Apple Sees Record Growth Amid Tariff Concerns
Apple experienced its best revenue growth in three years, though investors remained skeptical as shares dipped by approximately 1% amidst uncertainties over the sustainability of a surge in iPhone sales driven by tariffs.
The demand for iPhones rose due to preemptive purchases before potential U.S. tariff-related price hikes, boosted by subsidies in China and high interest in the budget 16e model released in February. This led to a remarkable 13.5% increase in quarterly device sales, surpassing expectations.
As a result, total revenue for the April-June quarter exceeded forecasts by 10%, with Apple providing a sales outlook for the upcoming quarter ending in September that also surpassed estimates.
Despite these achievements, Apple faces challenges, including tariff threats in China and India and a lag in adopting artificial intelligence (AI) technology embraced by its competitors.
Analysts noted the rebound in sales in China, where local rivals have outpaced Apple in AI advancement, as a positive sign. The company benefited from a state subsidy initiative in China that boosted smartphone sales.
However, analysts cautioned that the temporary sales surge might not indicate sustained demand for the remainder of the year.
Apple stock performance this year has been lackluster compared to its peers, barring Tesla, with a decline of over 17% while the S&P rose by 7.8% during the same period.
Apple has taken steps to mitigate tariffs by exempting some products and diversifying its supply chain, procuring iPhones from India and other devices like Macs and Apple Watches from Vietnam.
The U.S. is engaged in trade talks with China and India, with President Donald Trump mentioning potential 25% tariffs on India. Apple anticipates a $1.1 billion cost increase due to tariffs this quarter after an $800 million impact in the previous quarter.
Concerns persist about Apple’s AI strategy following delays in launching an AI-enhanced Siri and Apple Intelligence products. CEO Tim Cook expressed optimism about Siri’s progress and Apple’s increased focus on AI investments.
Matt Britzman, a senior equity analyst at Hargreaves Lansdown, emphasized the importance of Apple’s brand loyalty and the need for timely AI advancements to maintain market competitiveness.
