Apple's Record Earnings Overshadowed by Tariff Concerns and AI Challenges

Apple's tariff-fueled iPhone sales surge raises doubts about sustainability

Aug 1 (Reuters) - Apple's best revenue growth in three years failed to impress, with shares down about 1% in volatile trading on Friday, as investors questioned whether a tariff-driven surge in iPhone sales would last. A rush to buy iPhones ahead of potential U.S. tariff-driven price increases, along with China subsidies and upbeat demand for the budget 16e model launched in February, fueled a 13.5% jump in the quarterly sales of the device, crushing expectations. That pushed up total revenue by a better-than-expected 10% in the April-June period, and Apple issued an above-estimate sales forecast for the current quarter ending in September. The results came at a precarious time for the company long seen as Big Tech's safest bet. Beyond the tariff threats facing its manufacturing hubs China and India, Apple has been slow to move on artificial intelligence technology that its software and devices rivals have embraced as their next big growth driver. Analysts said the sales rebound in China, where local rivals have moved faster than Apple on AI features, was a positive. The company benefited in the world's largest smartphone market from a state subsidy program meant to prop up device sales. But they also warned the "pull-in" boost was expected to be temporary, raising doubts about demand for the rest of the year. "Pull-forward, remember, is not a U.S. issue. It's also a China issue. There, Apple's Pro model iPhones were too expensive to qualify for Chinese government subsidies that were being offered ... so they cut prices to qualify, leaning into the volume opportunity. It worked," MoffettNathanson analysts said. "But as with the U.S., what does that mean for the rest of the year?" So far this year, Apple stock has underperformed all its "Magnificent Seven" peers barring Tesla (TSLA.O), opens new tab, with a decline of more than 17%. The S&P has risen 7.8% in the period. Many of Apple's products are currently exempt from tariffs, and the company has also been rebalancing its supply chain to shield itself from the duties, sourcing iPhones from India and other products such as Macs and Apple Watches from Vietnam. The U.S. is currently negotiating trade deals with both China and India, with U.S. President Donald Trump saying India could face 25% tariffs as early as Friday. Apple said tariffs would raise costs by $1.1 billion in the current quarter after the company said it took an $800 million hit from tariffs in the third quarter. Its AI strategy also remains a concern after Apple delayed the release of an AI-enhanced version of Siri virtual assistant and was slow to launch Apple Intelligence. CEO Tim Cook said on Thursday the company was making good progress on Siri and that Apple is "significantly growing" its investments in AI. "Brand loyalty gives Apple time to get the AI transition right, but it needs to start delivering," said Matt Britzman, senior equity analyst, Hargreaves Lansdown. Reporting by Joel Jose and Harshita Mary Varghese in Bengaluru and Alun John in London; Editing by Amanda Cooper and Shinjini Ganguli Our Standards: The Thomson Reuters Trust Principles., opens new tab

Apple details tariff impact -- here's how the Trump tariffs affected iPhone sales this spring

