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Apple posted revenues for the blockbuster quarter on Thursday, but failed to shake up investors’ fears that iPhone makers are struggling with US President Donald Trump’s trade war and are behind in the AI race.
Stocks rose just 2% in after-hours trading, falling below this week’s highs despite earnings from the end of June to the end of June being far better than expected to increase 10% year-on-year.
“I think investors are just shrugging on the good news and talking to the wall of uncertainty for Apple investors today,” said Gene Munster, managing partner at Deepwater Asset Management. “It will basically be a ‘Show Me’ story. ”
Apple has been hit hard by Trump’s trade and tariff agenda since its release on “liberation day” in April, sweeping around $700 million from its market capitalization.
The concern that the company has also lagged behind its rivals in the competition to develop artificial intelligence has attracted investors in recent months, pushing for legal and regulatory decisions, poses a long-term threat to its services business.
Apple’s stock has declined 17% since the start of the year prior to its earnings reporting, and has earned significant profits from major high-tech peers such as NVIDIA, Microsoft and Meta.
The company expects tariff-related costs of around $1.1 billion from the quarter until September, assuming the current tariff rates remain the same, Tim Cook said.
Just hours after Apple announced its revenues on Thursday, Trump reimposed tariffs on imports from key partners, including India. Cook previously saw a “many” of iPhones currently born from India and sold in the US.
The $1.1 billion tariff impact is a $30-dollar tech giant’s “Champ change,” but Munster said the extra costs “psychologically…just keep investors on needles with the biggest fears, it slows growth.”
Cook faced many questions about Thursday’s revenue calls with analysts, focusing on its delayed AI efforts and how tariffs will affect the vast global supply chain and sales of critical devices.
Global iPhone sales increased 13.5% year-on-year to $44.6 billion from the quarter to June.
Chief Financial Officer Kevan Parekh said there was “some evidence” that sales were boosted by orders that customers had ordered U.S. tariffs earlier in the quarter.
He estimated that the tariff-related boost from early shopping was worth “about 10 points of year-over-year growth.”
Munster said the quarter’s revenue boost could be partly due to an increase in customer pool due to upgrades to aging devices.
Apple said the total margin, which is closely monitored for tariff costs indications regarding profitability, was 46.5% for the quarter, which is better than the 46% estimate.
The current quarter is expected to “medium to single-digit growth,” with total margins remaining stable between 46% and 47%.
In China, Apple sales are struggling to compete with local mobile phone manufacturers such as Huawei and Xiaomi. However, revenue from China has risen 4% quarterly from a year ago to $15.4 billion, falling into a quarterly decline.
Cook told analysts that China’s growth is being driven by the iPhone, with some of Apple’s products benefiting from the new government subsidy program for smartphones.
Services revenue, including the App Store, Icloud and Apple Pay, was $27.4 billion, up about 13% year-on-year, continuing double-digit growth.
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Earnings per share was $1.57, while consensus estimates were $1.43, while net income also increased by $23.4 billion compared to $21.4 billion.
Cook said Apple is expanding its AI investment. “We did it again in the June quarter, in the September quarter,” he told analysts without giving a specific number.
The company said, “A considerable number of people are coming back to focus on AI capabilities.
Apple spent $8.8 billion on research and development over the three months leading up to June, about $800 million more than last year.
Cook said he is also open to buying companies that will boost Apple’s AI efforts. “We are very open to M&As that accelerate our roadmap (and we are not stuck in a company of a particular size.”
