- Apple investors have had a lot to worry about this year.
- Investors wanted clarity on tariffs, AI, and diversification away from its China supply chain.
- During Thursday's earnings call, Tim Cook gave more details on some topics than others.
Tim Cook had a tough challenge during Apple's earnings call: predicting the unpredictable.
The Apple CEO faced questions about tariffs, China, and AI during the company's second-quarter earnings call on Thursday, and how they would shape the rest of the tech giant's year.
He was able to provide more detail to some questions than others.
On the impact of tariffs, the biggest question facing Apple, Cook said it's "very difficult to predict beyond June."
He gave some details about the potential cost to Apple, but it came with caveats.
Cook told analysts and investors that Apple expected a potential $900 million hit for the June quarter "assuming the current global tariff rates, policies, and applications do not change."
Though many American companies have been left to grapple with the levies, understanding the full extent of the impact on Apple has been a hugely important question for the market, given the company's vast supply chain empire in China.
"As far as tariffs go, the uncertainty will persist as rules keep getting made and unmade, often overnight," Dipanjan Chatterjee, a principal analyst at Forrester, a research firm, told Business Insider.
China sales and diversification
Apple has tried to diversify its supply chain away from China — something Cook addressed directly on the earnings call. He said the company expects "the majority of iPhones sold in the US will have India as their country of origin" in the June quarter.
Ben Wood, chief analyst at CCS Insight, a research firm, said exposure to China remains a huge issue.
"Previous investments in India are paying dividends, but it is impossible to divert huge volumes away from China in the short term, given how entrenched its manufacturing and supply networks are," Wood said.
One of the other major worries facing Apple investors — Apple's ability to reverse declining iPhone sales in China — got less clarity.
Sales in the Greater China region were down 2% for the quarter as Apple has been battling fierce competition from local players. Companies like Huawei now have 5G-enabled smartphones as capable as iPhones to entice Chinese consumers.
Cook said that a program in China meant to help subsidize smartphone purchases for the company "played a favorable impact on the results," but he said "it's difficult to estimate with precision as to exactly how much."
Apple's AI bet
Apple Intelligence, the company's late push into the generative AI arena that rivals like Google and Meta got a headstart in, has had a very slow start since its reveal at Apple's WWDC almost a year ago in June 2024.
Cook didn't provide a clear timeline for when Siri, a key part of Apple Intelligence, would be released after being delayed earlier this year. Cook said that "it's just taking a bit longer than we thought" to bring Siri up to Apple's "high-quality bar."
"The hiccups with that rollout have likely solidified the company's belief that it is better to do it right rather than move fast and break things," said Dipanjan.
According to Cook, though, there's evidence that Apple Intelligence is turning out to be the revenue driver analysts had hoped for. "During the March quarter, we saw that in markets where we had rolled out Apple Intelligence, that the year-over-year performance on the iPhone 16 family was stronger than those where Apple Intelligence was not available," Cook said in response to an analyst question.
The unknowns on tariffs and AI weighed on Apple's earnings beat and 5% year-on-year revenue bump, with shares down almost 4% on Friday.
Wood said that while Apple had delivered another strong performance, there was no escaping the fact that macroeconomic weaknesses and tariff uncertainty "continue to cast a shadow over performance for the rest of the year."
