Apple’s Q2 earnings report, released on Thursday, showed mixed results, leading to a drop of over 3% in its after-hours stock trading. During the call with analysts and investors, the company discussed critical issues such as tariffs, consumer behavior, and ongoing legal challenges.
Key Takeaways from the Earnings Call
1. Potential $900M Tariff Impact
Apple highlighted the anticipated effect of upcoming tariffs from the Trump administration, estimating a $900 million cost increase for the June quarter. CEO Tim Cook cautioned that this figure shouldn’t be projected onto future quarters due to unique variables affecting the current period. While he didn’t clarify whether Apple plans to absorb these costs or pass them on to consumers, he noted that most tariffs affecting them stem from a 20% rate on imports originating from China.
2. No Immediate Surge in iPhone Purchases
In response to a Morgan Stanley analyst’s inquiry, Cook reported that there was no clear evidence indicating that tariff discussions prompted consumers to hastily buy iPhones or other Apple products. He mentioned that the unit channel inventory for iPhones remained consistent from the beginning to the end of the quarter. Although Apple aimed to frontload some purchases to mitigate tariff impacts, overall demand stayed relatively flat.
3. Delay of Siri Features
Apple announced yet another delay for new personalized Siri features. Originally slated for iOS 18, these enhancements—including improved on-screen awareness and contextual memory—do not have a revised launch date. Cook stated that additional time is necessary to meet their quality standards.
4. Ongoing Legal Battle with Epic Games
In a recent filing before the earnings call, Judge Yvonne Gonzalez Rogers criticized Apple for alleged misconduct during the Epic Games antitrust trial, claiming that executives violated a prior court order. Cook expressed strong disagreement with the ruling and confirmed the company plans to appeal.
5. Commitment to U.S. Manufacturing
Opening the call, Cook emphasized Apple’s intention to expand its manufacturing operations in the U.S. with a pledge of $500 billion in domestic investment over the next four years. Apple plans to increase its workforce and facilities in several states, including Michigan and Texas, and will open a new factory for advanced server manufacturing in Texas.
6. Shift of Manufacturing to India
Despite the commitment to U.S. manufacturing, Cook mentioned that the majority of iPhones sold in the U.S. during the June quarter would likely originate from India. Most of Apple’s other products entering the U.S. will come from Vietnam, although China will remain the main manufacturing hub for products sold globally. However, analysts warn that manufacturing in India might raise costs by 5% to 8%, potentially squeezing profit margins.