Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide.
Apple has released its fiscal second-quarter results, delivering a steady set of numbers that highlight the company’s resilience while also revealing growing challenges. Apple is still a cash-generating machine, but global headwinds and shifting consumer behaviours could test the strength of its future earnings. Shares fell -2% in after-hours trading as reported service revenue for the quarter trailed consensus estimates.
Overall revenue rose 5.1% year-on-year to USD 95.4 billion, modestly beating expectations. Much of this was driven by continued demand for iPhones, which generated USD 46.84 billion in sales, up just under 2%. However, this growth was likely helped by consumers bringing forward purchases over fears of tariff-driven price hikes, rather than a surge in underlying demand. Apple has flagged approximately USD 900 million in additional costs from tariffs in the current quarter, raising questions about potential margin pressure and price adjustments moving forward.
Services revenue, considered Apple’s most profitable business segment, rose 12% to USD 26.65 billion. While this was still solid growth, it fell slightly short of forecasts and caused some investor disappointment, with shares falling nearly 2% in after-hours trading. Regulatory pressure is beginning to weigh on this segment. A recent court ruling will force Apple to allow third-party payment options on the App Store, potentially weakening its commission-based revenue model. There’s also increasing scrutiny from US and European regulators, which could further impact Apple’s lucrative digital services.
Hardware performance outside the iPhone was mixed. iPad sales impressed, up 15% year-on-year to USD 6.4 billion, helped by refreshed models with faster chips. Mac sales also rose 6.7% to nearly USD 8 billion, beating estimates. However, wearables, home, and accessories, a segment that includes AirPods and Apple Watch, dropped 4.9% to USD 7.52 billion, falling short of expectations. This reflects softer consumer spending in non-essential tech categories.
China remains a key concern. Revenue from the Greater China region declined 2.3% to USD 16 billion, missing estimates and highlighting competitive pressure from domestic brands like Huawei and Xiaomi. Apple is also facing policy-related constraints in China, such as restrictions on foreign tech in some workplaces. Additionally, the company’s AI offerings have yet to catch on in this key market, with rivals pulling ahead in innovation.
Despite these challenges, Apple remains in a strong financial position. It posted earnings per share of USD 1.65, ahead of the USD 1.62 estimate, and generated USD 24 billion in operating cash flow. The board approved a massive USD 100 billion share buyback and raised the dividend to USD 0.26 per share, demonstrating confidence in the business and providing support for long-term shareholders.
Looking ahead, Apple expects low to mid-single-digit revenue growth in the coming quarter, reflecting a more cautious tone. With rising input costs, geopolitical risks, and intensifying competition, especially in AI and hardware innovation, investors may need to temper expectations in the short term. However, Apple’s loyal customer base, strong balance sheet, and long-term strategy continue to provide a solid foundation. For long-term investors, staying the course with Apple remains a sound approach, though the share price may come under pressure in the short term.
