The Apple Selloff Paradox

Apple Beats iPhone Sales Expectations, but Tariff Uncertainty Weighs on Investors

Apple Inc. exceeded Wall Street expectations with its latest earnings report, driven by stronger-than-expected iPhone sales. However, a lack of clarity from executives on how the company will handle potential tariff impacts left investors uneasy, sending the stock down nearly 4% in after-hours trading on Thursday.

While CEO Tim Cook provided some commentary on rising trade costs, the company’s guidance did little to reassure markets. Apple projected an additional $900 million in costs for the June quarter if current tariffs remain unchanged — a figure that doesn’t account for a possible economic slowdown.

Still, Apple’s financial results for the quarter were solid:

• iPhone revenue reached $46.8 billion, above the $46 billion analysts had predicted.
• Earnings per share came in at $1.65, topping the $1.62 consensus.
• Total revenue was $95.4 billion, beating expectations of $94.5 billion.

However, not all metrics were positive.

• Services revenue, a key growth segment, fell slightly short at $26.64 billion versus a $26.70 billion estimate.
• Greater China revenue came in at $16.0 billion — about $1 billion below analyst forecasts.

The narrow margin of Apple’s outperformance, combined with weakness in some areas, didn’t ease investor concerns about future performance. There’s also skepticism over whether the strong iPhone results were boosted by a rush to purchase ahead of expected tariff hikes.

Cook dismissed this theory, noting that iPhone inventory levels remained consistent throughout the quarter, suggesting stable demand rather than a pre-tariff buying spike.

When it came to forward-looking guidance, Apple offered limited insight beyond the current quarter. However, Cook did outline changes in Apple’s supply chain aimed at mitigating trade risks. He said 50% of iPhones shipped to the U.S. are now made in India — a share expected to rise and become the majority in the June quarter. Most iPads, Macs, Apple Watches, and AirPods will now come from Vietnam.

These shifts suggest Apple is anticipating higher U.S. tariffs on Chinese-made products and is working to reduce its exposure accordingly. Cook confirmed that products sold outside the U.S. will continue to be manufactured primarily in China.

Despite investor concerns, some analysts remain optimistic. Kevin Cook, a strategist at Zacks, called the $900 million tariff cost relatively modest, noting the company’s agility in restructuring its operations. “If any global tech company can adapt quickly and effectively, it’s Apple,” he said.