Apple (AAPL) shares stumbled in early Friday trading after the company warned it expects a $900 million tariff headwind in the current quarter. The warning overshadowed an otherwise upbeat earnings report, as investors digest the potential long-term impact of escalating trade tensions with China under President Trump’s aggressive tariff policy.
CEO Tim Cook, when pressed by analysts, declined to comment on whether the tariff burden could grow in future quarters, stating only that he didn’t want to “predict the future.” But markets clearly interpreted the silence as a warning of more uncertainty ahead.
Apple’s fiscal second quarter, which ended March 29, beat expectations on the top and bottom lines, largely thanks to stronger-than-expected iPhone sales. The company posted earnings per share (EPS) of $1.65 on revenue of $95.4 billion, versus analyst expectations of $1.62 EPS on $94.2 billion in revenue.
Apple also announced a massive $100 billion stock buyback authorization, but that wasn’t enough to stop the stock from falling over 4% in post-earnings trading on Thursday.
Mixed signals: China dependence vs diversification
Apple continues to be deeply intertwined with China, which generated $16 billion in revenue this quarter, slightly under the $16.8 billion expected. While iPhones remain exempt from Trump’s 145% tariff on Chinese goods, other Apple products are vulnerable, especially those not yet manufactured in India or Vietnam.
Still, Cook tried to assure investors that Apple is diversifying. He revealed that most iPhones sold in the U.S. are now being sourced from India, and that “almost all” iPads, Macs, Apple Watches, and AirPods will soon be Vietnam-made. Globally, however, most Apple products are still made in China — a structural risk that could intensify if tariffs expand.
Cook added that Apple plans to source over $19 billion in chips from U.S. suppliers this year, a signal of both geopolitical caution and domestic investment.
Services stumble, hardware shines
While iPhone revenue beat expectations at $46.8 billion, and both Mac and iPad revenue came in slightly ahead of forecasts at $7.9 billion and $6.4 billion respectively, Services fell short, reporting $26.6 billion compared to the anticipated $26.7 billion.
The Services miss, although slight, may be weighing on investor confidence, especially given the segment’s importance as Apple transitions away from hardware reliance.
Tariffs cloud Apple’s bullish buyback
The $900 million tariff forecast casts a shadow over Apple’s newly announced $100 billion stock buyback plan. It also arrives amid a shifting global supply chain and growing tension between Washington and Beijing.
While Apple has taken major steps to rebalance its manufacturing base, it may not be fast enough to fully shield itself from the evolving trade war. Investors will likely scrutinize whether Apple can deliver on its geographic production shift — or whether its reliance on China remains a ticking financial risk.