Apple posted a record number of iPhone sales during its June fiscal quarter. And the ongoing turmoil over tariff policies may have helped. During the company's fiscal third quarter, which ended on June 28, Apple posted a little less than $44.6 billion in revenue from its iPhone business, a 13% increase from the previous year. Those iPhone sales helped Apple reach total revenue of $66.6 billon, another June quarter record for the company. Those numbers came in a quarter where U.S. trade policies continued to threaten tariffs against a lot of the countries where Apple assembles its products, particularly in China. Indeed, during the June quarter, Apple said tariff-related costs contributed about $800 million to its expenses, as the company shifted production to other countries and built up supplies ahead of new tariffs going into effect. So how much did the threat of tariffs push people to move up their purchases, buying new phones now ahead of potential price increases later in the year. Not as much as you might think, according to Apple, with CEO Tim Cook attributing the bigger-than-expected sales increase to the appeal of the iPhone 16. "If you look at the iPhone, the 16 family grew double-digits, as opposed to the 15 family from the year-ago quarter," said Cook, noting that Apple enjoyed a record quarter for iPhone upgrades. That said, Cook acknowledged some "pull forward" purchase -- a term that describes early upgrades from people looking to get in front of any tariff-driven price hikes. "We would estimate the pull forward of demand into April, specifically, to be about 1 point out of 10 points in terms of people buying because of discussions about tariffs." That impact wasn't just felt with iPhones. Apple also saw some "pull forward" sales with its Mac business, which saw a 13% increase to $8 billion in revenue for the June quarter. Cook reiterated Apple's strategy for dealing with tariffs that he outlined during Apple's earnings announcement for the March quarter. "In terms of what we do to mitigate, we obviously try to optimize our supply chain. And ultimately, we will do more in the United States," Cook said. "We've committed 500 billion investment in the U.S. over the next four years, and [we're] already building chips in Arizona, and in fact, we're building semiconductors across 12 states and 24 factories and have a lot of other things in the works." It's clearly not an issue that's going away. Apple estimates that the September quarterly currently underway will see the company add another $1.1 billion to its expenses in relation to tariffs, assuming no changes in current policies one way or the other. That said, the company told analysts to expect mid-to-high single-digit revenue growth for the September quarter. The other interesting bit of news coming out of the earnings call today (July 31) was an update of sorts on Apple's AI efforts with adding more intelligence to its Siri personal assistant. Apple says it's increasing its investment in AI, and it remains on track to deliver the long-promised improvements to Siri in 2026. "We're making good progress on a more personalized Siri, and we do expect to release the features next year, as we had said earlier," Cook said. "Our focus from an AI point of view is on putting AI features across the platform that are deeply personal, private, and seamlessly integrated, and, of course, we've done that with more than 20 Apple Intelligence features so far, from Visual Intelligence to Clean Up to Writing Tools and all the rest." Some new Apple Intelligence features are included in the iOS 26 update, which is currently in public beta ahead of its full release in the fall. At the same time the iOS update arrives, Apple is expected to release its new iPhone 17 models, with a report this week claiming that Apple is mulling over a price hike for its new phones.

Wall Street to scrutinize Apple over China struggles and slow AI progress

Tech company expected to report 4% rise in revenue over past quarter despite drop in stock price and looming tariffs Apple has been under pressure this year. It's playing catch-up to its fellow tech giants on artificial intelligence, it's seen its stock fall by double digits since the year began, it closed a store in China for the first time ever this week, and looming US tariffs on Beijing threaten its supply chain. On Thursday, the company will release its third-quarter earnings of the fiscal year as investors scrutinize how the iPhone maker might turn things around. Despite the gloomy outlook, the company is still worth more than $3tn, and Wall Street appears optimistic it will deliver on earnings. Analysts are expecting Apple to report a 4% rise in revenue over the last quarter to $89.3bn, according to S&P Global. "Apple has grown accustomed to having revenue growth in this high-margin services business, which masks other areas of the business not performing as well," said Dipanjan Chatterjee, a vice-president and principal analyst for Forrester. Chatterjee points to several issues that have led to Apple's less-than-stellar performance of late. He says Apple has lagged on hardware innovation, causing "consumer apathy" and its AI rollout has been glitchy. Apple Intelligence, Apple's AI product, has been limited to incremental features and rather than transformational upgrades. And it's been more than a year since Apple announced a suite of AI upgrades to its voice assistant Siri - many of which have yet to be released. "This work [on Siri] needed more time to reach our high-quality bar," said Craig Federighi, Apple's vice-president of software engineering, during the company's developer conference in June. Donald Trump's sweeping tariffs have also been a pain point for the company as the US president pushes his desire for manufacturing to boom in the US. The vast majority of Apple's products are made in China, with about 90% of iPhones assembled there, in spite of recent efforts to shift production elsewhere. Apple chief Tim Cook said during the company's last quarterly earnings call that he expected the China tariffs to add $900m to its costs this quarter. Apple has attempted to pivot, moving more of its manufacturing to other countries such as India and Vietnam. However, this week, Trump announced a rise in tariffs on India, too, up to 25% starting on 1 August. Because of the external and internal pressures, Apple has seen its share price plummet this year. Once the industry leader of the "Magnificent Seven" - the most valuable publicly traded companies in the world, all American technology giants - Apple boasted the highest-performing stock and biggest market capitalization on the US stock market. Now its share price is the second-worst performing after Tesla in percentage decline among the seven. Since January, Apple's stock has fallen roughly 15%.

