Tariffs Cause Worries for Apple Long Term, with Some Temporary Relief

Apple (Nasdaq: AAPL) reported a mixed second quarter this month, but a potential $900 million tariff headwind sent its stock falling 4% in the after-hours trading session. Yesterday’s tariff news brought some relief.

Apple’s Financials

Apple’s second quarter revenues grew 5% to $95.4 billion, falling short of the market’s forecast of $95.66 billion. EPS of $1.65 was ahead of the Street’s forecast of $1.63.

iPhone sales grew 2% to $46.8 billion compared with $45.8 billion anticipated by the market. Mac sales rose 7% to $8 billion, marginally ahead of $7.77 billion anticipated. iPad sales grew 15% to $6.4 billion, ahead of the Street’s outlook of $6.2 billion. Apple’s Services revenues grew 12% to $26.65 billion but missed the market’s outlook of $26.7 billion. Apple’s wearables division saw revenues fall 5% to $7.52 billion and missed the analyst estimates of $7.95 billion.

Apple did not provide an outlook for the third quarter. The market estimates EPS of $1.42 on $89.19 billion in revenues for the third quarter.

Apple’s Tariff Concerns

The ongoing tariff policy changes between the US and China are giving Apple reasons to worry. Apple earns more than 70% of its revenues from hardware sales that will all be impacted due to tariff changes. Apple claims that it was able to limit the impact of tariffs for the reported quarter by optimizing its supply chain. However, it expects an additional expense of $900 million in the current quarter due to tariff changes.

Given the uncertainty of the policies, Apple did not quantify the future impact. It is looking to mitigate some of the future impact by increasing sourcing from the US and other countries where tariffs are lower than China. Apple is already sourcing about half of the iPhones for the US from India and most of its other products for the US from Vietnam. Apple expects that the majority of iPhones sold in the US will now have India as their country of origin, and Vietnam for almost all iPads, Macs, Apple Watches, and AirPods products sold in the US. It will use China’s facilities to supply its products to other countries around the world.

Apple announced plans to spend $500 billion over the next four years within the US where it will be expanding teams in facilities in several states. It will also open a new factory for advanced server manufacturing in Texas. During the calendar year 2025, it expects to source more than 19 billion chips from a dozen states in the US, including tens of millions of advanced chips being made in Arizona. Apple is also evaluating price increases to its upcoming product line-up to deal with this increase.

Additionally, Apple may also get impacted by the possibility that semiconductors might receive additional tariffs. Section 232 is a provision of the Trade Expansion Act of 1962 that allows the President to impose tariffs on imports if they threaten national security. Earlier last month, the US government initiated an investigation on the import of semiconductors under this provision. If the investigation were to rule that semiconductors posed a security threat, the government could levy significantly higher tariffs on their imports, thus hurting Apple’s supply chain.

There was a hint of relief yesterday though when US and China announced plans of a 90-day negotiation period during which reciprocal tariffs were temporarily reduced to 10%. The market reacted positively to the news, and the stock was already up 5% in the day.

Apple’s stock is trading at $210.79 with a market capitalization of $3.15 trillion. It touched a 52-week low of $169.21 in April 2025 and climbed to a high of $260.10 in December 2024.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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