions of the Vivoactive 6 and Instinct 3 exemplify this transition. Both products featured minor advancements—like AMOLED displays and better battery life—while bypassing cutting-edge elements such as the Elevate v5 sensor.
This tactic enables Garmin to sustain a consistent release rhythm without considerably escalating production expenses, thereby promoting frequent upgrades without requiring revolutionary innovation. It’s a subtle yet effective means of maintaining consumer engagement while managing tariff-induced costs.
Targeted Price Adjustments
While concerns arose that tariffs would trigger widespread price increases, Garmin is employing a more selective strategy. Pemble stated that pricing choices would be made “on a case-by-case basis,” reliant on market competitiveness and product positioning.
For instance, the Vivoactive 6 is competitively priced at $299, while the premium Fenix 8 carries a steeper price of $1,099. Garmin is also investigating budget-friendly “E” models, such as the Fenix E and Instinct E, which simplify features to provide lower price points—similar to Apple’s SE series or Samsung’s FE offerings.
This tiered pricing approach enables Garmin to absorb tariff costs more efficiently by capitalizing on its premium products, where consumers are more inclined to pay more, while ensuring entry-level models remain attainable.
Looking Forward: New Product Categories on the Horizon?
Garmin’s countermeasure strategy might also encompass venturing into new product categories. With rivals like Meta and Samsung exploring AI wearables and AR glasses, Garmin could join the trend. Speculations about a Fenix 8 LTE model and consumer interest in Whoop-style fitness bands or smart rings indicate that Garmin is well-positioned to broaden its product range.
The company’s legacy in fitness technology and navigation provides a solid base to explore emerging sectors like fitness-centric AR glasses or LTE-equipped wearables. These advancements could unlock new revenue avenues and provide further insulation from tariff-related fluctuations.
Conclusion: A Strategic Shift in a Transforming Landscape
Garmin’s Q1 2025 earnings call revealed more than just solid financials—it demonstrated a company actively adjusting to a changing global trade landscape. Through initiatives such as Connect Plus, selective pricing, and an adjusted product strategy, Garmin is establishing a foundation to succeed in the face of rising tariffs.
Although investors may remain wary in the near term, Garmin’s strategic shift toward service-oriented revenue and diversification positions it well for future growth.
