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Wall Street is about to find out just how far the Apple (AAPL+0.52%) may fall from its trillion-dollar tree. As the Silicon Valley giant prepares to release its fiscal second-quarter earnings report on Thursday, the world’s most valuable tech company finds itself at the intersection of profit — and politics.
While Apple’s fundamentals remain sound, a rising tide of tariffs, overseas competitors, and investor skepticism all threaten to affect what once seemed like a bulletproof company. And apprehension levels are rising.
Still, analysts expect yet another quarter of reliable, if unspectacular, growth — earnings per share of $1.60, up about 5% from the same period a year ago, on revenue of $94.2 billion, a 3.8% year-over-year increase. Apple had projected low- to mid-single-digit revenue growth for this second quarter from the prior year.
The company has outpaced Wall Street’s earnings expectations for four consecutive quarters. Growth this quarter will likely continue to be driven by Apple’s services and iPad segments — especially as hardware sales growth re-balances.
Trade war hits Apple where it hurts
President Donald Trump’s tariffs-induced trade war has turned into a structural headwind for Apple’s global operations. The company manufactures about 90% of its iPhones sold in the U.S. in China — and they’re subject to steep tariffs… that could get even steeper.
Trump has imposed a 145% levy on all goods imported from China. While the White House temporarily spared smartphones from the harshest penalties, the administration has hinted that those protections might be fleeting. Earlier this month, Apple’s stock tumbled more than 25% around the president’s “Liberation Day” tariff announcement. But shares rebounded 15% about a week later, following those early signs of a potential easing in smartphone-related tariff policies.
The tariffs affect more than just Apple’s iPhones, too. The Trump administration’s restrictions on high-performance chips could affect Apple’s supply chains — especially given the company’s reliance on advanced semiconductors. Apple’s response to the tariffs on China has been swift: The company has moved to sharply increase iPhone production in India, with a goal to manufacture all U.S.-bound units there by 2026. But analysts remain cautious about the move.
“India is progressing, but it’s not China,” said Wedbush Securities analyst Matt Bryson. “Efficiency and yield remain lower. Tariff mitigation is working — barely — but margins could come under pressure if this persists.”
Apple has also diversified production to Vietnam and Malaysia, but the geopolitical risk remains sticky.
For years, China has been both a crucial manufacturing base and a major consumer market for Apple. But that dual role has become fraught. In the first quarter of 2025, Apple’s shipments in China fell 8% to 12% year-over-year, driven by intensifying competition from domestic players such as Huawei, Xiaomi, and Honor, along with growing nationalistic preferences among Chinese consumers.
In its second-quarter report, investors will look for clear guidance from Apple’s leadership on how it plans to navigate escalating U.S.-China trade tensions — whether the company intends to absorb the rising tariff costs or pass them on to consumers; to renegotiate supplier contracts, or accelerate its supply chain diversification into other countries.
And if price hikes are on the table, a big question will be whether Apple concentrates those increases on U.S. buyers or spreads them across its global customer base.
“The biggest concern surrounding the Apple story is the trade war with China,” Monness Crespi Hardt analyst Brian White said in a client note Thursday. “Even under the most favorable outcome, we expect Apple’s U.S. prices to increase, and manufacturing capacity to continue migrating out of China.”
Can services provide enough of a Q2 boost?
If geopolitics represents the clear external threat, Apple’s muted innovation cycle represents an internal one. Since the iPhone 11’s launch in 2019, Apple has released strong — but evolutionary — hardware updates. Its iPhone 16 is approaching the midpoint of the cycle, and other product releases, such as the M3-powered iPad Air, are expected to only provide a limited boost.
Apple has been slowly moving manufacturing of its Macs and iPads outside of China — but at a much slower rate than it has for its iPhones. As a result, those two categories could be ripe for more trade disruption. And even worse, Apple’s much-hyped and ambitious AI initiative, Apple Intelligence, remains in limbo. Investors will certainly be looking for positive updates on that front.
The good news for the company is that the services segment — which includes the App Store, iCloud, Apple Music, and other recurring streams — continues to grow at a healthy double-digit pace, now contributing nearly a quarter of total revenue. But with iPhone revenue still making up over 50%, services alone can’t carry the growth narrative indefinitely.
Despite the headwinds, Apple remains a cash-generating juggernaut. The company is expected to post net income of $24.2 billion this quarter. Long-term investors may see this pullback as a rare opportunity to buy into a still-dominant franchise under what they hope is temporary distress.
But Apple’s days as a pure growth story may be behind it. Earnings can no longer just hinge on product cycles; investors have to take into account how deftly the company can navigate global politics, diversify its supply chain, and close the widening AI gap — while still growing its product lineup, of course.
Thursday’s earnings call will offer one of the clearest signals yet: Is Apple still the safe haven stock of old — or has it become a bellwether of how trade wars and tech decoupling could reshape Silicon Valley’s biggest players?
