Increased iPhone sales in China signify potential growth for Apple stock. Should investors consider buying, selling, or holding onto their shares?
In a positive development for tech giant Apple, the company has reported a significant rebound in its sales in China, marking the first growth in the market since mid-2023 and ending a two-year decline streak.
Apple's second-quarter earnings for fiscal 2025 surpassed Street forecasts, with total revenue reaching $95.4 billion, up 5.1% year-over-year (YOY). The lead-up month of May delivered the real gains for Apple in China, as the company's iPhone sales grew 8% YOY in Q2 2025.
Several strategic moves were instrumental in this increase in iPhone sales. Apple implemented strategic price reductions and aggressive discounts just before China’s mid-June 618 shopping festival, stimulating consumer demand. The strong sales of the iPhone 16 Pro and Pro Max models benefitted from these price cuts and promotions on major e-commerce platforms like JD.com and Tmall.
In addition, increased trade-in values for older iPhone models and a national subsidy program that provided additional financial support to buyers also contributed to the growth. The subsidy program offered up to 500 yuan subsidies for select devices under 6,000 yuan, creating further affordability for customers.
The combination of these factors significantly improved Apple’s competitive position and helped reverse the previous downtrend in China. However, analysts have warned that subsidy reductions later in 2025 may pose headwinds for sustained growth in the second half of the year.
The Services segment of Apple has become an engine of dependable cash flow, with Services revenue climbing 11.6% YOY to $26.6 billion. Apple's business model has evolved into a powerful ecosystem play, with a commanding market capitalization of $3.2 trillion. The company's Products revenue was $68.7 billion, growing 2.7% YOY, led by better-than-expected iPhone, iPad, and Mac sales.
Apple's outlook for growth in China appears cautiously optimistic, with the company expected to post high single-digit growth for the remainder of the quarter. The company pays an annualized forward dividend of $1.01 per share, yielding 0.47%, with its most recent payout made on May 15. The company has raised its dividend for 13 consecutive years.
Apple has carved out leadership in the wearables and hearables markets through sustained demand for the Apple Watch and AirPods. Operating cash flow remained strong at $24 billion, and the company's active installed base of devices hit record levels across all categories and geographies.
The growth in China is attributed to Apple slashing prices aggressively in May and support from a national subsidy program. Despite previous challenges such as trade tensions, regulatory restrictions, and strong competition from domestic brands, China remains a critical revenue source for Apple. The company faces ongoing challenges in this fiercely competitive market, but its strategic pricing, subsidy utilization, and high demand for flagship models underpin the positive growth outlook in China for the near term.
- The growth in Apple's sales in China, ending a two-year decline streak, has caught the eye of investors, potentially attracting more attention to the company's stock-market performance.
- As technology advancements continue to drive the demand for smartphones, Apple's aggressive pricing strategies, such as price reductions and discounts, could encourage investing in the company's stock, particularly for those interested in the finance sector.
- The success of Apple's business in China, primarily due to the iPhone 16 Pro and Pro Max models and the influence of government subsidies, could spur further investment in the company's technology sector, as well as its efforts to expand its product range, including gadgets and wearables like the Apple Watch and AirPods.
