iPhone sales rose by 13.5% ahead of potential U.S. taxes.
iPhone maker Apple recorded its biggest revenue increase in three years thanks to strong iPhone sales ahead of potential new U.S. taxes, coupled with sustained government subsidies in China.
But despite a 10% increase in total revenue for the April to June quarter and a forecast that exceeded Wall Street's expectations, the company's stock price fell by about 1% on Friday. Investors remain skeptical about the sustainability of the gains, especially as Apple continues to face pressures on multiple fronts, including trade tensions and delays in AI advancements.
Chinese subsidies have added to the momentum.
According to the company, iPhone sales increased by 13% during the quarter, supported by strong demand for the discounted 16. The sales growth is also attributed to the Chinese government's efforts to support consumer spending on electronics, easily beating analysts' forecasts, thus improving overall sales for the tech giant.
The iPhone maker has benefited from a state subsidy program in China designed to support device sales. The government-backed program offered incentives for eligible devices, prompting Apple to lower the price of its high-end Pro models to meet the criteria.
"This is not just happening in the U.S. – China is also part of the story," said Moffett Nathanson analysts.
"Apple has lowered prices on its Pro models in China to qualify for subsidies, and that has paid off. But what does that mean for demand in the second half of the year?"
MoffettNathanson Analysts.
Investors are generally wary of the short-term effects of the strategy. However, analysts warn that the sales boom may not reflect a real increase in long-term demand.
Instead, this could be a temporary "pull-forward" effect, with consumers rushing to buy before prices rise under possible new taxes.
Despite the impressive figures, Apple's performance continues to lag behind that of its Big Tech rivals.
Its stock has fallen more than 17% so far this year – underperforming all members of the so-called "Magnificent Seven" except for Tesla. The S&P 500, on the other hand, has gained nearly 8% during the same period.
Apple is shifting its supply chain to manage risks.
To protect its operations against global trade uncertainty, the company has shifted its manufacturing footprint. As reported by Cryptopolitan, Apple is now sourcing more iPhones in India and producing Macs and Apple Watches in Vietnam, a move aimed at reducing its exposure to China-related taxes.
Still, Apple has said it expects the taxes to cost the company $1.1 billion in the current quarter, after an $800 million impact in the three months through June. And the risk remains high, with U.S. President Donald Trump warning that Indian exports could face taxes of up to 25% as early as this week.
AI-related delays have also weighed on investor confidence. Investors are increasingly worried that Apple is lagging in the fast-evolving AI race. While companies like Microsoft, Google, and Meta have aggressively integrated AI into their products, Apple has taken a more cautious approach.
The company recently delayed the release of an AI-powered update for Siri, its virtual assistant, and has only just begun deploying its broader strategy under the "Apple Intelligence" label.
CEO Tim Cook attempted to ease concerns on Thursday, telling investors that the company is "significantly increasing" its investment in AI and making good progress with improvements to Siri.
"Apple's brand loyalty gives it a bit of leeway in AI," said Matt Britzman, senior equity analyst at Hargreaves Lansdown. "But the market is watching closely – it needs to start delivering soon."
The strong quarter for the iPhone provides a welcome boost for Apple, but questions remain about how long this momentum can last.
Temporary price cuts, subsidies, and moving supply chains can help in the short term – but they do not replace long-term innovation.
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