Apple overcomes Trump's trade war, slow start in AI to deliver surprisingly strong quarter
The April-June results released Thursday came against a backdrop of adversity that has been raising worries about the trajectory of a longtime tech kingpin.
Despite the doubts, Apple remains a moneymaking machine.
The Cupertino, California, company earned $23.4 billion, or $1.57 per share, during its fiscal third quarter, a 9% increase from the same time last year. Revenue climbed 10% from a year ago to $94 billion. The company's iPhone sales surged 13% from a year ago to $44.6 billion. In another positive development, Apple's business in China showed signs of snapping out of a prolonged malaise with a 4% bump in revenue from the same time last year.
All those numbers were well above the analyst projections that steer investors, helping to boost Apple's recently slumping stock price by 2% in extended trading. But the unexpectedly solid performance doesn't necessarily mean it's smooth sailing ahead for Apple.
President Donald Trump's trade war targeting foreign-made products such as the iPhone and Apple's stumbling start in the pivotal transition to AI is causing investors to question if the company will remain at the tech forefront as the industry moves into a new era.
Before Thursday's report came out, Apple's stock price had plunged by 17% so far this year to wipe out more than $600 billion in shareholder wealth and knock the company off its perch as the world's most valuable company. Meanwhile, the shares of AI chipmaker Nvidia have surged 32% this year and the shares of AI pacesetter Microsoft have gained 27%, propelling the market value to $4 trillion.
Even though Apple remains highly profitable, the tariffs that Trump has already imposed on China and other countries cost the company $900 million during the past quarter, with even more financial pain looming as his administration threatens to ramp up the fees.
Apple softened the blow of Trump's tariffs on products made outside the U.S. during the past quarter by shifting its production of iPhones from China to India. But the administration intends to impose a 25% tariff on goods from India, a move that could intensify the pressure on Apple to raise the prices on the next generation of iPhones expected to be released in September.
Meanwhile, Apple is still trying to fulfill the AI promises it made last year when it unveiled an array of new iPhone features built on the revolutionary technology, raising expectations that the shift would spur millions of people to upgrade their old devices. But Apple still hasn't delivered on an AI upgrade that was supposed to smarten up its often-bumbling virtual assistant Siri, one of the main reasons underlying the lackluster growth of iPhone sales.
'There are two big questions looming over Apple: How are you going to rejigger your business model to deal with the new tariff backdrop and then what is the company going to do to drive an upgrade cycle for the iPhone?' said Melissa Otto, a stock market analyst for S&P's Visible Alpha.
Through Apple's recent ups and downs, the company has been able to rely on one consistent stronghold: the services division, which includes the iPhone app store, streaming subscriptions, product repair plans and other operations that generate recurring revenue. That was the case again in the past quarter, with services revenue rising 13% from last year to $27.2 billion.
But a significant portion of Apple's services revenue could evaporate, depending on how a federal judge decides to curb the abuses of Google's illegal monopoly in search. A ban on Google paying Apple more than $20 billion annually to lock in its search engine as the default on the iPhone, iPad and Mac computers is among the measures that U.S. District Judge Amit Mehta is considering as part of a decision expected before Labor Day.
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28 minutes ago
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A 2024 KFF poll showed that the majority of Americans are worried about prescription medication costs being too high. Such worries shouldn't be that surprising. Many prescription medications are not like mullets or fruitcakes. Taking them is often not a choice. Your well-being and even your life could literally depend on being able to afford the medication. And many pharmaceutical companies have shown no qualms about raising the price of medications as soon as they can. For example, even after receiving substantial funding from the U.S. government, Pfizer and Moderna quickly raised the prices of their COVID-19 vaccines as soon as the government wouldn't completely pay for them, as I described in Forbes in 2023. It is also true that talk about drug prices being too high in the U.S. is not new. Yet, none of the Presidential Administrations over the past two decades have done much to significantly alter these trends. 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an hour ago
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