Apple’s fiscal Q2 2025 results showed solid growth. Revenue was $95.4 billion (up 5% YoY) Net income rose to $24.78 billion (vs. $23.64 b in Q2 FY24), and diluted EPS was $1.65 (a March-quarter record, up 8% YoY). Services revenue hit a new high (≈$26.64 b, +12% YoY) and driving much of the growth, while new hardware (e.g. the lower-cost iPhone 16e and updated Apple Silicon Macs/iPads) contributed in Products. Tim Cook also highlighted Apple’s progress on sustainability (60% carbon-emissions reduction over 10 years) and AI: Apple Intelligence features are being rolled out in more languages but Cook said Apple needs more time to make Siri more personal at the high standards the company requires.

On the earnings call, management signaled a cautious outlook. For Q3 FY25, Apple expects low-to-mid single-digit revenue growth YoY and gross margins around 45.5–46.5%, incorporating an estimated $900 million tariff headwind. Apple is shifting production of U.S.-bound products to mitigate trade-policy impacts

Key Takeaways

• Strategic AI Development Positioned for Future Integration
  Apple confirmed continued internal development and testing of generative AI technologies. While details remain limited, CEO Tim Cook reiterated that AI capabilities are being increasingly integrated across Apple’s ecosystem, with further announcements anticipated at WWDC. The focus remains on delivering AI experiences that align with Apple’s product philosophy and user expectations and this is proving harder to do for the new and enhanced Siri. Ultimately it will be tis higher personalization that will keep consumers engaged within the Apple ecosystem.

• iPhone revenue reached $46.8 billion, marking a 2% year-over-year increase. The launch of the iPhone 16e, featuring the new A18 chip and energy-efficient C1 modem, contributed to strong performance. Sales of the iPhone 16 family exceeded those of the iPhone 15 over the comparable launch period. Apple also reported a new all-time high for the active iPhone installed base across all regions, with double-digit growth among upgraders.

• Geographic Expansion Drives Performance in Emerging Markets
  Apple reported strong double-digit revenue growth in several key emerging markets, including India, Mexico, the Philippines, Saudi Arabia, and Turkey. These results underscore the company’s long-term strategy to localize operations and expand its presence in high-potential regions through both retail and channel investments.

• Tariff Exposure Mitigated by Supply Chain Diversification
  In light of ongoing global trade uncertainty, Apple reiterated the robustness of its global supply chain. While the potential for new tariffs remains a concern, Apple’s long-standing investments in manufacturing and assembly operations in countries like India and Vietnam have helped reduce over-reliance on any single geography, particularly China. Cook said: “What we learned some time ago was that having everything in one location had too much risk with it, and so we have, over time with certain parts of the supply chain, not the whole thing, but certain parts of it opened up new sources of supply. And you could, you could see that kind of thing continuing in the future.”

• Wearables and Accessories Remain a Stable Contributor
  Revenue for the Wearables, Home, and Accessories category declined slightly to $7.91 billion. While not a primary growth driver this quarter, the segment continues to play a strategic role in expanding ecosystem engagement and enhancing the value proposition of Apple’s core devices.

What’s Significant

• Record Services & EPS: Services growth was a standout, with the segment achieving double-digit growth and an all-time high revenue. This underscores Apple’s focus on high-margin, recurring sales. EPS of $1.65 was a March-quarter record, driven by both revenue strength and tight cost control. Cook declined to comment on the recent court decision that found Apple violated a 2021 court order requiring them to loosen restrctions on Apple Store’s payments.

• Product Cycle Momentum: Apple refreshed key products: the new iPhone 16e (with Apple’s in-house modem) launched in Feb, and updated Apple Silicon Macs and iPads were introduced. These launches helped stabilize iPhone revenue (+2% YoY) and drove solid Mac/iPad growth, signaling a healthy product pipeline.

• Global Installed Base: Management noted that the active installed base of devices hit an all-time high across all products and regions. High customer loyalty continues to support repeat sales (services subscriptions, accessories).

• China stabilising – but helped by subsidies
  Greater China revenue fell just 2 % YoY (flat ex-FX), a sharp sequential improvement. Management attributed it partly to local handset subsidies and noted iPhone held the top two spots in urban-China market share surveys.

• Supply-Chain/Tariff Strategy: Apple openly discussed a ~$900 m tariff impact for Q3. Crucially, it is realigning its supply chain: over 50% of US iPhones are already built in India, and Apple expects India to be the origin for most US iPhones next quarter. Likewise, Vietnam will be the source for nearly all US-bound iPads, Macs, Watches and AirPods. These moves are significant for avoiding duty increases and diversifying beyond China. Alhought asked several times to comment about any impact the tariffs will have on costs after the June quarter, Cook declined to make any prediction saying there is too much that is not known.

