Tariff, AI strategy in focus as Apple (AAPL) prepares for Q2 earnings

Apple Inc. (NASDAQ: AAPL) is set to publish its highly anticipated second-quarter report this week, as speculation mounts over the impact of new import tariffs on the business. Recently, concerns have emerged about the gadget giant’s AI strategy, with iPhone sales showing signs of weakness and Apple Intelligence facing criticism for its perceived shortcomings.

Apple’s stock peaked in December 2024, after consistently setting new records over the past several months. Since then, the shares pulled back and slipped to a one-year low early this month. The company has lost significant market cap as the tariff-related trade tensions escalated, particularly due to its heavy reliance on China for production. At one point, Microsoft briefly overtook Apple to become the world’s most valuable company. AAPL has lost about 16% since the beginning of 2025.

Q2 Report on Tap

The company is poised to publish its Q2 2025 results on Thursday, May 1, at 4:30 pm ET. As per analysts’ consensus estimates, revenues increased about 4% from last year to $94.36 billion in the second quarter. The earnings forecast for the March quarter is $1.62 per share, compared to $1.53 per share in the corresponding quarter of 2024.

From Apple’s Q1 2025 earnings call:

“We grew in the majority of markets we track and reached all-time revenue records in several developed markets, including Canada, Western Europe, and Japan, and in emerging markets like Latin America, the Middle East, and South Asia. The iPhone active install base grew to an all-time high in total in an average geographic segment. We also set an all-time record for upgraders. According to a recent survey from Kantar, during the December quarter, the iPhone was a top-selling model in the U.S., urban China, India, the U.K., France, Australia, and Japan.”

iPhone Sales Drop

For the first three months of fiscal 2025, the tech firm reported net sales of $124.30 billion, compared to $119.58 billion in the same period of 2024. There was a 1% decrease in iPhone sales, which account for more than 50% of total revenue. Net income, on a per-share basis, rose to $2.40 from $2.18 in Q1 2024. Earnings exceeded estimates, marking the eighth consecutive beat. Net profit was $36.3 billion in Q1, compared to $33.9 billion in the year-ago period.

Currently, the main challenge to Apple’s business is the worsening trade relations between the US and China, which is both a supplier and an important market for the company. Ongoing uncertainties in the global economy and geopolitical tensions also weigh on its prospects.

Apple shares have been trading below their 52-week average price since the beginning of this month. On Tuesday, the stock opened higher and was trading slightly above $210 in the afternoon.