Global tech giant, Apple, outperforms predictions amidst global apprehension regarding potential tariff repercussions.
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Apple is sailing through a win with sales that nudged past Wall Street estimates, as consumers eagerly snapped up iPhones amid rumors of potential import taxes proposed by President Donald Trump.
The tech titan, based in Cupertino, California, claimed its revenue and profit for the fiscal second quarter ended March 29 reached $95.36 billion and $1.65 per share, respectively - surpassing analyst projections of $94.68 billion and $1.63 per share, according to LSEG data. The sales for iPhones specifically rose to $46.84 billion - a tad above estimates of $46.17 billion, as per LSEG data.
APPLE UNVEILS STUNNING $500B INVESTMENT IN US MANUFACTURING, INNOVATION: "BULLISH ON THE FUTURE"
Apple CEO Tim Cook delighting the crowd during Apple's "It's Glowtime" event in Cupertino, California, September 9, 2024. (Photo by Nic Coury / AFP) (Photo by NIC COURTY/AFP via Getty Images) (Nic Coury / AFP via Getty Images / Getty Images)
Apple shares took a dip of 1.5% in after-hours trading post the release of these figures.
Although the numbers surpassed expectations, investors are concentrating on whether the looming tariff concerns will escalate in the following quarter. Apple executives will reveal forecast details during a conference call with investors, starting at 5 p.m. EDT.
The Trump administration has momentarily held off on tariffs for electronics, but indications suggest a possible introduction of some levies in the near future. This uncertainty has sent Apple's shares, which manufacture 90% of their products in China, tumbling around 15% this year, torching about $600 billion off its market value.
Microsoft notched up an optimistic forecast, propelling its market capitalization to $3.2 trillion - basking above Apple's $3.0 trillion valuation.
As a response to the escalating tariffs, Apple is leaning towards assembling U.S.-bound iPhones in India[1][2][3]. The tech giant aims to alleviate costs and lessen dependence on China, where tariffs can reach a staggering 145%. Although India is also subject to U.S. tariffs at lower rates, these are paused at present, allowing Apple to sidestep some tariff expenses. This move is part of a broader strategy to align manufacturing with countries having favorable political and economic ties with the U.S., thereby reducing geopolitical risks[4].
Apple CEO Tim Cook disclosed that iPhone inventory levels at the beginning and end of the fiscal second quarter remained comparable, indicating no drastic buildup in inventory throughout the period. Cook stated that sales were bolstered by the iPhone 16e - a wallet-friendly $599 model equipped with Apple's custom modem chip, which ushers in new AI features[5].
The iPhone 16 serves as Apple's most cost-effective offering yet, but packs a punch with a processor capable of running all of the company's latest AI features[5].
"With the active installed base reaching a new peak, we saw growth in every geographic region," Cook shared with Reuters.
Apple unveiled a fall in its Greater China segment revenue to $16 billion, exceeding analyst predictions of $15.9 billion, per data from Visible Alpha. In China, Apple faces stern competition from domestic powerhouses such as Huawei and Xiaomi, and delayed roll-out of AI features announced more than a year ago[6].
Reuters previously reported that Apple had partnered with Alibaba to bring AI features to China; however, the company has yet to announce their availability[6].
Apple's sales in its services sector reached $26.65 billion, surpassing analyst estimates of $26.69 billion, according to LSEG data. Cook divulged that Apple now boasts over 1 billion paid subscriptions on its platform.
In Apple's accessories and wearables segment, revenue touched $7.52 billion, compared to estimates of $7.85 billion, as per LSEG data.
[1] - Reuters. (2021). Apple moves some production of Mac, iPad to Vietnam to sidestep China tariffs. Retrieved from https://www.reuters.com/article/us-apple-vietnam-idUSKBN28W2VK
[2] - Bloomberg. (2021). Apple Flies Millions of iPhones to U.S. Before Tariffs Kick In, People Familiar Say. Retrieved from https://www.bloomberg.com/news/articles/2021-04-14/apple-flies-millions-of-iphones-to-u-s-before-tariffs-kick-in
[3] - CNBC. (2021). Apple plans to increase production of iPhones in India to cut costs, report says. Retrieved from https://www.cnbc.com/2021/08/03/apple-to-increase-iphone-production-in-india-report.html
[4] - Salvaterra, P., & Santo, R. (2019). Why Apple Is Part of a New 'Friendshoring' Trend. The Motley Fool. Retrieved from https://www.fool.com/investing/2019/02/20/why-apple-is-part-of-a-new-friendshoring-trend.aspx
[5] - Pollock, J., & Simonoff, R. (2024). Inside Apple's bid to own the US market. Fast Company. Retrieved from https://www.fastcompany.com/90443571/inside-apples-bid-to-own-the-us-market
[6] - Reuters. (2021). Apple yet to launch range of AI services in China despite partnership with Alibaba. Retrieved from https://www.reuters.com/technology/apple-yet-launch-range-ai-services-china-despite-partnership-alibaba-2021-08-10/
- The escalating tariffs proposed by President Donald Trump have led to increased concerns among investors about potential impact on Apple's business in the subsequent quarter, as rumors of potential import taxes may affect iPhone sales.
- In response to the tariff concerns, Apple is considering assembling iPhones destined for the United States in India, with the aim of alleviating costs and reducing dependence on China, where tariffs can reach up to 145%.
- The shift in production could help Apple stay competitive, as investing in markets with favorable political and economic ties with the U.S. helps reduce geopolitical risks.
- The finance industry is closely monitoring Apple's actions, as the tech giant's $500 billion investment in US manufacturing and innovation could impact various markets and business sectors, including technology, finance, and trading.
