Quarterly Outlook
Upending the global order at blinding speed
John J. Hardy
Global Head of Macro Strategy
Global Head of Investment Strategy
Apple’s latest quarterly earnings arrived with solid numbers, yet beneath the calm surface, signs of turbulence are beginning to show—particularly from China and escalating tariff threats. Here's the full investor breakdown on what's really happening with the tech giant.
Apple delivered revenues of USD 95.4 billion, slightly ahead of analysts' forecasts at USD 94.6 billion. Earnings per share came in at a solid USD 1.65, beating expectations of USD 1.62. At first glance, it was another strong quarter—but Apple's shares dropped after-hours, revealing investor unease around deeper structural issues.
Notably, sales in China declined 2.3% to USD 16 billion, missing expectations significantly. Once Apple's most vibrant growth market, China has now become a source of persistent headaches. Domestic brands like Huawei and Xiaomi continue to seize market share, and tightening governmental restrictions on foreign technology aren’t helping.
One key takeaway from the earnings call was CEO Tim Cook's revelation about tariffs: Apple anticipates a hit of USD 900 million in additional costs for the current quarter alone. Cook cautioned explicitly against using this number for future projections, given certain unique short-term factors. Still, the statement underscores the deepening risks tariffs pose to Apple's cost structure. Investors need to brace for potential volatility—especially if the company decides it must pass these costs onto consumer.
As part of its strategy to mitigate these tariff impacts, Apple announced that a majority of US-bound iPhones will soon originate from India, while other key products like iPads and Macs are shifting to Vietnam. However, Apple’s heavy reliance on China for products sold elsewhere remains a significant vulnerability.
While revenue rose 5%, part of this growth appeared driven by consumer anxiety over tariffs, prompting early buying. CFO Kevan Parekh clarified on the call, however, stating: "For the March quarter, we didn’t see strong evidence of pull-forward demand." Investors should approach this cautiously: the crucial question remains whether consumers have genuinely increased their appetite or simply brought future demand forward out of tariff fears.
Apple’s services revenue grew a strong 12%, hitting USD 26.7 billion, though slightly below market expectations. Services remain Apple's high-margin powerhouse, but regulatory clouds loom large. The recent App Store court ruling and antitrust scrutiny over Apple’s lucrative search deal with Google could threaten billions of dollars in revenue. On the earnings call, Apple management notably declined to give explicit forward guidance on services, citing "uncertainty." Investors should remain vigilant, as these regulatory pressures could increasingly weigh on Apple's bottom line.
The iconic iPhone grew modestly by 2%, with the newly launched iPhone 16e failing to spark significant excitement. Its comparatively high USD 599 price may have turned off cost-sensitive buyers. On the earnings call, management highlighted upcoming models expected later this year, which could offer more compelling upgrades. Apple needs these new devices to resonate strongly—especially in China, where consumers are increasingly turning towards innovative rivals.
Despite challenges, Apple’s confidence remains intact. CFO Kevan Parekh emphasized on the call the record installed base of active devices and customer loyalty as foundations of the company's ongoing strength. To underline this confidence, Apple announced a USD 100 billion share buyback and a modest 4% increase in dividends. It’s a clear signal to investors: management believes strongly in Apple's long-term profitability.
For investors, navigating Apple’s earnings involves clearly defined watch points:
Apple remains one of the strongest, most well-managed tech giants globally, but even giants have vulnerabilities. This quarter's solid numbers were punctuated by clear warnings about tariffs, regulatory risks, and stiffening competition. Investors would do well to keep a close eye on these storm clouds—they might just dictate Apple's growth narrative for the foreseeable future.
In short: remain confident, but cautious. With Apple, the ride remains compelling, even if the waters ahead look increasingly choppy.