• No evidence of tariff pull-forward – Channel inventory remained “similar” QoQ; management acknowledged it built ahead inventory (visible in purchase-obligation disclosures) but did not see unusual sell-through in March .

• Environmental Goals: Apple reaffirmed its sustainability progress — carbon emissions are 60% lower than a decade ago. This highlights continued investment in green operations and design (using recycled materials, clean energy for factories). See my analysis here.

Financial Performance:

• • Revenue: $95.4 b in Q2 FY25 (up 5% YoY). This compares to $90.753 b in Q2 FY24 and $124.3 b in Q1 FY25 (seasonally higher due to holiday sales). Product sales were $68.714 b (+2% YoY) and Services $26.645 b (+12%)

  • Net Income: $24.78 b (Q2 FY25) vs $23.636 b (Q2 FY24). Q1 FY25 net income was $36.33 (reflecting the larger holiday quarter).

  • EPS: Diluted EPS of $1.65 (Q2 FY25) vs $1.53 (Q2 FY24). For reference, Q1 FY25 EPS was $2.40.

  • CapEx: Capital expenditures were roughly $3.1 b in Q2 FY25 (implied from $6.011 b for six months and $2.94 b in Q1). This is significantly higher than the ~$2.0 b invested in Q2 FY24. The rise reflects expanded investment in manufacturing (e.g. supply-chain diversification).

Business Highlights:

• iPhone: Revenue ~$46.84 b (+2% YoY). Apple launched the budget-friendly iPhone 16e in February (with Apple’s own modem) and continued sales of iPhone 16/16 Pro. Management noted the iPhone install base grew to a record level, with high customer satisfaction.

• Mac: Revenue ~$7.95 b (+7% YoY). Growth was driven by Apple Silicon Macs (Mac Studio with M2 Ultra, new MacBook Air/MacBook Pro models). Apple highlighted strong Mac demand, including corporate deployments, which means large-scale MacBook rollouts.

• iPad: Revenue ~$6.40 b (+15% YoY). Double-digit growth reflected refreshed iPad lines (M2 iPad Air, iPad Pro updates) and stronger consumer/education demand.

• Wearables/Home & Accessories: Revenue ~$7.52 b (–5% YoY). The only segment with a decline, as Apple Watch and AirPods sales eased off. Wearables growth had slowed after initial Apple Watch 10 demand; no new major Wearable launched this quarter.

• Services: Revenue ~$26.645 b (+12% YoY), an all-time quarterly high. Growth was broad: App Store, iCloud, Apple Music, Apple Pay, etc., all contributed. Tim Cook noted “double-digit growth in Services” in Q2, and the sector now represents ~28% of sales. The continued growth in services remains a positive signal for investors and their concern about Apple being overly dependent on iPhone sales.

• Vision Pro: Apple’s spatial-computing headset s included in Other Products. Although Apple did not break out Vision Pro sales, it was mentioned on the call (alongside iPhone/Mac) as one of the products not subject to new tariffs. Apple continues to build out Vision Pro content and supply, but volumes remain small.

• Apple Intelligence: Apple continues its on-device AI strategy. Cook emphasized that Apple’s custom silicon enables “Apple Intelligence”  making experiences “even more personal”. Apple rolled out expanded language support in Q2. Management did note that Siri still needs “more time” to be fully updated to deliver a more personal experience.

Outlook:

• Q3 FY25 Guidance: Apple does not give formal numerical targets in press releases, but on the conference call CFO Kevan Parekh said he expects low-to-mid-single-digit revenue growth year-over-year in Q3 (quarter ending June 28). Gross margin is guided to ~45.5–46.5% of sales (this range explicitly “includes the estimated impact” of ~$900 m in tariff costs). Operating expenses are expected at $15.3–15.5 b for the quarter. This contrasts with the year-ago quarter which had a 2% revenue decline; the guidance implies modest growth relative to last year’s comps.

• Tariffs Impact: Apple reiterated that new U.S. tariffs on China-bound goods will likely add roughly $900 m in costs in Q3. Tim Cook stressed this estimate assumes no further policy changes. He did not commit on pricing, analysts expect Apple to absorb much of the cost rather than raise retail prices immediately. Apple reported it had already taken steps (inventory build-ahead, sourcing shifts) to minimize near-term impact. While Apple maintains a disciplined focus on protecting margins, the company clearly recognizes the strategic importance of keeping its installed base current. Enabling customers to access the latest hardware is critical, not only to fully leverage forthcoming Apple Intelligence capabilities, but also to deepen engagement with the broader Services ecosystem and sustain long-term revenue growth. Tim Cook was intentionally vague about the tariff situation after June. He emphasized that he cannot precisely predict future tariff impacts due to ongoing uncertainties, including the Section 232 investigation.

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