After strong Q2 report, Apple (AAPL) hints at tariff headwinds ahead

Apple Inc. (NASDAQ: AAPL) reported better-than-expected second-quarter results this week but the gadget giant’s stock declined after the management’s cautious comments on tariffs and concerns over the performance of the services business dampened investor sentiment.

Stock Dips

On Friday, the Cupertino-headquartered company’s stock maintained its post-earnings downturn and was down 4% in early trading. AAPL’s performance has been disappointing in the recent past, declining steadily after peaking in December last year. The shares have dropped 18% in the past four months, mainly driven by concerns over the escalation of the US-China trade war.

It is worth noting that Apple’s quarterly sales and profit consistently beat estimates for over two years, showing the company’s resilience to market challenges and the strength of its business model. Apple’s CEO Tim Cook has warned of uncertainty over the trade tension beyond the first half, reflecting the heavy tariffs on imports from China. However, the company relies on its expanding supply chain and manufacturing presence in other countries like India and Vietnam to mitigate the impact of tariffs.

Sales Beat

The tech firm’s second-quarter earnings, on a per-share basis, rose to $1.65 from $1.53 a year earlier, surpassing expectations. Net profit was $24.78 billion in Q2, compared to $23.64 billion in the year-ago period. Sales increased to $95.4 billion in the March quarter from $90.75 billion in the same period of 2024. The top line exceeded estimates. There was a 1.9% increase in iPhone sales. All geographical regions except China registered revenue growth in Q2, with sales growing across the main business segments. Services revenue fell short of expectations, despite a 12% YoY growth that surpassed the other segments.

Commenting on the tariffs, Tim Cook said at the Q2 earnings call, “For the March quarter, we had a limited impact from tariffs as we were able to optimize our supply chain and inventory. For the June quarter, currently, we are not able to precisely estimate the impact of tariffs as we are uncertain of potential future actions prior to the end of the quarter. However, for some color, assuming the current global tariff rates, policies, and applications do not change for the balance of the quarter and no new tariffs are added, we estimate the impact to add $900 million to our costs.”

Risks

Apple is exposed to the ongoing trade war due to its dependence on China for both manufacturing and selling products. As a global company, it is highly sensitive to economic uncertainties and geopolitical tensions. Recently, the company faced criticism for lackluster iPhone sales and perceived glitches in Apple Intelligence, an AI system designed to enhance user experience across its devices.

Apple’s stock opened at $213.32 on Friday and mostly traded lower during the session. The shares have been trading below their 12-month average value since last month.