Decline in Apple Shares Due to Weaker Sales in China and Trade Tensions

Apple reported better-than-expected results in the second fiscal quarter of 2025, yet its shares experienced a nearly 4 percent drop in after-hours trading. The decline is attributed to weaker sales in the Chinese market and uncertainty regarding trade policy between the U.S. and China.

Revenue from the Chinese market fell by 2.3 percent year-on-year, totaling $16 billion (€14 billion) for the quarter ending in March. This continues a negative trend following an 11 percent drop in the previous quarter. The weakening in China is attributed to increasingly fierce competition from domestic smartphone manufacturers, as well as slower progress by Apple in artificial intelligence development. Conversely, sales in the U.S., Apple’s largest market, increased by 8 percent compared to the same period last year. CEO Tim Cook noted that there are no signs that consumers are rapidly purchasing devices in anticipation of potential future tariffs.

The company estimates that tariffs in the current quarter will increase costs by $900 million (€796 million), assuming no additional measures are implemented. Cook warned during the conference call that the forecast for the period after June is ‘very uncertain’ due to the changing U.S.-China trade policy. Although U.S. President Donald Trump exempted electronics from reciprocal tariffs against China in mid-April, they still remain subject to a 20 percent tariff imposed as part of measures against fentanyl smuggling.

Amid increasingly strained trade relations, Apple is reportedly preparing to relocate the production of all iPhones intended for the U.S. market to India as early as next year. However, Cook stated in an interview with CNBC that most of Apple’s products for other markets are still manufactured in China.

Following the announcement of results, Apple shares have lost a total of 16 percent of their value since the beginning of the year. The company has forecasted revenue growth in the current quarter in the low to mid-single-digit range, which is below analysts’ expectations of a 5 percent increase.

Despite the challenging situation, Apple has increased its quarterly dividend by 4 percent to $0.26 (€0.23) per share and announced a new $100 billion (€88.42 billion) share buyback program approved by the board of directors.

Growth in Revenue Driven by Services and New Devices

Total revenue for Apple in the quarter ending in March rose by 5 percent year-on-year, reaching $95.4 billion (€84.4 billion), which is above the consensus estimate of analysts of $94.6 billion (€83.65 billion). Earnings per share amounted to $1.65 (€1.46), exceeding the expected $1.62 (€1.43).

– “Today we are presenting strong quarterly results, including double-digit growth in the Services segment. We are pleased to include the iPhone 16e in our offering, as well as to introduce powerful new Mac and iPad devices that leverage the extraordinary capabilities of Apple silicon. We are also proud to have reduced carbon emissions by 60 percent over the past decade,” Cook stated.

iPhone sales reached $46.8 billion, representing a 1.7 percent increase compared to the previous year. Demand was supported by the more affordable iPhone 16e model, but its limited integration of AI features makes it less competitive in China, where brands like Xiaomi and Vivo are becoming increasingly strong.

Apple’s most profitable segment, Services, which includes Apple TV+, iCloud, and the App Store, achieved a revenue increase of 12 percent to $26.7 billion (€23.6 billion). However, this represents a slowdown compared to the 14 percent growth in the previous quarter, and the sector is facing increased scrutiny from European regulators. In the U.S., Apple is under pressure to allow alternative payment methods in the App Store. Sales of Mac and iPad devices also increased, with Mac up 7 percent and iPad up 15 percent year-on-year. New models of MacBook Air and Mac Studio were introduced in the quarter, along with an updated iPad Air featuring M3 chips. In contrast, the segment for wearables, smart home devices, and accessories, which includes the Apple Watch and AirPods, recorded a revenue decline of 5 percent. Cook attributed this result to a ‘base effect’ as the Vision Pro headset was introduced in the same period last year.