Apple beats Trump tariffs, slow start in AI to deliver strong quarter

Business Standard

3 days ago

Apple shook off a thicket of tariffs and a botched entry into artificial intelligence to accelerate its revenue growth during its springtime quarter, but the trendsetting tech company still faces a bumpy road ahead that could lead to higher iPhone prices.
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 that expects to absorb a setback of nearly $2 billion from the tariffs that President Donald Trump has already imposed and others in the pipeline.
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 per cent increase from the same time last year. Revenue climbed 10 per cent from a year ago to $94 billion. The company's iPhone sales surged 13 per cent 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 per cent 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 about 3 per cent in extended trading. But the unexpectedly solid performance doesn't necessarily mean it's smooth sailing ahead for Apple.
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 per cent 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 per cent this year, and the shares of AI pacesetter Microsoft have gained 27 per cent, 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 $800 million during the past quarter, and CEO Tim Cook told analysts during a conference call that the fees would exact an additional toll of $1.1 billion during the July-September period. The company also predicted its revenue for the July-September period would increase at a slightly slower pace than the past quarter.
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. Cook didn't address the possibility of an iPhone increase during his Thursday remarks to analysts.
Meanwhile, Apple is still trying to fulfil 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.
But Cook spent much of the conference call celebrating the ongoing popularity of the iPhone, noting that Apple has now sold more than 3 billion of them since the device's debut in 2007. He also credited the AI features that Apple has been able to introduce for spurring a flurry of customers upgrading to the iPhone 16 models that came out last year.
We see AI as one of the most profound technologies of our lifetime, Cook said. We are embedding it across our devices and platforms and across the company.
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.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)