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    AAPL
    Earnings call· Mar 2025(Q2 FY25)

    Apple Q2 FY25 earnings call AAPL

    May 1, 2025 Source

    Executive summary

    Apple Q2 FY25 — Strong Services Growth and Record EPS Despite Tariff Headwinds

    Apple delivered a strong second fiscal quarter, exceeding revenue expectations and achieving record EPS, primarily driven by robust growth in its Services segment and solid performance across iPhone, Mac, and iPad. The company continues to expand its installed base and paid subscriptions, signaling strong customer engagement. Management is actively navigating tariff-related cost pressures through supply chain optimization and inventory management, while also making significant long-term investments in U.S. manufacturing and AI capabilities.

    Highlights

    5

    • Total revenue of $95.4 billion, up 5% YoY, at the high end of guidance

    • Diluted EPS of $1.65, up 8% YoY, a March quarter record

    • Services revenue reached an all-time record of $26.6 billion, up 12% YoY

    • Installed base of active devices reached an all-time high across all product categories and geographic segments

    • Operating cash flow was strong at $24 billion

    Concerns

    3

    • Wearables, Home and Accessories revenue was down 5% YoY to $7.5 billion

    • Estimated $900 million impact to costs in Q3 FY25 from tariffs

    • Foreign exchange headwinds of almost 2.5 percentage points on total revenue and over 2 percentage points on Services revenue

    Guidance & targets

    6
    CategoryTargetConfidence
    June quarter total company revenue growth
    low to mid-single digits year-over-year
    high materiality
    High
    June quarter gross margin
    45.5% and 46.5%
    high materiality
    High
    June quarter operating expenses
    $15.3 billion and $15.5 billion
    medium materiality
    High
    June quarter Other Income & Expense (OI&E)
    around negative $300 million
    low materiality
    High
    June quarter tax rate
    around 16%
    low materiality
    High
    Annual dividend increase
    annual increases
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    iPhone
    Driven by the iPhone 16 family. Top-selling model in U.S., urban China, U.K., Germany, Australia, and Japan.
    Installed base: all-time highUpgraders: double digits year-over-yearCustomer satisfaction (U.S.): 97%
    		$46.8 billion2%——
    Mac
    Driven by the latest MacBook Air, MacBook Pro, and Mac mini models. Performance was broad-based with every geographic segment growing.
    Installed base: all-time highUpgraders: strong growthNew customers: strong growthCustomer satisfaction (U.S.): 95%
    		$7.9 billion7%——
    iPad
    Driven by the new M3-powered iPad Air. Strong double-digit growth.
    Installed base: all-time highNew customers: over half of purchasersCustomer satisfaction (U.S.): 97%
    		$6.4 billion15%——
    Wearables, Home and Accessories
    Faced a more difficult compare against the launch of Apple Vision Pro and Watch Ultra 2 in the prior year.
    Apple Watch installed base: all-time highApple Watch new customers: over half of purchasersApple Watch customer satisfaction (U.S.): 95%
    		$7.5 billion-5%——
    Services
    All-time revenue record with strong performance across all categories and geographic segments. Double-digit growth in both developed and emerging markets. Growth rate comparable to December quarter when removing negative FX impact.
    Transacting accounts: all-time highPaid accounts: all-time high, double-digit growth year-over-yearPaid subscriptions: well over 1 billion, double-digit growthApple Pay active users: all-time record, double-digit growth year-over-year
    		$26.6 billion12%——

    Operational metrics

    31
    Total revenue
    $95.4 billionup 5% year-over-year
    Q2 FY25

    At the high end of the guidance range provided last quarter.

    Diluted EPS
    $1.65up 8% year-over-year
    Q2 FY25

    A March quarter record.

    Foreign exchange headwind on total revenue
    2.5 percentage points
    Q2 FY25

    Impact on total revenue growth.

    Products revenue
    $68.7 billionup 3% year-over-year
    Q2 FY25

    Driven by growth in iPhone, iPad, and Mac.

    Foreign exchange headwind on Services revenue
    2 percentage points
    Q2 FY25

    Impact on Services revenue growth.

    Company gross margin
    47.1%up 20 basis points sequentially
    Q2 FY25

    In the middle of guidance range, primarily driven by favorable mix.

