Apple’s latest earnings report showed that the company remains resilient, but also revealed some growing challenges. While Apple remains a strong cash generator, global economic headwinds and changing consumer behavior could weigh on future profits. It had lost value as services revenue fell short of expectations.
Total revenue rose 5.1% YoY to $95.4 billion*, slightly ahead of expectations. Much of this growth came from continued demand for iPhones, with sales of $46.84 billion*. However, the underlying reason for this increase is likely to be consumers bringing forward purchases ahead of potential tariff-related price hikes. Apple said it faced additional costs of approximately $900 million* in the current quarter due to tariffs, raising questions about margin pressure and potential price adjustments.
Services revenue, the company’s most profitable segment, rose 12% to $26.65 billion*. Growth was strong, but falling short of analyst estimates disappointed investors and pushed the stock price lower. Regulatory pressures in this area are also starting to take hold. A recent court ruling *requires Apple to allow third-party payment options on its App Store*, which could weaken its commission-based revenue model. The company’s digital services are also under increasing regulatory scrutiny in both the U.S. and Europe.
Performance in hardware segments other than iPhone was mixed. *iPad sales rose 15% to $6.4 billion*—driven by new models and faster chips. *Mac sales also rose 6.7% to almost $8 billion*, beating expectations. However, the wearables, home and accessories category, which includes products such as *AirPods* and *Apple Watch*, fell 4.9% to $7.52 billion*, below expectations, reflecting a decline in consumer demand for “must-have” tech products amid a difficult economic climate.
The Chinese market continues to be a notable problem area. Revenue from the Greater China region fell by *2.3% to $16 billion*, falling short of expectations. Competition from local brands such as Huawei and Xiaomi is challenging Apple, while restrictions on foreign technology in some public institutions are also affecting sales. In addition, Apple’s AI initiatives have not received enough attention in this market, and competitors have taken the lead in innovation.
Despite all these challenges, Apple still has a strong financial position. *Earnings per share exceeded the estimate of $1.62, coming in at $1.65*. The company also generated $24 billion in operating cash flow. *The board of directors approved a massive $100 billion share buyback program and increased the dividend to $0.26 per share*. These decisions show that confidence in the business model continues and that there are supportive factors for long-term investors.
When all these things I have said are considered, even if the stock is squeezed in the short term, its loyal customer base, solid balance sheet and long-term strategy will continue to make Apple strong. *In my opinion, it will reach $220 in a short time.* Valuation models that include Vision Pro and share buybacks, if certain conditions are met, it is necessary for $251 or more, and if these are provided, we will see these in the medium term.
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