Apple’s chaotic month culminates in tariff-focused earnings test

While tariff exemptions for smartphones and other electronics have so far allowed Apple to avoid the worst-case scenario, the situation remains in flux, further clouding the company’s prospects.

This earnings season has already seen a number of high-profile companies — including United Airlines, Skechers, and Snap Inc. — abandon their outlooks given the uncertainty.

“Exemptions gave Apple some breathing room, but it remains in the hot seat, and there’s still so much that’s so hard to predict,” said Kevin Cook, senior strategist at Zacks Investment Research.

“Even if you set aside how things can swing on every Truth Social post, we don’t know how to quantify the impact on margins, costs, or growth, except to say they could be significant. I’m sure it’s leading to a lot of sleepless nights.”

Apple is expected to report net earnings growth of 6.1% this quarter and a 4.3% increase in revenue. While both are below the pace expected for the S&P 500 Index, according to Bloomberg Intelligence, some upside is possible as customers rushed to buy Apple products ahead of the tariffs.

Analysts will be listening closely for any further detail on how the company, the largest in the world by market capitalization, views the effects of tariffs going forward.

April was a month of enormous swings for the stock. It sank more than 20% over a four-day period — the biggest such drop since October 2000 — and immediately followed that with its biggest one-day gain since 1998. While it has rebounded 23% off an April low, it fell 4.3% over the month.

Separately, the CBOE Apple VIX, which tracks a market estimate of future volatility for the stock, recently hit a five-year high.

Apple is seen as among the companies most impacted by tariffs given a supply chain that is heavily reliant on China, Vietnam, and India, where it is looking to increase its annual iPhone output.

Rising tensions also threaten the company’s overseas sales; less than 43% of its fiscal 2024 revenue came from the Americas, according to data compiled by Bloomberg.

While the Trump administration wants Apple to make iPhones in the U.S., doing so would be extremely difficult, and Bank of America estimated it would lead to skyrocketing costs, something that would undoubtedly impact demand.

Beyond the company-specific impact, any tariff-induced economic weakness could weigh on consumer spending at a time when customers have already been reluctant to trade up for the latest iPhone.

Then there are the concerns about Apple that predated tariffs, like tepid growth, delays with its artificial intelligence offerings, and a multiple that continues to be seen as elevated.

Estimates for the company’s net 2025 earnings have come down just 0.7% over the past month, according to data compiled by Bloomberg, while the revenue consensus has been lowered by 0.3%. However, estimate reductions have been far more severe for Apple’s 2026 fiscal year, which begins Oct. 1.

More bullish investors argue that Apple offers a number of defensive characteristics, including strong cash flow, a massive user base, and robust capital returns. Morgan Stanley expects the latest report will come with a low- or mid-single-digit increase to the dividend, and a $110 billion addition to the company’s buyback authorization.

However, any further reduction in estimates would bolster the argument that Apple’s multiple is too lofty given its prospects. Shares trade near 28 times estimated earnings, notably above its 10-year average of 20.8, and a premium to the overall market.

“You could argue that Apple would be defensive absent the tariff issue, but given the source of the uncertainty and the potential risks, it is really losing that shine,” said Matt Stucky, chief portfolio manager of equities at Northwestern Mutual Wealth Management.

“It needs to remain highly valued for the stock to work, but because it trades at a premium to the market while growing slower, that’s an uphill battle, especially since tariff uncertainty will likely be with us for a long time.”

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Earnings due Thursday

With assistance from Subrat Patnaik, Riley Griffin and Kurt Wagner.

Ryan Vlastelica, Bloomberg News

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