ii view: tariff uncertainty overshadows Apple earnings beat

Second-quarter results to 29 March

• Revenue up 5% to $95.4 billion (£71.6 billion)
• Adjusted earnings up 8% to $1.65 per share
• Dividend of $0.26 per share, up from $0.25 in Q1

Chief Executive Tim Cook commented: 

“Today Apple is reporting strong quarterly results, including double-digit growth in Services.” 

“We were happy to welcome iPhone 16e to our lineup, and to introduce powerful new Macs and iPads that take advantage of the extraordinary capabilities of Apple silicon. And we were proud to announce that we’ve cut our carbon emissions by 60 percent over the past decade.”

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ii round-up:

Apple Inc (NASDAQ:AAPL) reported quarterly sales and earnings that surpassed Wall Street estimates, although the iPhone maker offered little reassurance about the impact of newly imposed US trade tariffs. 

Second-quarter sales rose 5% from a year ago to $95.4 billion (£71.6 billion), driving adjusted earnings growth of 5% to $1.65 per share. Analysts had expected $94.7 billion and $1.63 per share respectively. Making and importing electrical products from overseas to the US, Apple estimates tariff costs for the current quarter of $900 million but offered no guidance beyond that.

Shares in the Dow Jones and Nasdaq giant fell 3% in US trading having come into these latest results down 15% year-to-date. That’s similar to fellow hardware maker NVIDIA Corp (NASDAQ:NVDA). The tech-heavy Nasdaq Composite index is down 8% so far in 2025. 

Apple has been busy trying to switch supplies of items made in China that are now subject to tariffs as high as 145%, to makers based in India and Vietnam which are subject to lower tariffs. 

Apple product sales to China during the quarter to 29 March were 2% lower than a year ago at $16 billion. That came before Donald Trump imposed his tariffs on 2 April. China subsequently retaliated, imposing its own tariffs on US imported goods.  

Group product sales to Europe improved 1% year-over-year to $24.4 billion. The European Union has also been considering its own additional trade tariffs on US goods. 

Overall sales for the company’s core iPhone product rose 2% to $46.8 billion, potentially aided by the ongoing rollout of AI backed apps. 

Apple Service sales such as those for music, TV and data holding, rose 12% to $26.6 billion, although that just missed analysts’ predictions for $26.7 billion. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results. Third-quarter numbers are likely to be announced late July or early August. 

ii view:

Headquartered in Cupertino, California, Apple came to the stock market in 1980. Today, Apple devices and services compete against an array of rivals including Samsung, Meta Platforms Inc Class A (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN) owned AWS and Prime TV, as well as others such as Spotify Technology SA (NYSE:SPOT), Netflix Inc (NASDAQ:NFLX), and The Walt Disney Co (NYSE:DIS). Home US sales continue to dominate, coming in at 36% of the group total during its last financial year to late September. That was followed by sales to Europe at 26%, Greater China at 17%, the rest of Asia at almost 8%, Japan 6% and the Americas the balance of 6%. 

For investors, uncertainty over the level of trade tariffs around the world and to what amount they will increase Apple costs, persists. High tariffs could drive inflation higher, raising interest rates and making consumers more reluctant to spend. Concerns about a lack of product innovation, particularly regarding Apple’s core iPhone, remain, while government concerns about the dominance of large tech companies have not completely gone away. 

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To the upside, some backtracking in US trade tariff levels has already been seen. The tie-in of customers using its services on their Apple devices generates high customer loyalty. Product innovation now includes the rollout of AI based intelligence features. Product and geographical diversity exist, including exposure to payment services, while the dividend, although not a core attraction, has been increased consecutively for the last 10 years and the shares yield about 0.5%.

For now, uncertainties and risks have clearly increased. That said, Apple devices and services remain an important feature for populations globally, with the shares still deserving of their place in many diversified investor portfolios.   

Positives:

• Diverse geographical markets
• Strong customer loyalty

Negatives:

• Dependency on iPhone sales
• Strained relations between the West and China

The average rating of stock market analysts:

Buy