    Products gross margin
    35.9%down 340 basis points sequentially
    Q2 FY25

    Partly offset by cost savings.

    Services gross margin
    75.7%up 70 basis points sequentially
    Q2 FY25

    Primarily driven by a different mix, partly offset by foreign exchange.

    Operating expenses
    $15.3 billionup 6% year-over-year
    Q2 FY25

    Total operating expenses for the quarter.

    Net income
    $24.8 billion
    Q2 FY25

    Total net income for the quarter.

    Cash and marketable securities
    $133 billion
    Q2 FY25

    Total cash and marketable securities at the end of the quarter.

    Total debt
    $98 billion
    Q2 FY25

    Includes $3 billion in debt maturities and $4 billion increase in commercial paper.

    Net cash
    $35 billion
    Q2 FY25

    Calculated as cash and marketable securities minus total debt.

    Capital returned to shareholders
    $29 billion
    Q2 FY25

    Includes dividends and share repurchases.

    Dividends and equivalents
    $3.8 billion
    Q2 FY25

    Part of capital returned to shareholders.

    Share repurchases
    $25 billion
    Q2 FY25

    Through open market repurchases.

    Dividend per share
    $0.26up 4%
    Q2 FY25

    Increased by the Board of Directors.

    Tariff-related costs
    $900 million
    Q3 FY25

    Estimated impact to costs for the June quarter, assuming current global tariff rates, policies, and applications do not change.

    U.S. suppliers
    9000+
    Q2 FY25

    Across all 50 states.

    Chips sourced from U.S.
    19 billion+
    CY25

    Includes tens of millions of advanced chips from Arizona this year.

    Emissions reduction
    60%from 2015 levels
    Q2 FY25

    Progress towards carbon neutrality goal by 2030.

    Renewable electricity brought online by suppliers
    17.8 gigawatts
    Q2 FY25

    Part of sustainability efforts.

    Apple TV+ award nominations
    2500+
    Q2 FY25

    Reflects content quality and viewership.

    Apple TV+ award wins
    560
    Q2 FY25

    Reflects content quality and viewership.

    iPhone 16e modem
    C1 modem
    Q2 FY25

    Allows for longest battery life of any 6.1-inch iPhone.

    iPhone 16e chip
    A18 chip
    Q2 FY25

    Powers the new entry-level iPhone.

    iPhone 16 Pro chip
    A18 Pro
    Q2 FY25

    Turbocharges the Pro models.

    MacBook Air chip
    M4
    Q2 FY25

    Features a 12-megapixel Center Stage camera.

    Mac Studio chips
    M4 Max and M3 Ultra
    Q2 FY25

    Most powerful Mac shipped, capable of running LLMs with over 600 billion parameters.

    iPad Air chip
    M3
    Q2 FY25

    Combines powerful performance and exceptional portability.

    Apple Intelligence language expansion
    French, German, Italian, Portuguese, Spanish, Japanese, Korean, simplified Chinese, localized English (Singapore, India)
    Q2 FY25

    Released with iOS 18.4.

    Industry KPIs

    7
    MetricValueDetails
    Capital return FCF$29 billionUSD
    Gross margin drivers47.1%%
    Company specific kpis97%%
    Market share commentarytop-selling model
    Services peripheral attachwell over 1 billionunits
    Installed base refresh runwayall-time high
    Revenue mix by end market segment—

    Product announcements

    9
    ProductTypeDetails
    iPhone 16elaunch
    M4-powered MacBook Airupdate
    Mac Studio with M4 Max and M3 Ultraupdate
    iPad Air with M3update
    AirPods 4launch
    visionOS 2.4update
    iOS 18.4update
    Apple Intelligence features (Writing Tools, Genmoji, Image Playground, Image Wand, Clean Up, visual intelligence, ChatGPT connection, movie creation from memories, AI-powered photo search, smart replies, priority notifications, mail/message summaries)milestone
    More personal Siri featuresroadmap

    Deals & partnerships

    3
    KPMGcustomer contract

    KPMG recently rolled out iPhone 16 for all U.S. employees, reflecting confidence in Apple's security and privacy features.

    Nubankcustomer contract

    Nubank, the largest digital bank in Latin America, selected MacBook Air as the standard computer for thousands of employees.

