Apple Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Product Launches: Introduced iPhone 16e with A18 chip and C1 modem; updated Mac lineup with M4-powered MacBook Air and new Mac Studio; M3-powered iPad Air drove iPad growth; Wearables, Home and Accessories saw updates to Apple Watch and AirPods, and Vision Pro mentioned.
• Services: Achieved all-time revenue record, up 12% year-over-year; Apple TV+ had record viewership, and Apple Pay active users at all-time high.
• Sustainability: Celebrated Earth Day, cut emissions by 60% since 2015; increased use of clean energy and recycled materials.
• Supply Chain: Plan to spend $500 billion over 4 years in US, expanding teams and opening new factories; sourcing more chips and glass from US suppliers.

Segment Performance

• iPhone: Revenue was $46.8 billion, up 2% year-over-year, contributing approximately 49.16% to total revenue.
• Mac: Revenue was $7.9 billion, up 7% year-over-year, contributing ~8.28% to total revenue.
• iPad: Revenue was $6.4 billion, up 15% year-over-year, contributing ~6.71% to total revenue.
• Wearables, Home and Accessories: Revenue was $7.5 billion, down 5% year-over-year, contributing ~7.86% to total revenue.
• Services: Revenue was $26.6 billion, up 12% year-over-year, contributing ~27.88% to total revenue.

Guidance

• June Quarter Outlook: Expected total company revenue to grow low to mid-single digits year-over-year. Gross margin expected between 45.5% and 46.5% including $900 million tariff impact. Operating expenses between $15.3 billion and $15.5 billion.
• Tariff Impact: Estimated $900 million tariff impact for June quarter, with uncertainty beyond June due to trade policy changes.

Risks

• Tariffs: Uncertainty around future tariff policies, including potential new tariffs and Section 232 investigations affecting semiconductor supply.
• Geopolitical Tensions: Impact on sales in regions like China, with uncertain effects from subsidies and geopolitical factors.
• Software Delays: Delays in delivering more personal Siri features, affecting consumer experience and potential upgrades.

Question and Answer

• Q: Erik Woodring asked about mix of India-sourced iPhones for the US and goal to source 100% for US-bound iPhones.

A: Tim Cook discussed country of origin for June quarter, with majority of iPhones sold in US to have India as origin, Vietnam for other products, and China for most outside US.

• Q: Ben Reitzes asked about tariff impact beyond June quarter and China sales.

A: Tim Cook mentioned uncertainty beyond June due to trade policy, and China sales were down 2% but roughly flat excluding foreign exchange, with subsidies having a positive impact.

• Q: Michael Ng asked about supply chain resilience and pricing with tariff impact.

A: Tim Cook talked about engaging on tariffs and operational team optimizing supply chain; Kevan Parekh discussed product gross margin factors like mix, foreign exchange, and cost savings.

• Q: Samik Chatterjee asked about Apple Intelligence impact and US consumer reaction to macro.

A: Tim Cook said Apple Intelligence boosted iPhone 16 family sales in markets where available, and US consumer results were strong but not predicting future macro impacts.

• Q: Richard Kramer asked about Siri delays and tariff learnings.

A: Tim Cook discussed progress on Apple Intelligence features despite Siri delays, and Kevan Parekh emphasized R&D investments.