Apple’s highly anticipated quarterly earnings report has not alleviated investor worries regarding significant challenges such as rising tariff expenses and a downturn in the Chinese market.
In premarket trading on Friday, shares of Apple fell approximately 2.8 percent. The company’s second-quarter results, released earlier, revealed disappointing sales figures from China. Furthermore, Apple indicated in its Thursday announcement that tariffs will lead to increased costs in the upcoming quarter, highlighting the detrimental effects of geopolitical tensions on its operations.
CEO Tim Cook stated during a conference call that Apple anticipates $900 million (around Rs. 7,603 crore) in additional costs due to tariffs this quarter. Despite this, the company expects revenue growth in the low- to mid-single digits, falling short of the five percent average estimated by analysts. Apple did not offer any outlook regarding the impact of tariffs for future periods.
“We will manage the company as we always have, through thoughtful and deliberate decisions, with an emphasis on long-term investments,” Cook remarked during the call.
Sales in China declined by 2.3 percent, totaling $16 billion (approximately Rs. 1,35,165 crore) for the second quarter ending March 29. Analysts had forecasted sales of $16.83 billion (about Rs. 1,42,164 crore), indicating growing troubles in a previously thriving market for Apple.
The company has seen increasing competition from local smartphone brands like Huawei, Xiaomi, and Oppo, and has faced restrictions from the Chinese government, which has banned foreign technology in certain work environments. In addition, Apple’s production reliance on China has made it particularly vulnerable to tariffs introduced by the previous US administration.
Apple also faces challenges in the artificial intelligence sector, notably in China, where its Apple Intelligence platform has not yet debuted. Furthermore, the brand is viewed by consumers in China as outdated, especially as competitors launch innovative foldable devices.
Looking ahead, Apple plans to introduce its AI services in China in the coming months, working with partners such as Alibaba Group Holding Ltd. and Baidu Inc., and a foldable iPhone is set to debut next year.
In its quarterly report, Apple announced an increase of $100 billion (approximately Rs. 8,44,670 crore) to its share buyback program and a four percent increase in its quarterly dividend to 26 cents per share. Prior to the report, Apple shares had already seen a 15 percent decline this year.
Overall, the company reported a five percent increase in sales, bringing in $95.4 billion (around Rs. 8,05,821 crore) last quarter, surpassing the $94.6 billion (approximately Rs. 140) analyst estimate. Earnings per share reached $1.65, exceeding the expected average of $1.62 (about Rs. 135).
In terms of iPhone sales, Apple sold $46.8 billion (approximately Rs. 3,95,379 crore) worth of devices, surpassing estimates of $45.9 billion (around Rs. 3,87,804 crore). However, this marks only a slight increase of less than two percent from $46 billion (approximately Rs. 3,88,355 crore) the previous year, and a decrease from $51.3 billion (about Rs. 4,33,391 crore) two years ago.
The latest iPhone models have not demonstrated significant improvements compared to their predecessors, often featuring the same AI functionalities as the iPhone 15 Pro released last year, giving consumers fewer incentives to upgrade.
The quarter also saw the introduction of the iPhone 16e model, which replaces the lower-end $429 (about Rs. 36,240) SE model. The new device’s $599 (approximately Rs. 50,604) price point is higher than many of its competitors, which may have impacted sales. Apple is expected to unveil more significant updates to the iPhone lineup later this year, including a more refined design. Cook commended the new C1 modem chip featured in the 16e, indicating that it marks the start of a new path for the company.
Apple navigates a variety of hurdles beyond the tariff concerns. Recently, the company has seen shifts in its AI management and faces increasing regulatory scrutiny both in the EU and domestically. A federal judge has prompted Apple to allow third-party payment options within its App Store, which could impact revenue from external purchases.
On the services front, which encompasses the App Store and Apple TV+, revenue increased by 12 percent to $26.7 billion (approximately Rs. 2,25,568 crore), aligning with analysts’ expectations. However, this segment faces threats from recent rulings impacting App Store income and attempts by the US government to dismantle Apple’s lucrative agreement with Google regarding search services.
Due to prevailing uncertainties, Apple has refrained from offering specific guidance regarding future growth in its services segment.
In the Mac division, which recently launched new MacBook Air and Mac Studio models, revenue reached $7.95 billion (about Rs. 67,151 crore), outperforming estimates of around $7.8 billion.
The iPad segment brought in $6.4 billion (approximately Rs. 54,051 crore), exceeding the predicted $6.1 billion (about Rs. 51,518 crore). In March, Apple revamped its lower-end iPad and Air models, introducing versions powered by faster M3 processors. A new iPad Pro featuring an M5 chip is anticipated as early as the end of this year, as reported by Bloomberg News.
Meanwhile, the Wearables, Home, and Accessories category faced challenges, generating $7.52 billion (around Rs. 63,510 crore) in sales, which was below the average estimate of $8.05 billion (about Rs. 67,980 crore).
Tariff implications remain a significant concern. While Apple may avoid the proposed 145 percent tariff on products from China, new levies on electronics loom. This uncertainty could disrupt the company’s supply chain and may necessitate price increases.
Cook recently stated that he had no updates on potential price hikes.
In an effort to mitigate the impact of tariffs, Apple is shifting a substantial portion of its iPhone production to India, which now accounts for half of US demand. Cook noted that the majority of production for Apple Watches, AirPods, iPads, and Macs destined for the US will occur in Vietnam, where tariffs are more favorable than those imposed by China.
In its quarterly report, Apple emphasized “trade and other international disputes” as one of the risks and uncertainties, a statement typically included in its annual filings.
Despite these tariff concerns, Apple saw a surge of customers rushing to retail locations to purchase iPhones and other products in anticipation of potential price increases. This influx is expected to be reflected in sales for the upcoming June quarter, according to Cook, who noted that while tariffs did not drive extra demand during the March quarter, he remains uncertain about their precise impact in the current period.
Cook avoided discussions regarding increasing manufacturing in the US but mentioned that the company will utilize tens of millions of US-made processors this year.
Regarding Apple’s AI initiatives, Cook addressed queries about the delays related to the new version of the Siri voice assistant, stating that the company requires additional time to ensure features meet Apple’s “high-quality bar.”
“We are making progress,” he asserted. “We look forward to delivering these features to our customers.”
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(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
