Apple Inc. (AAPL) Q2 2025 Earnings Summary

Executive Summary

• Beat on revenue and EPS; Apple posted $95.36B revenue (+5% YoY) and $1.65 diluted EPS (+8% YoY), both March-quarter records; Services hit an all‑time high ($26.65B, +12% YoY) while company gross margin reached 47.1% within guidance midpoint .
• New $100B buyback authorization and a 4% dividend increase to $0.26/share; returned $29B in Q2 via $25B open‑market repurchases (108M shares) and $3.8B in dividends .
• Guidance: June quarter (Q3) revenue to grow low-to-mid single digits YoY; GM 45.5–46.5%; OpEx $15.3–$15.5B; OI&E ≈ -$300M; tax ≈16%; Apple estimates tariffs will add ~$900M to Q3 costs, with some unique one‑time offsets in June (build‑ahead) .
• Strategic narrative: AI/“Apple Intelligence” continues to drive demand and engagement; management highlighted resilient supply-chain diversification (more U.S., India, Vietnam content) and record installed base, while noting FX headwinds and a tougher YoY compare in Wearables .

What Went Well and What Went Wrong

• What Went Well

  • Services momentum: record $26.65B (+12% YoY) with paid accounts and subscriptions growing double digits; Services GM 75.7% (+70 bps QoQ) .
  • AI as a demand catalyst: In markets with Apple Intelligence, iPhone 16 family outperformed those without; management reiterated strong feature adoption across Writing Tools, Genmoji, Image Playground, Clean Up, and Visual Intelligence .
  • Capital returns and balance sheet: $24B operating cash flow, $29B returned to shareholders; board authorized $100B repurchases and raised dividend to $0.26 .
  • Quote: “Services achieved an all-time revenue record, growing 12% compared to the prior year.” — Tim Cook .

• What Went Wrong

  • Wearables softness: Wearables, Home and Accessories revenue fell 5% YoY, facing a difficult comp against prior-year Vision Pro and Watch Ultra 2 launches .
  • FX and product mix pressure: Products gross margin fell 340 bps QoQ due to mix, FX, and seasonal loss of leverage (partly offset by cost savings) .
  • Tariff uncertainty: Q3 cost headwind estimated at ~$900M; management emphasized unpredictability beyond June and noted mix of country-of-origin shifts (India, Vietnam) .

Financial Results

Headline metrics versus prior periods

Actual vs S&P Global consensus (Q2 2025)

• *Values retrieved from S&P Global.
• Notes: Company also stated revenue +5% YoY and EPS +8% YoY; both are March-quarter records .

Segment revenue and mix

Product category revenue

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic focus on AI integration and privacy: “We built our own highly capable foundation models… and went to great lengths to build a system that protects user privacy… with Private Cloud Compute.” — Tim Cook .
• AI driving device demand: “In markets where we had rolled out Apple Intelligence, year‑over‑year performance on the iPhone 16 family was stronger than those where Apple Intelligence was not available.” — Tim Cook .
• Tariff transparency and mitigation: “We estimate the impact [in June quarter] to add $900 million to our costs… [and] built‑ahead inventory… was helpful.” — Tim Cook .
• Margin dynamics: “Products gross margin was 35.9%, down 340 bps sequentially, driven by mix, foreign exchange and seasonal loss of leverage… Services gross margin was 75.7%, up 70 bps.” — CFO Kevan Parekh .
• Capital returns: “Board authorized an additional $100 billion for share repurchases… raising our dividend by 4% to $0.26.” — CFO Kevan Parekh .

Q&A Highlights

• Tariffs and sourcing: Majority of U.S. iPhones to be India-origin and Vietnam-origin for most iPad/Mac/Watch/AirPods in June quarter; ~$900M Q3 cost headwind; cannot predict beyond June given Section 232 probe .
• Channel and demand: No obvious evidence of tariff-driven sell‑in pull‑forward in March; channel units similar QoQ; did build ahead inventory (shows in purchase obligations) .
• Margin color: Product GM down sequentially on mix/FX/seasonality; year‑on‑year down 70 bps on mix/FX; longer-run product cost downs expected as usual .
• China: Down 2% YoY in March quarter; roughly flat ex‑FX; subsidies supportive; no channel build; iPhone/iPad top models in urban China .
• AI roadmap: Personalized Siri deferred to meet quality bar; hybrid data center strategy; continued investment in foundational models and third‑party partnerships .

Estimates Context

• Q2 2025 beats: Revenue $95.36B vs $94.71B*; EPS $1.65 vs $1.626*; GM 47.05%* vs 47.02%* .

• Estimate revisions: Given Services outperformance and a higher company GM vs consensus, Street EPS may bias up near term, but Q3 GM guide (45.5–46.5%) embeds ~$900M tariff costs and FX headwinds, tempering product margin expectations .

• Coverage breadth: 28 revenue estimates and 29 EPS estimates for Q2*.

• *Values retrieved from S&P Global.

Key Takeaways for Investors

• Quality beat with defensible mix: Broad-based upside in Services and resilient Products delivered a clean revenue/EPS beat; company GM expanded to 47.1% despite mix and FX pressure .
• Capital return accelerant: $100B new buyback plus a higher dividend underpin EPS durability and offer downside support into tariff uncertainty .
• AI as a structural driver: Evidence that Apple Intelligence is lifting iPhone performance in supported markets suggests a multi‑quarter upgrade cycle as features/languages expand .
• Near-term caution on margins: Q3 GM guide steps down on tariffs and FX; watch mix, tariff evolution, and further supply‑chain shifts (India/Vietnam) for gross margin trajectory .
• China stabilizing ex‑FX with subsidy tailwinds; Americas/Japan strong: Regional mix favors growth even as China remains competitive .
• Services flywheel intact: Record revenue, double‑digit growth in paid accounts/subscriptions, and 75.7% GM provide recurring earnings ballast .
• Trading setup: Into Q3, model tariff drag (~$900M), lower GM range, and modest revenue growth; medium‑term thesis supported by AI‑driven device replacement, Services mix shift, and outsized buyback .