Apple revenue could actually benefit from China tariff war

AppleInsider

Analysts at JP Morgan are looking more favorably at Q2 results, predicting that Apple may actually see increased revenue in Q3 thanks to short-term effects of the ongoing U.S.-China tariff battle.

Apple Park - Image Credit: Apple

Apple will be reporting its Q2 2025 earnings on May 1, to a background of a tariff war between the U.S. and China. Despite the noise, JP Morgan is still looking towards good results for the concluded quarter.

In the near-term view, a note to investors seen by AppleInsider proposes Apple will have a good quarter, thanks to a pull-forward of demand for iPhones, Macs, and other products. The early-year threat of tariffs will have modestly increased demand, causing early consumer upgrades as well as an increased influx of inventory by retailers.

This positive view has led to JP Morgan increasing its Q2 2025 forecast, raising the revenue from $93.5 billion to $95.8 billion, while earnings per share is upped from $1.59 to $1.66. These are both higher than the consensus of $94.2 billion and $1.61 respectively.

The change implies a revenue growth for Apple of 5.5% year-on-year, if it reaches the new value.

There is also an expectation for gross margins to remain resilient even though concerns are raised over tariffs. The report expects that margins it will track to 47.1%, in line with its consensus.

Q3 positivity

The Q3 results will be the most problematic for Apple, since it will be the one directly affected by the Donald Trump administration's introduction of global tariffs. That, and the tariff battle it caused with China.

JPM isn't too bothered about it, though. For the quarter, it offers better-than-feared expectations with a conservative guide of low single-digit growth.

The uncertainty of the tariff situation will cause some pull-forward from consumers and retailers. It's expected that, rather than wait and encounter higher prices, consumers and stores will be buying and stocking up on products before those tariffs become a pricing problem.

The analysts believe that there could still be a 6% year-on-year revenue growth for the third quarter. However it also anticipates Apple being conservative with its guidance, and to offer low-to-mid single-digit revenue growth for the period.

In that quarter, JPM tentatively forecasts revenues of $90.8 billion, against a consensus view of $89.2 billion. The gross margin will be slightly lower at 46.3% versus the consensus 46.7%, but the earnings per share is expected to be higher at $1.51 versus $1.48.

For investors, JPM's Q3 analysis is a fairly optimistic view of what could happen during a very turbulent financial period. Three months is a long time away to speculate on financials, especially given the rapid changes that happened to the markets during just a few weeks in April.

For the moment, JP Morgan rates Apple's shares as "Overweight" with a $245 price target.



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blastdoor

Another “pull forward” that could hurt Apple is China deciding now (or soon) is the time to launch a gambit to take Taiwan. Trump has no credibility with anyone. No country is going to put their soldiers in harms way to support the US under his leadership. That means no country will support the US in defending Taiwan. In fact, Trump might not even try to defend Taiwan.

But I could see Trump blowing up TSMC fabs so the Chinese don’t get them. 

daalseth

blastdoor said:

But I could see Trump blowing up TSMC fabs so the Chinese don’t get them. 

I remember reading an article, I believe with the head of TSMC, where he was asked about an invasion. He said that they have a ‘kill switch’ that would destroy the equipment if there were an invasion. The Chinese knew this and it was one of the things that kept them from invading. Not that I wouldn’t put it past president mush-for-brains to order a strike anyway. 

hammeroftruth

I think panic buying has subsided. Those who haven’t bought, are gonna wait and see what happens as we get closer to a new iPhone launch. Where I have seen prices spike in the last 2 weeks has been groceries and gasoline prices are still not even close to what Donald has claimed they are at. 

