Apple expects a billion dollar U.S tariff ‘hit'

Tahawul Tech

2 days ago

Apple has reported strong revenue from China and acceptable iPhone sales, giving the company a necessary boost in light of recent business struggles over the past year.
That better-than-expected performance reassured Wall Street investors that key parts of its business are holding steady as Apple struggles to keep pace with rivals in the artificial intelligence race and navigates President Donald Trump's looming tariffs. Apple could incur $1.1 billion in tariff-related costs in the September quarter, CEO Tim Cook said on a call with analysts, which would be up from the $800 million this past quarter.
The iPhone generated $44.5 billion in revenue for the quarter that ended in June, beating analyst expectations of $40 billion and last year's results of $39.3 billion for the same period. Overall revenue came in $94 billion in the quarter, marking a 10% increase year-over-year.
Sales of iPhones also grew in China, where the company has underwhelmed recently, growing from $14.7 billion in the third quarter of 2024 to $15.3 billion this past quarter.
Apple shares were up a little more than 2% in after-hours trading. But that's a much smaller boost than tech giants Microsoft and Meta, which saw there shares surge by nearly 7% and over 9% respectively on Wednesday thanks to their AI investments. Apple has woefully underperformed its rivals. The stock is down nearly 15% this year, missing out on the market's big rally over the past several months.
There was a time when surging iPhone sales would have been enough to excite Wall Street. But analysts pressed Apple CEO Tim Cook about the company's vision for how AI will shape future products and how the company views the iPhone's relevance in the AI age.
But Cook believes the iPhone will continue to be essential even as AI plays a bigger role in everyday life.
'It's difficult to see a world where iPhone's not living in it,' he said in response to a question about how Apple is preparing for a scenario in which people rely more on voice assistants and less on screens. 'And that doesn't mean that we are not thinking about other things as well, but I think that the devices are likely to be complementary devices, not a substitution.'
Big quarter for the iPhone
The iPhone generates more revenue than any other Apple product, making it the company's most important business in Wall Street's eyes. Apple CEO Tim Cook said on a call with analysts that the company set a June quarter record for iPhone sales, growing 13% year-over-year.
But Trump's whipsaw tariff policies have required Apple and other tech giants to rethink how they manufacture and ship devices like smartphones and computers. Investors are also eager for Apple to make a bigger splash in artificial intelligence as other tech behemoths like Google, Meta and Microsoft push forward.
Apple shifted most production of US-bound iPhones from China to India earlier this year to avoid Trump's tariffs. Smartphones were exempt from the previous reciprocal levies on China that would have increased the tariff rate to a staggering 145%, but Trump has also said companies like Apple and Samsung could face a 25% tariff unless they make their smartphones in the US. A temporary trade deal between the two powerhouse economies will keep tariffs at 30% until August 12, while Trump threatened India with tariffs as high as 25% earlier this week.
When asked about how the company is handling its product assembly based on the tariff situation, Cook said there hasn't been a change since last quarter; the 'vast majority' of iPhones sold in the United States have India as their country of origin.
He also reiterated that Apple has a strong presence in the United States, with roughly 19 billion chips coming out of the US currently.
Source: CNN
Image Credit: Apple