Apple Beats Forecasts, Warns of $900M Tariff Hit

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Apple Beats Forecasts, Warns of $900M Tariff Hit \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ Apple exceeded Wall Street expectations for first-quarter earnings, despite trade war uncertainty and challenges in its AI rollout. CEO Tim Cook said most U.S. iPhones this quarter will come from India to dodge Trump’s tariffs. The company also faces rising costs and declining China revenue.

Quick Looks

Q1 Earnings: $24.78 billion, $1.65 per share
Revenue: $95.36 billion, up 5.1% YoY
iPhone Sales: $46.84 billion, up 1.9%
AI Delays: iPhone 16 AI features rollout incomplete
Tariff Impact: $900M expected cost increase this quarter
Production Shift: U.S.-bound iPhones from India, iPads from Vietnam
China Sales Drop: Down 2.3% to $16 billion
Trump Tariffs: 145% duties threaten Apple supply chain
Cook’s Diplomacy: Private meetings with Trump, $1M inauguration donation
Stock Movement: Shares fell 2.7% in after-hours trading

Deep Look

Apple kicked off 2025 with stronger-than-expected earnings, defying growing concerns about President Donald Trump’s escalating trade war and the company’s own missteps in the artificial intelligence space. CEO Tim Cook confirmed Thursday that most iPhones sold in the U.S. this quarter will be made in India, while iPads and other devices are increasingly sourced from Vietnam—a significant production pivot meant to shield Apple from tariff fallout.

The company reported $24.78 billion in net income for the first three months of the year, translating to $1.65 per share, topping analyst expectations. Revenue rose to $95.36 billion, up 5.1% from last year. Analysts had projected $1.62 per share on $94.19 billion in revenue, according to FactSet.

Despite these positive figures, Apple expects $900 million in added costs this quarter due to the new tariff regime—a direct consequence of Trump’s 145% duties on Chinese imports, including electronics.

Manufacturing Shift: India and Vietnam Take Center Stage

Cook emphasized that Apple is accelerating its geographic diversification strategy, long in motion but now urgent under Trump’s trade agenda. For years, Apple has relied heavily on Chinese factories to produce the iPhone, but the administration’s unpredictable tariffs have forced the company to expedite its move to India for iPhone assembly and to Vietnam for iPads and accessories.

“The majority of iPhones sold in the U.S. this quarter will come from India, not China,” said Cook. However, supply chain experts warn that completely untangling Apple from China will take well into 2026, making the company vulnerable to further tariff disruptions in the near term.

AI Stumbles and Missed Expectations

Beyond tariffs, Apple continues to battle disappointment over its delayed rollout of AI features on the iPhone 16. The company had promised cutting-edge upgrades powered by generative AI, but those capabilities weren’t ready when the device launched last fall.

As a result, Apple has rolled out AI features in limited markets through software updates, but the overall experience has fallen short of the original promise. The failure to deliver on Siri’s AI transformation led Apple to withdraw ad campaigns promoting the tech, though more features are expected later in the year.

The company had hoped that AI buzz would boost demand for new iPhones, especially after global sales dipped 2% in 2024. So far, it’s working modestly—iPhone sales rose 1.9% year-over-year to $46.84 billion, outperforming analyst estimates of $45.62 billion.

Navigating Tariffs and Politics

Apple has walked a delicate political line to avoid becoming collateral damage in Trump’s revived trade war with China. After an earlier wave of tariffs, Cook met with Trump privately, attended his inauguration, and pledged a $500 billion investment in the U.S. economy, including the hiring of 20,000 American workers.

The effort paid off temporarily—Trump exempted iPhones from a prior round of tariffs, helping Apple recover from a 23% stock price drop that briefly wiped out $773 billion in shareholder value. But with tariffs now back in full force, Apple’s stock has slipped nearly 5% since the April announcement.

Consumers, fearing price hikes, rushed to buy iPhones in late March and early April, anticipating cost increases. Those purchases, however, won’t show up until Apple reports its April-June results later this summer.

China Weakness and Global Trends

Apple’s Greater China revenue fell 2.3% to $16 billion, reflecting growing economic tension and local competition. In contrast, sales in the Americas, Europe, and broader Asia-Pacific markets posted gains, helping to offset the China slowdown.

While the company remains heavily exposed to China, it continues building new production hubs and supplier relationships across Southeast Asia and India. Still, as analysts note, the logistical complexity of moving high-volume production to a new country is immense.

Investor Reaction and Market Outlook

Despite beating Wall Street forecasts, Apple shares fell 2.7% in after-hours trading Thursday to $207.51, likely due to investor worries about tariff-related costs, AI delays, and geopolitical volatility.

Analysts like Thomas Monteiro of Investing.com believe Apple is better positioned than most to weather economic headwinds:

“Margins remain healthy, and the company still has room to maneuver without dipping into cash reserves.”

Nonetheless, Apple’s next quarters will be closely watched as it tries to shore up iPhone demand, deliver on AI promises, and avoid the full brunt of a renewed U.S.-China trade war.