• Apple reports 5% revenue and profit growth in Q2 FY25, meeting expectations but facing margin pressures.
  • Jefferies downgrades AAPL to Underperform, citing $900M tariff impact and escalating risks.
  • iPhone shipments to China (~7M units) expected to meet U.S. demand, but cost pressures loom.

Apple’s Steady Growth Meets Tariff Headwinds

Apple Inc. delivered a solid yet unspectacular Q2 FY25, with revenue climbing 5% year-over-year to $95.4 billion, matching consensus estimates. The tech giant saw growth across most segments—Mac (7%), iPad (15%), iPhone (2%), and Services (12%)—though Wearables/Home/Accessories slipped 5%. Net profit and EPS also rose 5%, reflecting stable execution. However, Jefferies’ downgrade to Underperform, with a modestly raised price target of $170.62 (from $167.88), underscores mounting concerns over tariffs and margins.

The Tariff Toll

Management flagged a $900 million hit from tariffs next quarter, a figure that could expand if U.S.-China trade tensions escalate. While iPhone shipments to China (approximately 7 million units) are expected to balance U.S. demand, Jefferies’ analysts warned that margin compression is becoming structural. “The tariff overhang isn’t priced in,” one analyst noted, pointing to Apple’s reliance on Chinese manufacturing and the potential for further retaliatory measures. Low-to-mid single-digit revenue guidance for the coming quarter suggests tempered optimism.

Market Reaction and Broader Implications

Investors reacted cautiously, with shares dipping slightly post-announcement. The downgrade reflects broader skepticism about Apple’s ability to offset tariff costs without sacrificing profitability. “The services segment is a bright spot, but hardware margins are under siege,” said a portfolio manager at a major asset firm. Apple’s balancing act—navigating geopolitical risks while sustaining growth—mirrors challenges across the tech sector, where supply chain resilience is increasingly tied to trade policy.

Apple declined to comment beyond its earnings release. Jefferies did not immediately respond to requests for elaboration on its revised outlook.