Apple Q2 FY25 earnings preview: iPhone sales, services growth and US-China trade tensions in focus

Writer | Fabien Yip | Market Analyst

When is Apple reporting its second quarter earnings?

Apple will release its financial results for Q2 on Friday, 2 May 2025 at 6.30am (AEST), with investors closely watching iPhone sales trends and the impact of ongoing US-China trade tensions.

Apple's Q2 FY25 financial expectations

Apple is expected to show 3.8% revenue growth with services offsetting hardware slowdown

• Revenue: $94.2 billion, representing a 3.8% year-over-year increase
• Net income: approximately $24.2 billion, up 2.5% year-over-year
• Gross margin: 47.1%, improving slightly from 46.6% in the previous year

In the previous earnings call, Apple guided for low- to mid-single-digit growth in overall revenue for the March quarter compared to the previous year, aligning with current analyst expectations. This growth will likely be driven primarily by Apple's services and iPad segments, continuing the trend seen in recent quarters.

Apple financial expectations and result

Services revenue crucial as hardware sales growth moderates

Services revenue, which includes the App Store, iCloud, and advertising, has become increasingly important as hardware sales growth slows. This segment is expected to grow by approximately 12% year-over-year, helping to offset the cyclical slowdown in smartphone sales. iPhone sales, which accounted for 56% of the company's revenue in Q1 FY25, will be closely scrutinised. The sustainability of services growth is crucial, particularly as Apple seeks to offset slower hardware sales with recurring revenue streams.

US-China trade tensions create significant supply chain risks

Apple faces substantial risks from trade policy uncertainty, with approximately 90% of iPhones assembled in China while the US remains its largest market by revenue. This exposure creates significant vulnerability to tariff decisions and trade restrictions.

Although electronics and smartphones received temporary exclusion from high reciprocal tariffs, the Trump administration has indicated these products will be included in upcoming semiconductor sectoral tariffs. Implementation could occur within one to two months, potentially disrupting Apple's cost structure.

Management's guidance on navigating these tensions will be essential. Investors will look for clarity on whether Apple plans to:

• Absorb tariff costs
• Renegotiate with suppliers
• Adjust pricing
• Further diversify its supply chain beyond China to locations like India and Vietnam

Geographic revenue trends show heavy US dependence and China recovery potential

From a geographic perspective:

• North America: contributed 42% of revenue in the previous quarter, making Apple particularly sensitive to US trade policies and domestic economic conditions
• Greater China: expected to revert to positive growth after multiple quarters of negative growth since 2023, a potential turnaround that will be closely watched

Apple revenue breakdown by business segment and geography

Apple's AI strategy and innovation roadmap

Apple's progress on artificial intelligence products will be a focal point for investors and analysts. In March, the company indefinitely postponed the launch of AI features for Siri, raising concerns about Apple's position in the AI race compared to competitors like Google and Microsoft.

The company has steadily increased its research and development (R&D) spending to safeguard its leadership in product innovation. In the previous quarter, Apple allocated 7% of its total net sales to R&D, highlighting its commitment to technological advancement despite supply chain disruptions.

Investors will seek updates on Apple's AI integration roadmap across its product ecosystem. The company faces pressure to demonstrate compelling AI applications that enhance user experience while maintaining its trademark focus on privacy and security.

Analyst outlook and target price considerations

Analyst sentiment on Apple has declined in recent months. According to LSEG Data & Analytics, out of 49 analysts covering the stock:

• 12 maintain a "Strong buy" recommendation
• 21 rate it as a "Buy"
• 13 as "Hold"
• 3 assign a "Sell" rating

The average one-year price target stands at $237.71, suggesting a potential 19% increase from the 22 April 2025 closing price of $199.74.

Apple price indicators and buy/sell signals

TipRanks smart score charts

When comparing Apple to its "Magnificent Seven" peers, it ranks fourth in year-to-date returns. The company's valuation as indicated by its price-to-earnings (P/E) ratio has become more reasonable following recent pullbacks, though not as attractive as peers like Alphabet and Meta when considering trade policy exposure.

Valuation and performance of Magnificent Seven

Apple share price technical analysis

Apple's share price has experienced a significant pullback this year, falling as much as 35% from its record high of $260.10 reached on 26 December 2024. Despite some recovery, the stock remains 23% below its peak.

Technical analysis shows that Apple's share price broke its uptrend in late February and has been trading below its 200-day simple moving average (SMA) since then. This pattern typically signals a bearish trend, with the 200-day SMA now acting as resistance.

A better-than-expected earnings report could drive the share price toward the $225 level, which aligns with recent peaks. If the price sustains above the 200-day SMA, this would indicate a potential reversal in trend and renewed bullish momentum.

Conversely, disappointing results could see the stock testing support near the recent low of $169. This level may prove crucial for determining whether Apple shares stabilise or continue their downward trajectory in the coming months.

Apple daily chart

• ^{Source: TradingView. The figures stated are as of 22 April 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}