I think people are more concerned with their day to day costs and aren’t really considering upgrading their Apple devices unless they really need to. The stores looked really busy the last couple of weeks, but that was because of panic buying and very few salespeople on the floor due to Apple’s forecasting of needing less help this time of year, which has blown up in their face. 

retrogusto

Another thing that might help to make the upcoming numbers look good is the weakening dollar. All of the uncertainty relating to tariffs, to US disinterest in global leadership (severe cuts to aid, State Dept., US embassies, Radio Free Europe) and disinterest in traditional alliances (e.g. NATO, Ukraine vs. Russia) has led to a weaker dollar, which will make global sales numbers look better when converted to dollars. Often in recent years Luca Maestri spoke of “FX headwinds” that made things look worse, but things are swinging in the other direction now. Unfortunately, the same uncertainty will probably make it difficult for Apple to be very optimistic with any forecasts, so the benefit of a weaker dollar will likely be overshadowed by that. 

applezulu

This is a great example of the sort of short-term business thinking that Apple usually tries to avoid. While a "pull forward of demand" can look great on the current quarter's report, it's just cannibalization of future earnings. This is nothing to be celebrated and certainly isn't a strategy that Apple would intentionally pursue. On the other hand, it's just the sort of thing that the oversupply of MBAs out there will cheer for because quarterly earnings! 

In the best-case scenario, the US administration cancels the whole tariff thing and moves on to some other attention-seeking chaos. Later this year, iPhone 17 gets released, and sales are not quite as robust as they might've been, because some who would've bought them just bought an iPhone 16 instead. The clever folks at JP Morgan will then downgrade Apple stock, because of lackluster sales of iPhone 17. Headlines in the tech trades will speculate that Apple has lost its way with the iPhone 17, and the peanut gallery here will whine about incrementalism and how Apple is doomed and Tim Cook should resign. That's the best-case scenario.

More likely, there will still be tariff chaos when iPhone 17 is released, the price will be higher, sales will be lower, and the short-term thinkers will still be doing their short-term thinking. 

Either way, a "pull forward of demand" is not anything Apple wants to see. As long-term thinkers, they know it's a problem, not a positive headline for quarterly earnings reports.

ssfe11

Yes Retrogusto! The weakening dollar is huge for Apple! I only see one Analyst talking about it. But yes thank you for pointing this out. 

bloggerblog

A good quarter for Apple doesn't necessarily equate to recovered stock value. I remember when Apple had a great quarter exceeding expectations sometime in 2020 or 2021 yet its stock plummeted because the market felt that Apple has reached its max potential.

charlesn

It's either financial malpractice or stupidity or both for JP Morgan's position to be "not too bothered" by possible effects of tariffs on Apple's business going forward. Are you kidding me? Listen: no one, including his own Treasury Secretary per yesterday's interview with Bessent, can predict what the orange buffoon will do or what lies he will tell when it comes to China tariffs. But what's on the table right now is: an expiration "soon" of the "temporary" exemptions given to Apple and others, plus 145% tariffs. And, as Bessent confirmed, Trump is lying about ongoing trade talks--none are happening. I sure don't know what this lunatic is going to do next, but I do know this: he has been willing to do huge damage to his polling and perception of his presidency thus far to stick to his tariff insanity, so you can't assume he will step back from the brink. And even the fall back position he has floated of cutting the China tariffs in half, perhaps even unilaterally, would still leave them at near 75%, hardly a "win" for Apple. 

Yes, 2nd quarter may look better than expected because of people "stocking up" on Apple products before the tariffs hit in full, but if you're betting on Apple stock going forward, then you're betting that fiscal sanity will prevail in this administration and that's a very risky bet to make with a malignant narcissist who's in love with tariffs having the final say. 

nubus

Apple is a master of inventory control. On average it is 9-12 days while Dell is 3x that. This is why tariffs will hit Apple earlier. It should be visible in the quarterly report.
Basic 20% tariffs started on February 4th and Apple has been selling most of FY-Q2 under those tariffs.

Will the weakened dollar work? It won't affect sales in the US until vendors raise their prices causing inflation in the US.
Add the cost of shipping by air from India instead of by boat from China - and for shipping from China to Europe.

Outside US the consumer sentiment is crashing from EU to Japan. If people stop buying then it won't help.

quakerotis

don't buy anything. 

t-rump can go to hell