Apple gets a boost from China, but faces an expected $1.1 billion tariff hit this quarter

Apple gets much-needed boost from iPhone and China, but faces expected $1.1 billion in tariff hit this quarter
Source: CNN Business , by Lisa Eadicicco
Updated: July 31, 2025

Apple Inc. reported strong iPhone sales and a rebound in revenue in China, giving a much-needed boost to two businesses that have struggled over the past year.

The better-than-expected results reassured Wall Street investors that Apple's core business remains strong despite lagging in artificial intelligence competition and facing challenges from impending tariffs imposed by US President Trump. Apple CEO Tim Cook said on a conference call with analysts that tariffs could result in an additional $1.1 billion in expenses for the current fiscal quarter (ending in September), up from $800 million in the previous quarter.

iPhone revenue reached $44.5 billion in the June quarter, beating analysts' expectations of $40 billion and $39.3 billion in the same period last year. The company's total revenue was $94 billion , up 10% year-on-year.

iPhone sales in China also rebounded, growing from $14.7 billion in the third quarter of 2024 to $15.3 billion in this quarter.

Apple's stock price rose over 2% in after-hours trading, but still lagged behind the gains of Microsoft (+7%) and Meta (+9%) driven by AI investments. Apple's stock price has fallen nearly 15% this year, missing out on the market's sharp gains of the past few months.

In the past, a surge in iPhone sales would have been enough to excite Wall Street, but now analysts are more focused on Apple's product vision for the AI era and the iPhone's long-term positioning. Cook stated that even as AI plays a larger role in daily life, the iPhone will remain an indispensable device, and he believes that future devices will complement, rather than replace, each other.

iPhone Performance Highlights

• The iPhone remains Apple's most important product, setting a June quarter sales record this quarter and increasing 13% year-over-year.
• Trump's tariff policy has forced Apple and other tech giants to rethink their manufacturing and shipping strategies.
• Earlier this year, Apple moved most of its iPhone production for the US market to India to avoid potential tariffs of up to 145% in China.
• The interim trade deal keeps U.S.-China tariffs at 30% until August 12, but Trump recently threatened to impose tariffs of up to 25% on India.
• Cook stressed that most iPhones currently sold in the United States come from India, and that about 19 billion chips have been produced in the United States.

AI Challenges

• Apple is seen as lagging behind in the field of AI, and a major upgrade to Siri has been postponed indefinitely.
• Cook said the upgrade is progressing smoothly and plans to launch a new version of Siri next year.
• Currently, AI functions are scattered across various products and applications, such as custom emoticons, text summaries, and image generation, but their impact is not as great as ChatGPT.
• Apple has acquired seven companies this year (some of which are not related to AI) and reallocated a large amount of manpower to AI research and development.
• Recently, several AI researchers have jumped ship to Meta, raising questions about whether Apple should replace its CEO with a more product-focused one.

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Key points

1. Financial and market performance

• Total revenue in Q3 (ending June) was US$94 billion , a year-on-year increase of 10%.
• iPhone revenue was $44.5 billion , exceeding expectations and increasing 13% year-over-year.
• Revenue in the Chinese market increased from US$14.7 billion to US$15.3 billion.
• The stock price rose 2% after the market closed, but is still down nearly 15% so far this year.

2. Tariff impact

• Tariff expenses are expected to be $1.1 billion this quarter (compared to $800 million in the previous quarter).
• Most iPhone production for the US market has been moved to India.
• US-China interim agreement: 30% tariffs to remain in place until August 12.
• Trump threatens to impose tariffs of up to 25% on India.

3. AI Progress and Challenges

• The Siri upgrade has been delayed and a new version is expected to be released next year.
• Existing AI functions are fragmented and its competitiveness lags behind Google, Meta, and Microsoft.
• Strengthening AI R&D: Acquired 7 companies and significantly adjusted staffing.
• The loss of talent to Meta has raised questions about the CEO's leadership.