Apple reported a 5% rise in second-quarter revenue to $95.4bn ($94.7bn expected). Operating profit rose 6% to $29.6bn.
There was growth across both the Product and Services businesses, with iPhone sales up 2% to $46.8bn. On a regional basis, all areas were in positive territory except China where sales dropped 2%.
In the first 6 months, free cash flow fell from $58.2bn to $47.9bn. Net cash, including longer term securities, stood at $34.7bn.
Apple declared a dividend of $0.26 per share, and a new $100bn buyback has been authorised.
In the third quarter, Apple expects low to mid-single digit revenue growth, with tariffs to be a $900mn cost headwind.
The shares fell 3.8% in after-hours trading.
Our View
Apple had a solid quarter, but this was always about the outlook. CEO Tim Cook did his best to reassure investors on the call, but many likely came away still wanting more clarity about what lies in the second half of 2025. The challenge, of course, is the unpredictability around tariffs - things are changing so quickly that no-one can really say for sure what’s coming next.
That said, there were several bright spots. The expected $900 million hit to profit in the upcoming quarter sounds huge but is a relatively small hit to margins. Plus, there wasn’t any significant pull-forward in iPhone sales in the quarter just gone, and Apple hasn’t seen any major tariff impacts on demand just yet.
iPhone sales were pretty strong, and Apple has one of the most loyal customer bases on the planet. Still, the lack of real innovation in recent years needs addressing. Gone are the days when each new iPhone was so packed with new features that consumers felt obligated to upgrade every year.
The hope for Apple is that there’s enough substance in the new AI features to drive a multi-year upgrade cycle. The AI story hinges on Apple Intelligence, but it’s a country mile from the ‘wow’ experience that was promised. Apple has time to get this right, but it needs to make improvements sooner rather than later.
Services growth is likely to remain a key profit driver going forward, including areas like the App Store and Apple Music. This part of the business is higher margin, as adding users doesn’t carry the same costs as building a MacBook or iPhone. But for Services to reach its full potential, it still depends on growing hardware sales.
The next few quarters are crucial. Apple faces major decisions around its production strategy as it looks to sidestep the worst of the tariffs. While we’re cautiously optimistic about some exemptions, the iPhone production shift to India is set to continue - and the impact on margins is worth watching.
All in, Apple’s brand is so strong that it’s well placed to navigate the uncertainty ahead. iPhone sales (68% of hardware revenues) are key, and demand looks to be robust despite a lack of value add from AI, which bodes well for the future if it can get Apple Intelligence right. That said, we think the valuation looks about right given the challenges ahead, and there are no guarantees.
Environmental, social and governance (ESG) risk
The technology industry is low-risk in terms of ESG, though some segments like Electronic Components are more exposed to environmental risks. Business ethics tends to be a material risk within the tech sector with everything from anti-competitive practices to intellectual property rights weighing. Historically the sector has flown under the radar when it comes to regulatory oversight, but more recently we’ve seen regulators keen to get involved given the high-profile of some of the “big tech” names. Other key risk drivers include labour relations, data privacy, product governance and resource use.
According to Sustainalytics, Apple’s management of ESG risk is average.
Apple is facing legal pressure on multiple fronts, with lawsuits and investigations over antitrust practices tied to the App Store, Apple Pay, and developer restrictions - leading to billions in fines across the EU, UK, and US, while prompting policy changes like lowering fees and allowing third-party app stores in Europe.
Apple key facts
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