Apple earnings: beats forecasts, but China and tariff risks loom large

Apple earnings: beats forecasts, but China and tariff risks loom large

Jacob Falkencrone

Global Head of Investment Strategy

Key points:

  • Solid numbers, shaky China: Apple’s earnings beat expectations slightly, but weakness in China raises red flags about future growth.
  • Tariff threats escalating: Apple faces a hefty USD 900 million cost increase from tariffs next quarter, posing serious risks to margins and pricing strategies.
  • Regulatory and innovation risks loom: App Store and Google search-deal scrutiny, plus limited recent innovation, place pressure on Apple's growth engines, requiring close investor attention.

This content is marketing material.

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.

Headline numbers: a modest beat, but watch China

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.

Tariffs: the USD 900 million question

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.

Revenue growth: organic or borrowed?

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.

Services: under regulatory scrutiny

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.

Innovation challenges: why upgrade?

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.

Management's response: confidence amid uncertainty

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.

Investor takeaways

For investors, navigating Apple’s earnings involves clearly defined watch points:

  • China performance: Monitor closely for signs Apple can regain traction against rising domestic competition.
  • Tariff impacts: Observe carefully how Apple handles additional tariff costs—can they avoid raising prices, or will consumer demand take a hit?
  • Regulatory developments: Stay alert to regulatory pressures on services like the App Store and Google partnership—these could significantly influence profitability.
  • Product innovation: Look for consumer reactions to the upcoming new iPhone launches. True innovation could reignite growth; stagnation may dampen it further.
  • Economic resilience: Consider Apple's potential performance during broader economic downturns—will consumer loyalty hold if wallets tighten?

Storm warning or passing clouds?

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.

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.


Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.