TLDR
- Apple stock fell after hours following Q2 earnings despite beating estimates
- Company warned of $900 million tariff headwind in the current quarter
- iPhone revenue exceeded expectations at $46.8 billion
- China revenue disappointed at $16 billion versus $16.8 billion expected
- Apple authorized an additional $100 billion in stock buybacks
Apple reported its fiscal second quarter earnings on May 1, 2025, beating analyst expectations on both revenue and profit. However, shares fell in after-hours trading and continued to decline in pre-market trading the next day.
The tech giant posted earnings per share of $1.65 on revenue of $95.4 billion. These results surpassed Wall Street’s estimates of $1.62 EPS and $94.2 billion in revenue.
iPhone revenue was a bright spot for Apple. The company reported $46.8 billion in iPhone sales, beating expectations of $45.6 billion and showing growth from the $45.9 billion reported in the same quarter last year.
However, Apple’s performance in China raised concerns among investors. The company generated $16 billion in revenue from its Greater China region, falling short of the $16.8 billion analysts had anticipated.
During the earnings call, Apple warned of a $900 million headwind from tariffs in the current quarter. This revelation pressured the stock, which fell about 3% in pre-market trading on Friday after dropping 4% following Thursday’s earnings call.
APPLE $AAPL Earnings…
š Apple shares drop 4% after earnings
ā Beat on revenue & EPS
šø Announced $100B buyback
ā ļø Warns of a $900M tariff headwind this quarter
š®š³ Now sourcing most iPhones from India pic.twitter.com/69tksx1kxJ
— Trader Edge (@Pro_Trader_Edge) May 2, 2025
Global Production Shifts
Apple is actively shifting its production away from China in response to trade tensions. CEO Tim Cook stated that the company is now sourcing the majority of iPhones destined for the US market from India.
“Almost all” iPad, Mac, Apple Watch, and AirPods products would be sourced from Vietnam as their country of origin, according to Cook. Products sold outside the US will still primarily originate from China.
Cook declined to make longer-term predictions about production allocation, stating, “I wouldn’t want to predict the mix of production in the future.”
The company also announced plans to source more than 19 billion chips from the US this year. This move is part of Apple’s strategy to reduce its reliance on China while increasing iPhone production in India.
When asked about consumer behavior ahead of potential tariff-related price increases, Cook noted, “We don’t believe that we saw obvious evidence of a significant pull forward in demand in the March quarter due to tariffs.”
Financial Outlook
For the upcoming June quarter, Apple provided guidance that aligns with Wall Street expectations. The company expects revenue to grow at a low-to-mid single-digit rate compared to last year’s $85.8 billion.
At the midpoint of this guidance range, Apple would generate roughly $89.2 billion in revenue, matching analysts’ consensus forecasts.
Apple also projected gross margins between 45.5% and 46.5% for the quarter. Based on these figures, Apple’s net income would be approximately $21.3 billion, slightly below the $22 billion analysts are expecting.
The company emphasized that it was providing this guidance “despite the overall uncertain environment,” suggesting caution about economic and trade conditions.
In a move that typically pleases investors, Apple authorized an additional $100 billion in stock buybacks. However, this wasn’t enough to offset concerns about tariffs and China sales.
Mac and iPad revenue performed well, with Mac sales reaching $7.9 billion (versus $7.7 billion expected) and iPad revenue hitting $6.4 billion (compared to expectations of $6.1 billion).
Services revenue came in at $26.6 billion, just shy of analysts’ forecasts of $26.7 billion.
During the earnings call, Tim Cook opened by highlighting Apple’s US manufacturing efforts, underscoring the company’s commitment to domestic production amid trade tensions.
When asked about AI developments, particularly regarding Siri, Cook responded that “We need more time,” indicating that Apple’s AI strategy is still evolving.
The company noted that its products are not yet subject to the reciprocal tariffs announced in April. However, the White House is working on a plan for duties on semiconductors that could extend to smartphones and computers.
Apple’s stock traded at $206.88 in pre-market trading on Friday, down 3.02% from its Thursday close of $213.32.
