Apple Exceeds Sales Expectations - But Tariff Challenges and Competition in China Worry the Company
Apple reported results that narrowly beat Wall Street expectations as consumers stocked up on iPhones amid fears of potential import tariffs from President Donald Trump.
The Cupertino, California-based company said its sales and earnings for the fiscal second quarter ended March 29 were $95.36 billion and $1.65 a share, respectively, compared with analysts’ estimates of $94.68 billion and $1.63 a share, according to LSEG data. iPhone sales were $46.84 billion, compared with estimates of $46.17 billion. While the results were better than analysts had expected, investors are focused on how tariff concerns will play out in the coming quarter.
The Trump administration has so far spared electronics from tariffs, but Washington has signaled that some taxes could come in the coming weeks. The uncertainty has pushed shares of Apple, which makes 90% of its products in China, down about 15% this year, wiping more than $600 billion from its market value.
Microsoft's optimistic forecast pushed its market capitalization to $3.2 trillion, overtaking Apple to take first place.
Apple will try to mitigate the tariffs by shifting production of iPhones destined for the US to India. Analysts expect the company to spread some of the cost of the tariffs through its supply chain, keeping price increases to a minimum to avoid losing market share. It comes at a time when the tech giant faces stiff competition and has experienced delays in launching key artificial intelligence features, such as improvements to its Siri voice assistant.
Apple CEO Tim Cook said iPhone inventory levels at the beginning and end of the fiscal second quarter were comparable, meaning there was no major inventory build-up during the period. Cook said phone sales were boosted by the iPhone 16e, the company's $599 mid-range model that features its first custom modem chip.
The iPhone 16 is Apple's cheapest model, but it has a processor powerful enough to use all the latest artificial intelligence features the company offers.
Apple said sales in Greater China fell to $16 billion, better than analysts’ expectations of $15.9 billion, according to data from Visible Alpha. In China, Apple has faced particularly tough competition from domestic manufacturers such as Huawei and Xiaomi, and has yet to launch key artificial intelligence features that were announced nearly a year ago.
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