Apple’s stock dipped slightly despite strong revenue growth, as investors eye potential impacts from U.S. tariffs and competition in AI.
Apple’s shares saw a modest decline of about 1% on Friday, even as the company posted its strongest revenue growth in three years. Investors are scrutinizing the sustainability of iPhone sales surges, which have been boosted by consumers anticipating potential price hikes due to U.S. tariffs.
Did you know? The “pull-forward” effect, where consumers buy ahead of anticipated price increases, is also a factor in China, contributing to Apple’s recent sales boost.
iPhone sales surge driven by tariff fears and subsidies
A rush to buy iPhones, fueled by fears of impending U.S. tariffs, coupled with Chinese government subsidies and strong demand for the economical 16E model released in February, propelled a 13.5% leap in quarterly iPhone sales. This performance significantly surpassed market expectations.
This surge in device sales contributed to a 10% overall revenue growth for Apple in the April-June period, exceeding analyst forecasts. The company also provided a sales outlook for the current quarter, ending in September, that also outpaced analyst estimates.
Concerns linger over AI strategy and long-term growth
These positive results arrive at a critical juncture for Apple, a company long considered a remarkably safe bet among tech giants. Beyond the looming threat of tariffs impacting its production hubs in China and India, Apple has been perceived as slow to adopt artificial intelligence technologies, a sector competitors are aggressively pursuing as the next frontier for growth.
Analysts note that the resurgence in sales within China is a welcome development, particularly given that local rivals have been quicker to integrate advanced AI features. Apple has benefited from a government subsidy program in China, the world’s largest smartphone market, designed to bolster sales.
However, these same analysts caution that the recent sales increase, driven by consumers “pulling forward” their purchases, may only be temporary, raising questions about demand for the remainder of the year.
- Apple’s shares fell 1% despite a 10% revenue increase, driven by strong iPhone sales.
- iPhone sales jumped 13.5% due to tariff fears, Chinese subsidies, and demand for the 16E model.
- Analysts express concern over the temporary nature of this sales surge and Apple’s AI strategy.
- Apple’s stock has underperformed most “Magnificent Seven” peers this year, excluding Tesla.
- The company is rebalancing its supply chain to mitigate tariff impacts, producing in India and Vietnam.
Analysts at Maffettnathanson observed, “The pull-forward phenomenon is not just an American issue. It also concerns China. There, the pro-iPhone models were too expensive to benefit from Chinese government subsidies … so they lowered prices to return to the requirements, focusing on the volumes. It worked.” They added, “But, as in the United States, what does this mean for the rest of the year?”
What is the market performance of Apple’s stock?
Since the start of the year, Apple’s stock has lagged behind most of its “Magnificent Seven” counterparts, with the exception of Tesla. It has seen a drop of over 17%, while the broader S&P index has risen by 7.8% during the same period.
Supply chain adjustments and tariff impacts
Many of Apple’s products currently face no tariffs. The company is actively diversifying its supply chain to protect against potential duties, manufacturing iPhones in India and other products like Macs and Apple Watches in Vietnam.
The United States is currently engaged in trade discussions with both China and India. U.S. President Donald Trump has previously indicated that India could face tariffs as high as 25%, potentially starting from Friday.
Apple has stated that tariffs are expected to increase its costs by $1.1 billion in the current quarter. This follows a negative impact of $800 million from tariffs in the third quarter.
AI development remains a focus
Apple’s approach to artificial intelligence continues to be a point of concern, particularly after the company delayed the release of an enhanced version of Siri and was late to market with its Apple Intelligence features.
Tim Cook, Apple’s CEO, stated on Thursday that the company is making significant progress with Siri and is “growing significantly” its investments in AI.
“Brand loyalty gives Apple the time needed to properly manage the AI transition, but now it needs to start delivering,” commented Matt Britzman, a senior equity analyst at Hargreaves Lansdown.