    Dassault Systèmespartnership

    Dassault Systèmes, a provider of engineering and 3D design software, natively integrated Apple Vision Pro into their next-generation platform, bringing immersive spatial experiences to enterprise customers.

    Capital programs

    1
    U.S. Investmentunderway$500 billion

    Benefit: expanding teams and facilities in Michigan, Texas, California, Arizona, Nevada, Iowa, Oregon, North Carolina, and Washington; opening a new factory for advanced server manufacturing in Texas

    Investment across several states, including CapEx and OpEx, and for advanced server manufacturing.

    Risks & headwinds

    3
    Tariff-related costsJune quarter (Q3 FY25)

    $900 million

    Mitigation: Supply chain optimization, inventory build-ahead, engagement in tariff discussions.

    Foreign exchange headwindsQ2 FY25

    2.5 percentage points on total revenue; 2 percentage points on Services revenue

    Legal cases (Epic case injunction, Google antitrust trial)Ongoing

    Potential material impacts on Services business

    Mitigation: Strong disagreement and appeal for Epic case; monitoring closely for DOJ case, outcome unclear.

    Q&A highlights

    8

    What is the expected mix of India-sourced iPhones for the U.S. by year-end, and is the goal to source 100% of U.S.-bound iPhones from India? How should this trend beyond Q3 FY25?

    For Q3 FY25, the majority of U.S.-bound iPhones will be from India, and most iPads, Macs, Apple Watches, and AirPods from Vietnam. China will remain the primary origin for products sold outside the U.S. Management declined to predict future production mix beyond Q3 FY25 due to ongoing tariff uncertainties and investigations.

    “I wouldn't want to predict the mix of production in the future, I -- but I wanted to give you clarity for the June quarter of where the country of origins are so you can use that for your modeling.”

    asked by Erik Woodring · answered by Timothy Cook

    2 min read5 chapters

    Detailed Narrative

    01

    Tariff Impact and Supply Chain Strategy

    Apple estimates a $900 million impact to costs in the June quarter due to tariffs, assuming current global tariff rates and policies remain unchanged. The company has been actively optimizing its supply chain and inventory, including building ahead inventory, to mitigate these impacts. Management noted that the majority of iPhones sold in the U.S. in the June quarter are expected to originate from India, while most iPads, Macs, Apple Watches, and AirPods sold in the U.S. will originate from Vietnam. China will remain the country of origin for the vast majority of total product sales outside the U.S.

    02

    AI Integration and Product Innovation

    Apple continues to integrate AI across its product ecosystem, with new features like Writing Tools, Genmoji, Image Playground, and AI-powered photo search rolled out with iOS 18.4. The company highlighted its M4-powered MacBook Air and Mac Studio as AI powerhouses capable of running large language models. While many AI features have been delivered, the more personal Siri features require additional development time to meet Apple's quality standards. The company is also making significant R&D investments to support its AI roadmap.

    03

    U.S. Investment and Manufacturing Expansion

    Apple announced plans to spend $500 billion over the next four years in the United States, expanding teams and facilities across several states including Michigan, Texas, California, and Arizona. This includes opening a new factory for advanced server manufacturing in Texas. The company expects to source over 19 billion chips from a dozen states in calendar year 2025, emphasizing its commitment to U.S. domestic supply chain and job creation.

    04

    Services Momentum and Customer Engagement

    Services achieved an all-time revenue record of $26.6 billion, growing 12% year-over-year, with strong performance across all categories and geographic segments. The installed base of active devices reached an all-time high, driving continued growth in transacting and paid accounts, which both saw double-digit increases. Paid subscriptions also grew double digits, now exceeding 1 billion across the platform. Apple Pay active users also reached an all-time record, growing double digits YoY.

    05

    China Market Performance

    Revenue in Greater China was down 2% year-over-year, but was roughly flat when accounting for foreign exchange headwinds🌐, showing sequential improvement from the previous quarter's 11% decline. Subsidies were noted as having a favorable, though unquantifiable, impact on results. iPhone was a key driver of this improvement, with iPhone and iPad ranking as top-selling models in urban China. Mac, iPad, and Watch continue to attract a majority of new customers in the region.

    AI-generated summary of the company’s earnings call. Not investment advice.