Apple's blowout earnings marred by tariff fears, a slow AI rollout, and the stock barely moves

Apple reported blowout earnings on Thursday, beating Wall Street's predictions with its biggest revenue growth since December 2021. However, the market reaction was muted, with analysts citing concerns over long-term issues including tariffs and AI. The company reached $94 billion for the quarter ending June 28, driven by strong iPhone demand, surging services revenue, and solid performance across international markets, representing a 10% increase from the same time last year. Earnings per share came in at $1.57, well above the $1.43 analysts had forecast. Net income rose 12%, while gross margin ticked up to 46.5%. Despite the positive results, the company received a subdued response from investors, with its stock rising just over 2% in after-hours trading. Apple has already been dealing with a rough year, and the company's stock price has dropped 17% year to date. "$AAPL shares are up 2% on great news and guidance, underscoring that investors don't believe it's sustainable," Gene Munster, Deepwater Asset Management's managing partner, said in an X post. Munster said Apple stock had become a "show-me" story as investors worry about "tariffs, regulatory changes, and Apple's AI strategy come back to weigh on growth." The somewhat muted reaction is likely down to a couple of ongoing sore points for Apple: the AI race and President Trump's tariffs on China and India. The tariffs hit the company slightly less than previously estimated, costing Apple around $800 million rather than the $900 million CEO Tim Cook had predicted in March. Cook said that the impact was mainly in connection with Trump's tariffs against China that hit "early in the year." Kate Leaman, chief market analyst at AvaTrade, told Fortune that Apple was clearly nervous about the impact of further tariffs. "The risks to Apple are real," she said. "Regulation is coming and tariffs are back in the headlines, with the US still locked in negotiations with China. And for firms like Apple, global politics and supply chains still matter a lot." The tariff issue looks set to get worse for the tech giant before it gets better, with expected cost hits rising next quarter. "For the September quarter, assuming the current global tariff rates, policies, and applications do not change for the balance of the quarter and no new tariffs are added," Cook said on Thursday's earnings call. "We estimate the impact to add about $1.1 billion to our costs." Wedbush's Dan Ives called tariffs a "problem for Apple" despite the company continuing to focus on production in India and the fact that the majority of iPhones sold in the US are now being made in the country rather than China, which has faced the most aggressive tariffs from the Trump administration. "Trade policy remains unsettled and uncertain, and Apple is acutely aware of the importance of remaining on the right side of the administration, lest it face increasing ire and tariff risk," Forrester's VP principal analyst Dipanjan Chatterjee said. "It's no surprise that Tim Cook was very particular in emphasizing several times Apple's continuing investment in the United States and American innovation." Apple has faced criticism for years for the company's apparent failure to capitalize on the AI boom, and the company's most recent earnings don't appear to have soothed investors. "AI is the elephant in the room," Ives, who has been less than impressed with the company's AI efforts, said in a note. "While Apple is expanding its AI investments internally, the reality is it's not moving the needle and patience is wearing thin about investors." Apple has taken a few hits to AI efforts recently, losing at least four prominent AI researchers to Meta's "Superintelligence" team. In a particularly harsh blow to Apple, Meta successfully managed to lure away the leader of the company's AI division, Ruoming Pang, with a compensation package reportedly valued at more than $200 million. The hits to Apple's talent haven't helped the perception that the company is lagging behind competitors in the AI space. "The AI Revolution is the biggest technology trend in 40 years and right now Apple is watching this from a park bench drinking lemonade while every other Big Tech company is racing ahead like F1 drivers building out its AI strategy and monetization plan," Ives said. "This continues to be the big problem for Cook as in our opinion, this is a black eye moment for Apple and is the major anchor on the ship." Despite Cook confirming Apple was ramping up its internal AI investment, some investors, including Ives, are hoping the company will regain some ground through external partnerships or significant M&A. Cook has already signaled the company was "open to M&A that accelerates [Apple's] roadmap." Chatterjee called the company's AI urgency "palpable" and observed a "quiet admission of its sluggishness in the acknowledgement that it may have to lean heavily on acquisition to compress timelines." Some investors are hoping that Apple will acquire AI darling Perplexity, a fast-growing AI search startup seen as a potential springboard to overhaul Siri and close Apple's AI gap with rivals like Google and Microsoft. "Rumors swirl about a Perplexity deal, and if that were to happen, it may greatly accelerate the elusive promise of a more effective Siri," Chatterjee said.

