Apples Strong Quarter But Tarriffs Create Drag

Apple delivered a robust set of quarterly results late on Thursday, posting a sharp rise in iPhone sales and record revenue for the three months to June. But investor reaction remained muted, as concerns over tariffs, regulatory pressure and the company’s AI strategy continued to weigh on sentiment.

Shares rose just two per cent in after-hours trading, despite Apple beating Wall Street forecasts across nearly all key financial metrics. That limited response underscores how far investor confidence has slipped this year. Apple’s stock is still down around 17 per cent since January, making it an outlier among major technology names.

By contrast, peers such as Microsoft, Nvidia and Meta have all posted double-digit gains in 2025, propelled by excitement over artificial intelligence. Apple, by comparison, has been criticised for moving too slowly to integrate AI into its product line-up, a narrative the company is now struggling to shake.

Chief executive Tim Cook told investors the group was stepping up its AI efforts and reallocating teams internally to accelerate development. “We are putting all of our energy behind it,” he said. “We did during the June quarter, we will again in the September quarter.”

Cook also said the company remained open to acquisitions that would strengthen its position in the field. “We are very open to M&A that accelerates our road map,” he said. “We are not stuck on a certain size company.”

Apple reported revenue of $91.3bn for the quarter, up 10 per cent year on year, comfortably ahead of analyst estimates. Earnings per share came in at $1.57, compared with consensus expectations of $1.43. Net income rose to $23.4bn from $21.4bn a year earlier.

The standout performer was the iPhone. Global iPhone sales rose 13.5 per cent to $44.6bn, helped by what chief financial officer Kevan Parekh described as “early shopping” from US customers keen to avoid looming import tariffs.

Parekh said the early boost to demand accounted for roughly one percentage point of the ten per cent growth figure. While positive for the quarter, it also suggests future sales may be pulled forward, leading to a possible softening in the second half of the year.

Apple expects the current quarter to deliver mid to high single-digit growth, with gross margins stable at between 46 and 47 per cent. That margin range is slightly higher than analysts had forecast, helped by a favourable product mix and better services performance.

Services revenue, which includes the App Store, iCloud and Apple Pay, came in at $27.4bn, a 13 per cent increase on the prior year. The division continues to grow faster than the hardware business and is closely watched as a key driver of longer-term profitability.

Apple’s gross margin for the June quarter was 46.5 per cent, ahead of estimates of 46 per cent, easing fears that rising costs from tariffs and supply chain changes would eat into earnings.

Even so, Cook confirmed that the company expected around $1.1bn in additional costs from tariffs in the current quarter, assuming no changes in trade policy. The warning came just hours before President Donald Trump reimposed import duties on a range of US trading partners, including India.

India now produces the majority of iPhones sold in the United States, following Apple’s effort to diversify its manufacturing base. Cook said the company remained committed to its suppliers in India, despite the new tariffs. However, analysts warned that geopolitical risk around Apple’s supply chain was becoming more difficult to manage.

“While one billion dollars is not going to move the needle for a company of this scale, the psychological effect on investors is significant,” said Gene Munster of Deepwater Asset Management. “It reinforces the idea that growth could slow, even if the fundamentals look solid.”

Apple has already seen its market value fall by around $700bn since April, when Trump first launched his so-called “liberation day” trade agenda. That package of measures included tariffs of up to 125 per cent on selected Chinese imports, prompting Apple to reroute a larger share of its US-bound production through Indian factories.

Tariff risks aside, Apple also faces a growing list of regulatory and legal challenges. The US Department of Justice is pursuing an antitrust case that could force the company to change how it controls app distribution on iPhones. In Europe, the Digital Markets Act has triggered investigations into Apple’s compliance. And in China, the company continues to face pressure from local competitors, including Huawei and Xiaomi.

Still, Apple reported a four per cent rise in revenue from China to $15.4bn, reversing recent quarterly declines. Cook said the rebound was driven by iPhone sales and supported by a new government subsidy programme that made some Apple devices more affordable.

The company spent $8.8bn on research and development in the three months to June, up from $8bn in the same period last year. Much of the increase is understood to be related to AI investment, although Apple has offered few specifics on product timelines.

While some investors had hoped for a more ambitious announcement on AI, Cook’s remarks stopped short of unveiling any new hardware or services. Analysts believe the company may use its next iPhone launch in September to showcase AI features, potentially including voice assistance, image editing or predictive automation tools.

“Apple is clearly ramping up investment, but they are still playing catch-up,” said Munster. “The contrast with Microsoft or Google is stark. Those companies are already rolling out generative AI across their product suites, while Apple is still laying the groundwork.”

Some of that delay is structural. Unlike its peers, Apple controls both the hardware and software ecosystems, meaning changes require deeper integration and longer development cycles. But with consumer expectations shifting rapidly, the pressure to deliver is rising.

Apple’s cautious approach has its defenders. The company has traditionally been slow to adopt new technologies, waiting until products are polished and commercially viable before making them mainstream. That playbook worked with fingerprint sensors, facial recognition, and wireless charging. Whether it will work with AI is less certain.

For now, investors appear to be taking a wait-and-see approach. The solid quarterly results suggest Apple’s core business remains strong, and the group’s ability to sustain high margins through turbulent periods remains intact.

But until the company can show progress on AI and navigate the tariff environment more decisively, its stock is likely to lag its peers.

As one analyst put it, “Apple’s results were very good. But good is not good enough anymore.”