Apple Inc. warned on Thursday that it expects a $900 million hit to its bottom line this quarter due to the Trump administration's sweeping tariffs on Chinese imports, prompting a significant shift in its global supply chain. The tech giant said it is moving the majority of iPhone production for the U.S. market from China to India as part of efforts to avoid the newly imposed duties.
"Assuming the current global tariff rates, policies, and applications do not change for the balance of the quarter and no new tariffs are added, we estimate the impact to add $900 million to our costs," CEO Tim Cook said during Apple's fiscal second-quarter earnings call.
Apple reported earnings per share of $1.65 on revenue of $95.4 billion for the quarter ended March 29, exceeding Wall Street's expectations. Analysts had forecast $1.62 per share on revenue of $94.2 billion. The company also announced a $100 billion increase to its stock buyback authorization.
Despite the earnings beat, Apple's stock declined 4% in after-hours trading Thursday and was down another 3% in early Friday trading. Investors were rattled by Cook's comments on tariffs and the uncertain production outlook.
"We have a complex supply chain. There's always risk in the supply chain," Cook told analysts. "What we learned some time ago was that having everything in one location had too much risk with it."
While iPhones, iPads, and other Apple devices have so far been largely exempt from Trump's 145% reciprocal tariffs on Chinese goods, Cook said most Apple products originating from China are still subject to a baseline 20% levy. He said almost all iPads, Macs, Apple Watches, and AirPods sold in the U.S. will now be sourced from Vietnam.
For the quarter, iPhone revenue rose 2% to $46.8 billion, topping analyst expectations. Mac and iPad sales came in at $7.9 billion and $6.4 billion, respectively, also ahead of projections. Services revenue hit $26.6 billion, narrowly missing the $26.7 billion forecast.
Sales in Greater China, however, declined by about 2% year-over-year to $16 billion, as competition from Chinese smartphone makers intensified. Apple said it remains committed to that market but acknowledged headwinds.
Cook declined to speculate on how the production mix might evolve. "I wouldn't want to predict the mix of production in the future," he said.
The Trump administration has signaled that additional tariffs could be applied to consumer electronics, including semiconductors, smartphones, and computers. Apple confirmed it plans to source over $19 billion worth of chips from the U.S. this year to mitigate its exposure to tariff risks.