Apple profits soar as Perplexity rumours swirl

Service revenue jumped to an all-time high of $27.4bn, a more than 13pc increase year on year. Apple's quarterly revenue is up 10pc, hitting $94bn, with boosts in iPhone and Mac sales, and service returns reaching an all-time high. Total sales were at $66.6bn for the quarter ending June, up more than $5bn from Q3 2024, with the Americas seeing the largest jump at around $3.5bn. iPhone sales grew by nearly 13.5pc and Mac sales by nearly 15pc. While service revenue jumped to $27.4bn - a more than 13pc increase year on year. The record service revenue was "not a surprise," said Forrester principal analyst Dipanjan Chatterjee. According to him, this is continuing a trend that has remained for a while. "The iPhone revenue boost came from some one-off revenue bumps, including consumers buying in advance of tariffs and a China boost from in-market subsidies." At the earnings call yesterday (31 July), CEO Tim Cook said that the company incurred roughly $800m in added tariff-related costs for the June quarter, and expects - if the situation doesn't change - an impact of another $1.1bn in the next one. While, throughout the call, Cook made repeated mentions of Apple's continuing investment in the US and American innovation. Chatterjee said, "Trade policy remains unsettled and uncertain and Apple is acutely aware of the importance of remaining on the right side of the administration, lest it face increasing ire and tariff risk." Apple has been hard hit by the US' 'Liberation Day' tariffs, losing roughly $700bn in market capitalisation since the announcements in April. Adding further concerns are the 25pc tariff on India, a country where a majority of iPhones originate from. Although, experts say that it will be business as usual for Apple in India. The company announced a slew of new updates at its recent Worldwide Developer Conference this June. This included a new software design called Liquid Glass and a deeper partnership with OpenAI Apple also revealed at the event that the time for MacBooks with Intel chips was over. Still, it seemed that investors were concerned about Apple Intelligence. So, reports surrounding a possible acquisition of the SoftBank-backed AI browser Perplexity - if gone through - could help the company's AI prospectives and give Siri a boost. "Apple's AI urgency is palpable and there is a quiet admission of its sluggishness in the acknowledgement that it may have to lean heavily on acquisition to compress timelines," Chatterjee said. "Rumours swirl about a Perplexity deal, and if that were to happen, it may greatly accelerate the elusive promise of a more effective Siri." Don't miss out on the knowledge you need to succeed. Sign up for the Daily Brief, Silicon Republic's digest of need-to-know sci-tech news.

