Apple earnings under pressure from tariffs, slow AI roll-out
Wall Street expects the company to post a 4.2 per cent rise in revenue for the April-June quarter to US$89.34 billion. Still, the focus will be on how Apple plans to adjust to a landscape that has turned its global supply chain, long a strength, into a potential liability.
U.S. President Donald Trump has targeted the consumer electronics giant for its reliance on overseas manufacturing, threatening 25 per cent tariffs on foreign-made iPhones. To limit the damage, Apple shifted production of U.S.-bound iPhones to India, further drawing Trump's ire.
Trump on Wednesday imposed a 25 per cent tariff on goods imported from India starting August 1, in what could be a setback for Apple.
The total volume of Indian-made smartphones had jumped 240 per cent in the second quarter, largely driven by Apple's supply chain shift, according to research firm Canalys.
Analysts and investors are now expecting the strategy to help Apple limit the hit from tariffs to well below US$900 million it had estimated in May.
IPhones are 'a very high-profile product that both the Chinese and the U.S. governments understand they have a lever over,' D.A. Davidson analyst Gil Luria said. 'So until the tariff rates get settled, Apple is very much at risk of being impacted by the current trade dispute.'
Analysts also said Apple, like many other firms, potentially overestimated tariff costs to leave room for an earnings beat.
'Most companies we follow have made conservative assumptions by overestimating tariff costs as the goal of management is generally to beat its own guidance,' said Jamie Meyers, senior analyst at Apple shareholder Laffer Tengler Investments.
Sales of iPhones are expected to have risen 2.2 per cent in Apple's fiscal third quarter, according to data compiled by LSEG, helped by an improvement in demand in China, Apple's third-largest market. In the fiscal second quarter, this increased 1.9 per cent.
Counterpoint Research data shows iPhone sales in the world's largest smartphone market jumped eight per cent in the quarter, fueled by steep discounts during the 618 shopping festival, government-backed trade-in subsidies and targeted iPhone 16 Pro promotions.
Sales of Apple's other devices are expected to have slowed in the April-June period, while revenue from services - its fastest-growing segment in recent years - is likely to rise to 10.7 per cent. In the January-March period, services revenue grew 11.6 per cent.
Doubts still remain over Apple's prospects in China, where domestic companies including Honor are rolling out smartphones packed with AI features such as generative AI photo editors.
Apple's cautious approach to AI has fueled concerns it is sitting out what could be the industry's biggest growth wave in decades. The company was slow to roll out its Apple Intelligence suite, including a ChatGPT integration, while a long-awaited AI upgrade to Siri has been delayed until next year.
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Reporting by Akash Sriram and Zaheer Kachwala in Bengaluru; Editing by Aditya Soni, Sayantani Ghosh and Anil D'Silva
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Toronto Sun
an hour ago
- Toronto Sun
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Get email updates from your favourite authors. THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK. Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors Don't have an account? Create Account The closest thing to winners may be the countries that caved to Trump's demands — and avoided even more pain. But it's unclear whether anyone will be able to claim victory in the long run — even the United States, the intended beneficiary of Trump's protectionist policies. 'In many respects, everybody's a loser here,' said Barry Appleton, co-director of the Center for International Law at the New York Law School. Barely six months after he returned to the White House, Trump has demolished the old global economic order. Gone is one built on agreed-upon rules. 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an hour ago
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Safe Harbor for Forward-Looking Statements During the course of the presentation, Electronic Arts may disclose material developments affecting its business, and make forward-looking statements regarding future events or the future financial performance of the company that are subject to change. Statements including words such as 'anticipate,' 'believe,' 'expect,' 'intend,' 'estimate,' 'plan,' 'predict,' 'seek,' 'goal,' 'will,' 'may,' 'likely,' 'should,' 'could' (and the negative of any of these terms), 'future' and similar expressions also identify forward-looking statements. These forward-looking statements are not guarantees of future performance and reflect management's current expectations. Our actual results could differ materially from those discussed in the forward-looking statements. 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