Apple CEO Tim Cook attends the opening ceremony of the China Development Forum in Beijing on March 23, 2025 (Adek Berry/Getty Images)

Apple slumps as big iPhone sales that drove earnings and sales beat may be tariff-fueled one-off

Revenue and EPS beat analyst expectations.

Rani Molla

5/1/25 3:48PM

Apple beat analysts’ expectations, bringing in adjusted earnings per share of $1.65 (the FactSet consensus estimate was $1.62) and revenue of $95.4 billion (analysts forecast $94.5 billion). Its iPhone revenue was $46.8 billion, compared to the $45.97 billion analysts expected and up about 2% from the $45.96 billion it was in Q2 2024.

Apple is trading down after-hours.

While overall sales were strong, revenues from China declined and missed estimates, and its services sales were also a touch light.

Moreover, there’s concern that its iPhone sales, which notably exceeded expectations, represent a one-off pulling forward of demand from customers worried that tariffs will drive up its costs.

Investors will be focused on any color about how and where Apple is moving its supply chain and how these trade levies might affect the company.

The Trump administration’s tariffs on China stand to hurt Apple more than any other Big Tech company. Apple makes about 75% of its revenue from physical products, including iPhones and Macs that are mostly made in China, where tariffs are as high as 145%. Apple and other semiconductor-based electronics companies were recently granted an exemption from those tariffs only to learn they were simply being thrown into other buckets, whose levies have yet to be specified.

The Financial Times recently reported that Apple was trying to move all of its manufacturing for iPhones for the US market to India next year.

Apple had faced sluggish iPhone sales, with a year-over-year iPhone revenue decline last quarter. Additionally, it’s been lagging its peers in the AI space and has delayed a number of AI features from its iPhone 16 — something that culminated in a personnel shakeup and may be slowing new purchases of its flagship product even more.

Apple has also been beset by legal troubles recently.

Following its own antitrust trial back in 2021, Apple was told to enable third parties to direct customers off the App Store to make in app-purchases. Apple did so but charged a 27% commission on purchases that happened on those third-party websites — a work-around that a federal judge yesterday forbade it from doing in a ruling that could cost the company billions in revenue each year.

And as part of Google’s antitrust remediation, Apple also stands to lose the roughly $20 billion a year it gets from the search giant to be the default browser on iPhones.

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Tesla and Google’s Waymo to Senate committee: Fix self-driving laws or China will win

Ahead of their appearances Wednesday at a Senate committee hearing on the future of self-driving, the two biggest names in the sector, Tesla and Google’s Waymo, are talking the same book.

Both companies are warning lawmakers that without a federal framework for autonomous vehicles — something Congress has debated for years and is now considering again as part of broader transportation legislation — China will seize the lead.

“The United States is locked in a global race with Chinese AV companies for the future of autonomous driving, a trillion-dollar industry comparable in strategic importance to flight and space travel,” Waymo Chief Safety Officer Mauricio Peña said in written remarks ahead of the event. “In the absence of US leadership on a national AV legislative framework, Chinese AV competitors will fill the gap and set the safety and technical standards for the rest of the world.”

Tesla Vice President of Vehicle Engineering Lars Moravy, for his part, wrote, “If the US does not lead in AV development, other nations — particularly China — will shape the technology, standards, and global market.” He added, “China will be the dominant manufacturer of transportation for the 21st century.”

The two companies face steep competition from Chinese firms, including Baidu, which operates a robotaxi service, and BYD, whose EVs offer driver assistance technology similar to Tesla’s Full Self-Driving and which has been outselling the US automaker.

Hit the Road, Mac: The Future of Self-Driving Cars

$126B

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Waymo is now worth $126 billion, after raising $16 billion in a funding round led by its parent company, Google. With this capital, Waymo plans to expand its robotaxi service to more than 20 new cities, including international markets.

On Wednesday, Waymo’s chief safety officer will testify at a Senate Committee on Commerce, Science, and Transportation hearing, alongside a representative for Tesla, urging lawmakers to create a national regulatory framework for autonomous vehicles.

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Dan Ives thinks Tesla will someday merge with SpaceX, too

Wedbush Securities analyst Dan Ives is just like us: he thinks that Elon Musk’s Tesla and SpaceX could someday become one company.

In a note this morning, Ives argued there’s a “growing chance” Tesla will eventually merge in some form with newly merged SpaceX and xAI, as Musk builds what he sees as a single, sprawling AI ecosystem spanning both space and Earth.

Over time, Ives wrote, he thinks Musk will look to “combine forces/technologies,” with the long-term goal of owning and controlling more of the AI stack. Ives thinks Musk could achieve that “holy grail” over the next year and a half.

Earlier today, we pointed out the myriad similarities between Tesla and SpaceX — shared impossible missions, common methods for achieving those goals, and a physics-first, economics-later ethos — as well as Musk’s long-standing penchant for knitting his companies together in the first place.