Apple Revenue Forecast Beats Estimates, Tariff Costs Projected at $1.1 Billion

Apple has delayed the release of an AI-enriched version of Siri Apple forecast revenue for the current quarter ending in September well above Wall Street's estimates on Thursday, sending shares up despite a warning from CEO Tim Cook that US tariffs would add $1.1 billion in costs over the period. As the centerpiece of US President Donald Trump's trade war, those tariffs cost Apple $800 million in the June quarter and spurred some customers to buy iPhones in late spring this year. Those purchases helped Apple's fiscal third-quarter sales beat expectations by the biggest percentage in at least four years, according to LSEG. The company still forecast growth, though, with Chief Financial Officer Kevan Parekh saying the company expects revenue growth for the current quarter in the "mid to high single digits," which would exceed the 3.27 percent growth to $98.04 billion that analysts expected, according to LSEG data. Apple reported $94.04 billion in revenue for its fiscal third quarter ended on June 28, up nearly 10 percent from a year earlier and beating analyst expectations of $89.54 billion, according to LSEG data. Its earnings per share of $1.57 topped expectations for $1.43 per share. Apple shares were up 3 percent in after-hours trading, extending gains after Apple provided its forecast. Sales of iPhones, the best-selling product for the company based in Cupertino, California, were up 13.5 percent to $44.58 billion, beating analyst expectations of $40.22 billion. Apple has been shifting production of products bound for the US, sourcing iPhones from India and other products such as Macs and Apple Watches from Vietnam. The ultimate tariff rates many Apple products could face remain in flux, and many of its products are currently exempt. Sales in its Americas segment, which includes the US and could face tariff impacts, rose 9.3 percent to $41.2 billion. In Greater China, where Apple has faced long delays in approval to introduce AI features on its devices, sales were $15.37 billion, up from a year ago and above expectations of $15.12 billion, according to a survey of five analysts from data firm Visible Alpha. That gain was a turnaround from a year-over-year decline in China sales in the March quarter. In a conference call with analysts, Cook said some of that was due to a subsidy program in China to help revive the smartphone market, which boosted some of Apple's products. "It was the first full quarter of the subsidy playing out," Cook told analysts. In an interview with Reuters, Cook said the company set seasonal records for upgrades of iPhones, Macs and Apple Watches. He said Apple estimates about 1 percentage point of its 9.6 percent of sales growth in the quarter was attributable to customers making purchases ahead of potential tariffs. "We saw evidence in the early part of the quarter, specifically, of some pull-ahead related to the tariff announcements," Cook told Reuters, though he also said the active user base for iPhones hit a record high in all geographies. The US is still negotiating with both China and India, with Trump saying India could face 25 percent tariffs as early as Friday. However, analysts said India could still retain cost advantages for Apple in the longer term. "The pull-forward in demand due to tariffs was somewhat expected given the uncertainty around pricing. However, it's important to put this in context as this is typically a slow quarter for Apple, yet they still delivered exceptional results with iPhone growth," Emarketer analyst Jacob Bourne said. Tariffs are only one of Apple's challenges. The company faces competition from rivals such as Samsung Electronics Co in a tough market for premium-priced mobile phones. On the software front, Apple faces challenges from Alphabet, which is quickly weaving AI features into its competing Android operating system. While AI leaders Microsoft and Nvidia have seen their stock market values soar to record highs, Apple's shares have fallen 17 percent in 2025, with investors concerned about the impact of tariffs, and about what they view as slow progress integrating AI features into its products. Apple has delayed the release of an AI-enriched version of Siri, its virtual assistant, but Cook said the company is "making good progress on a personalized Siri." He also said Apple, which has thus far not engaged in the massive capital expenditures of its Big Tech rivals to pursue AI, is "significantly growing" its investments in artificial intelligence. "Apple has always been about taking the most advanced technologies and making them easy to use and accessible for everyone, and that's at the heart of our AI strategy," Cook said. Apple faces regulatory rulings in Europe that threaten to undermine its lucrative App Store business. Apple said sales from its services business, which includes the App Store as well as music and cloud storage, were $27.42 billion, topping analyst expectations of $26.8 billion. Sales of wearables such as AirPods and Apple Watches were $7.4 billion, missing estimates of $7.82 billion. Mac sales of $8.05 billion beat expectations of $7.26 billion, while iPads hit $6.58 billion in sales, missing expectations of $7.24 billion. Apple said gross margins were 46.5 percent in the fiscal third quarter, beating analyst expectations of 45.9 percent, according to LSEG estimates. The company forecast gross margins for the current quarter of 46 percent to 47 percent, with the entire range above estimates of 45.9 percent, according to LSEG data.

Apple's iPhone Sales Soar Despite China Tariff Pressure (and Because of It)

