[source image]
Dow Jones NewsMay 1, 11:28 PM UTC
MW Here's why Apple's stock is getting dumped despite solid earnings results
By Laila Maidan
IPhone sales beat Wall Street's expectations, but Apple's vagueness around tariff impacts doesn't sit well with investors
While Apple Inc.'s latest earnings results were solid, investors came into the report looking for tariff updates - and likely weren't pleased with the vagueness and uncertainty offered by executives.
The stock was down more than 4% in after-hours trading Thursday.
It's not exactly Chief Executive Tim Cook's fault. Apple (AAPL) is navigating an uncertain policy environment. For now, the guidance that Cook provided was for $900 million in extra June-quarter costs, provided that tariff rates remain as they are, and not factoring in the prospect of an economic slowdown.
While the company's forecasting left something to be desired, Apple's numbers for the latest quarter were pretty decent. The company sold $46.8 billion worth of iPhones, beating Wall Street's expectations of $46 billion. Earnings per share of $1.65 topped the $1.62 FactSet consensus, as did overall revenue, which at $95.4 billion, cleared analysts' $94.5 billion mark.
Read more: Apple earnings show further weakness in China, and the stock is down
There were admittedly some more sour points to the report. Revenue from services, Apple's most reliable growth category, came in at $26.64 billion, slightly below expectations for $26.70 billion. And Greater China revenue of $16.0 billion was almost $1 billion shy of what analysts had modeled.
The devil is in the details when it comes to the numbers. Not only did some categories underperform, but the tight margins between headline results and expectations weren't enough to fend off questions about the company's standing for the remainder of the year. Nor could they convince investors that the uptick in iPhone sales wasn't the result of a buying frenzy ahead of tariffs.
Cook addressed this theory by saying that there was no evidence that a "pull forward" of demand drove the strong sales, noting that unit channel inventory was similar for products from the beginning of the quarter to the end. The lack of a dramatic change there suggests not much was amiss in the supply chain.
Outside of that, the company said that it could not provide any guidance beyond the June quarter.
Analysts went into the call expecting commentary on how Apple would manage its supply chain to ease the impact of tariffs, and Apple did provide insight into that. Cook said that Apple imports 50% of its iPhones to the U.S. from India, adding that that percentage would increase, making that origin country the majority importer for June's third fiscal quarter. Meanwhile, almost all iPad, Mac, Apple Watch and AirPod products will come from Vietnam. While the Trump administration has yet to reveal its tariff plans for consumer electronics, Cook's commentary suggests he expects the rate will be higher for Chinese imports than for those from India or Vietnam, as is the case currently with the tariffs on other industries.
Products shipped to countries besides the U.S. will continue be made primarily in China, Cook said.
Despite investor concerns, Kevin Cook, a strategist at Zacks, saw the $900 million tariff cost as minimal given the adjustments the company had to make due to the trade war, including production sourcing from 12 U.S. states. "I am highly confident that if any global tech company can adapt with resiliency and redundancy, it will be Apple," he said.
-Laila Maidan
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
05-01-25 1928ET
Copyright © 2025 Dow Jones & Company, Inc.
