May 2nd, 2025 – Apple Inc. reported stronger-than-expected earnings for the second fiscal quarter of 2025, but investor confidence was shaken after CEO Tim Cook raised concerns over rising tariff-related costs. The company’s Services revenue also fell slightly short of analyst expectations, causing Apple shares to drop as much as 4% in after-hours trading.
Strong Earnings, Mixed Response
Apple’s Q2 performance beat Wall Street estimates in several key areas:
| Metric | Reported | Estimated |
|---|---|---|
| Earnings Per Share (EPS) | $1.65 | $1.63 (LSEG) |
| Total Revenue | $95.4 billion | $94.66 billion |
| iPhone Revenue | $46.84 billion | $45.84 billion |
| Mac Revenue | $7.95 billion | $7.77 billion |
| iPad Revenue | $6.4 billion | $6.20 billion |
| Wearables, Home & Accessories | $7.52 billion | $7.95 billion |
| Services Revenue | $26.65 billion | $26.70 billion |
| Gross Margin | 47.1% | 47.1% |
Despite these positive numbers, Cook’s comments about future uncertainties due to tariffs unsettled investors.
Tariffs to Add $900 Million in Q3
During the earnings call, Cook said Apple expects tariffs to increase its costs by $900 million in the June quarter, assuming no further policy changes. However, he cautioned that it’s “very difficult” to predict the situation beyond June.
“We will manage the company the way we always have—with thoughtful and deliberate decisions, with a focus on investing for the long term,” Cook said. “As we look ahead, we remain confident.”
Apple CFO Kevan Parekh said the company expects revenue to grow in the “low to mid-single digits” on an annual basis for Q3. Apple had reported $85.78 billion in sales during the same quarter last year.
Shifting Production to Lower-Tariff Countries
To offset tariff impacts, Apple is shifting part of its production out of China. Cook told CNBC that about 50% of iPhones for the U.S. are now made in India, while most other Apple products for the U.S. market come from Vietnam, where tariffs are significantly lower.
Still, Apple continues to manufacture the majority of its products for other markets in China. Cook said the iPhone’s components are globally sourced and noted that Apple will buy 19 billion chips from U.S. suppliers this year.
Hardware Performs Well, Services Growth Slows
Apple’s core hardware categories largely performed well:
- Mac sales rose nearly 7% to $7.95 billion.
- iPad sales increased 15% year-over-year, reaching $6.4 billion.
- iPhone sales were strong, rising to $46.84 billion.
The company introduced new iPad Air and MacBook Air models in March, helping drive sales.
However, the Wearables, Home, and Accessories division reported a 5% decline to $7.52 billion. Cook attributed this to high base numbers from last year’s launch of the Vision Pro headset.
The Services segment, which includes Apple TV+, iCloud, Apple Music, and Google search deals, generated $26.65 billion—up 11.65% from last year but just under expectations. In Q2 last year, the division grew 14.2%.
Regional Performance: China Declines, Americas Grow
Sales in Greater China—including Hong Kong and Taiwan—dropped slightly to $16 billion. Cook noted that sales would have been flat if not for currency exchange impacts, and said the region is seeing improving quarterly trends.
On the other hand, sales in the Americas—Apple’s largest market—rose nearly 8%, indicating growing consumer demand. Cook dismissed suggestions that tariff fears caused customers to buy early in Q2.
“We don’t believe that there was a significant pull forward due to tariffs into the March quarter,” he said. “There’s no obvious evidence of it.”
Share Buybacks and Dividend Hike
Apple’s board authorized up to $100 billion in share repurchases this quarter, slightly down from $110 billion last year. The company also raised its dividend by 4% to 26 cents per share.
Cook reaffirmed Apple’s long-term commitment to annual dividend increases and continued investment in innovation.
AI Delays and Strategic Adjustments
Apple delayed some of its AI features, including improvements to Siri announced last summer. These features are now expected to launch later this year. The company had earlier removed promotional content related to the new AI upgrades.
“We need more time to complete our work on these features so they meet our high-quality bar,” Cook said.
Outlook
Despite the current tariff uncertainty, Apple remains optimistic. With strong product sales, growing services, and strategic supply chain adjustments, the company is positioning itself to navigate future global trade challenges.
However, the dip in Services revenue and increasing costs from tariffs will likely remain key concerns for investors as Apple enters the next quarter.