Apple beat expectations with record revenue, rising iPhone sales and a bold A.I. shift. Apple may be the tech company most exposed to the Trump-era global tariffs, with the majority of its iPhones still manufactured in China. But the company calmed Wall Street's concerns with its latest financial results, which showed a surge in iPhone sales. CEO Tim Cook also laid out a roadmap to ease the impact of levies. Sign Up For Our Daily Newsletter Sign Up Thank you for signing up! By clicking submit, you agree to our <a href="http://observermedia.com/terms">terms of service</a> and acknowledge we may use your information to send you emails, product samples, and promotions on this website and other properties. You can opt out anytime. See all of our newsletters During the April-June quarter, Apple's revenue jumped 10 percent year-over-year to $94 billion, while net income rose 9 percent to $23.4 billion. While both figures beat analyst expectations, Apple shares were mostly flat today (Aug. 1). A key driver of that growth was a 13 percent increase in iPhone sales, which climbed to $4.6 billion. Apple attributed the spike in part to customers rushing to buy smartphones ahead of anticipated tariff-related price hikes. The company is currently facing a 20 percent levy on imported Chinese-made products. In May, Apple had warned analysts to expect a $900 million tariff hit for the quarter. The actual impact was closer to $800 million, Cook said on the earnings call. However, he projected that figure could rise to $1.1 billion in the next three months. To mitigate future tariff costs, Apple is accelerating its domestic manufacturing efforts. In February, it announced plans to invest $500 billion to expand U.S.-based production through new facilities, increased hiring, sourcing chips from local suppliers, and -- as announced last month -- launching a manufacturing academy in Detroit. Apple also saw gains in its non-iPhone business. While sales of iPads and Apple Watches declined, Mac revenue rose 15 percent year-over-year to $8 billion during the quarter. The Services division, which includes Apple News+ and Apple TV++, grew 13 percent to $27.4 billion, marking an all-time high. Apple TV+ had a particularly strong quarter. Boosted by hits like the F1 film and shows Severance and The Studio, which together earned 50 Emmy nominations, viewership surged by "strong double digits" during the quarter, according to Cook. The company also signaled momentum on its long-developing A.I. strategy, which has so far trailed competitors. Apple plans to significantly increase its investment in the technology, said CFO Kevan Parekh, though he did not disclose specific figures. The company also intends to shift more employees to A.I.-focused teams. To date, Apple's A.I. work has resulted in over a dozen new features, including writing tools and visual intelligence capabilities. However, unlike rivals such as OpenAI, Meta, and Alphabet, Apple isn't racing to release new hardware centered on the technology. Instead, the company is doubling down on the iPhone. "It's difficult to see a world where iPhone is not living in it," said Cook. "That doesn't mean that we are not thinking about other things as well, but I think that the devices are likely to be complementary devices, not substitution."

Apple shares rise after strong quarterly results amid tariff woes, competition - The Economic Times

Apple shares rose 2% in premarket trading on Friday. Driven by a sharp rebound in its flagship phone sales, Apple posted its fastest revenue growth since 2021.Apple shares rose 2% in premarket trading on Friday, after the iPhone maker's quarterly results topped Wall Street expectations, indicating resilience in the face of global trade tensions and intensifying artificial intelligence rivalry. Driven by a sharp rebound in its flagship phone sales, Apple posted its fastest revenue growth since 2021 and forecast "mid to high single digit" growth for the current quarter, well above analysts' 3.27% estimate. "Although there are specific drivers like China subsidies that can be attributed for some of the exceptional strength, the acceleration in revenue growth ... is equally surprising, especially in a quarter when consumers typically hold off purchases ahead of the next iPhone launch in September," JP Morgan analysts said. Apple has been rebalancing its manufacturing footprint, sourcing iPhones from India and other products such as Macs and Apple Watches from Vietnam, while much of its product line still benefits from tariff exemptions. CEO Tim Cook warned that tariffs would raise costs by $1.1 billion in the current quarter after the company said it took an $800 million hit from tariffs in the third quarter. The company also faces stiff competition from hardware rivals such as Samsung Electronics in the premium smartphone space and software giant Alphabet, which is rapidly embedding AI into Android and ramping up AI spending with growing returns. Among the 'Magnificent Seven' stocks, Apple has lagged behind this year, with its stock down 17%, as it grapples with staying competitive in the fast-evolving AI space. Apple has delayed the release of its AI-enhanced virtual assistant - Siri, and was slow to launch Apple Intelligence, but Cook said the company is making headway and scaling up its AI spending to catch up with Big Tech rivals. "Brand loyalty gives Apple time to get the AI transition right, but it needs to start delivering", said Matt Britzman, senior equity analyst, Hargreaves Lansdown.