Apple is arguably the only Nasdaq company to be roiled by Trump's tariffs. Trump’s reciprocal tariff gambit has put paid to Apple's success in China more than any other. It's cozy reliance on China's manufacturing prowess, which it knows is unmatched by any other.
Apple's plan to move manufacturing back to US in 2017 with Foxconn's $10 billion plant in Wisconsin was a complete failure.
Foxconn's subsequent move to India signified the start of Apple's shift from it's China centric supply chain. Indeed, Apple aims to shift assembly of all U.S.-bound iPhones (approximately 60 million units annually) to India by the end of 2026, driven by U.S. tariffs of up to 145% on Chinese imports.
Apple’s Q2 2025 earnings, announced on May 1, 2025, highlighted several positive outcomes despite tariff concerns and mixed segment performance. Below are the key positives from the earnings report, based on available data:
Revenue Growth:
Apple reported quarterly revenue of $95.4 billion, up 5.1% year-over-year, surpassing Wall Street consensus estimates of $94.66 billion (LSEG) and $94.2 billion (Bloomberg). This reflects strong overall business performance.
Earnings Per Share (EPS) Beat:
The company achieved an EPS of $1.65, up 8% year-over-year, beating analyst expectations of $1.63 (LSEG) and $1.62 (Bloomberg). This marked a March quarter record, driven by robust margins and operational efficiency.
Strong iPhone Performance:
iPhone revenue reached $46.8 billion, up 2% year-over-year, exceeding estimates of $45.84 billion (StreetAccount) and $45.6 billion (analysts). The iPhone 16 lineup contributed to this growth, with some demand pulled forward due to tariff-related consumer behavior.
Mac and iPad Revenue Growth:
Mac revenue was $7.95 billion, up 7% year-over-year, topping estimates of $7.77 billion, driven by the M4 MacBook Air and other updated Macs.
iPad revenue reached $6.4 billion, up 15% year-over-year, surpassing expectations of $6.2 billion, fueled by new iPad Air and Pro models.
Services Growth:
Services revenue hit $26.65 billion, up 11.65% year-over-year, driven by subscriptions, iCloud, Apple Music, Apple TV+, and search licensing deals. Although slightly below StreetAccount’s $26.7 billion estimate, it remains a high-margin growth driver with over 1 billion paid subscriptions.
Gross Margin Expansion:
Apple’s gross margin was 47.1%, up 0.5 percentage points year-over-year, aligning with StreetAccount estimates and reflecting strong cost management despite supply chain challenges.
Shareholder Returns:
Apple authorized a $100 billion stock buyback program, signaling confidence in long-term value, though slightly down from last year’s $110 billion.
The company increased its quarterly dividend by 4% to $0.26 per share, continuing a 14-year streak of dividend growth, with plans for annual increases.
Operational Cash Flow:
Apple generated $24 billion in operating cash flow, enabling $29 billion returned to shareholders through buybacks and dividends, showcasing financial strength.
Supply Chain Resilience:
Apple mitigated tariff impacts by sourcing half of U.S.-bound iPhones from India and most other products from Vietnam, where tariffs are lower (26% vs. China’s 145%). This strategic shift limited tariff costs in Q2 and positions Apple to navigate future tariff challenges.
Despite the positives, challenges include a 2% year-over-year decline in Greater China revenue ($16 billion vs. $16.8 billion expected), reflecting weakness in the region, and a 5% drop in Wearables, Home, and Accessories revenue ($7.52 billion vs. $7.95 billion expected).
The anticipated $900 million tariff cost for Q3 (June quarter) tempered enthusiasm, with CEO Tim Cook noting uncertainty beyond June.
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