Apple Q3 Earnings Trends: Unfazed by Tariffs?

American electronics conglomerate Apple Inc (ticker: AAPL) is seemingly in the midst of multiple headwinds: while executing a momentous shift in its manufacturing chain which sees facilities in India being positioned in China’s place, President Trump’s tariff war threatened to upend sales by introducing heightened tariffs for its finished products while economic conditions have been sapping away at sales in China – once its fastest growing market.

However, as it stands, the company’s position and strategic moves are relatively robust.

Trend Analysis

On the 31st of July this year, the company reported the third quarter (Q3) results for its Fiscal Year (FY) 2025. Therein, trends for the first nine months (9M) of FY 2025 indicate some strengthening of positive trends seen in Q2.

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Source: Company Information; Leverage Shares analysis

Net sales are trending to be 7% higher than previous FY, which is threefold that of the growth seen in FY 2024. The Americas, Europe and Japan continue to grow their revenue share while China is trending towards running flat relative to previous FY. In many respects, Japan and Europe are on the cusp of becoming growth markets in China’s place. North America, however, remains on top in share of net sales.

In terms of products offered overall, services are driving the bulk of sales growth so far this year, with the sales of Macs coming a close second.

Source: Company Information; Leverage Shares analysis

Services and Macs have quietly been rising as a “quiet support” to Apple’s net sales. In services, Japan and Europe have seen increasing sales while the company reports increasing sales of Macs in China.

Meanwhile, sales of iPhones are trending at a growth of 7% over the previous FY, which registered a net 0% growth over the previous year. However, Apple isn’t likely to shake off the notion that it is primarily a smartphone company; over half of the company’s sales are from iPhones – with Europe and Japan again picking up increasing volumes.

The overall rise in net sales see a nearly similar increase in costs as well.

Source: Company Information; Leverage Shares analysis

While operating expenses and cost of sales are trending towards a 5-7% increase over the previous FY, greater efficiencies in inventory management and other factors are currently ensuring that the earning per share are trending towards a powerhouse 23% increase over the previous FY – which breaks two years of downtrends in EPS growth.

It’s a crowded market – be it streaming (a mainstay of “Services”), mobile phones or laptops. Numerous companies offer products that are argued to have “better features” at lower prices than what Apple’s products command or at comparable levels, especially in Europe, Japan and China. This drives home the notion that the build quality of its products and the brand equity in its name remain well-regarded and deeply embedded among customers’ buying preferences.

Managing Tariff Troubles

President Trump’s hiking of tariffs on both India and China potentially undermines Apple’s globe-spanning manufacturing chain. Furthermore, his demands that Apple base its manufacturing entirely within the U.S. likely isn’t going to be a realistic proposition for the company, given its global customer base and the decades it spent building out its global presence.

On the 6th of August, the company announced that it is adding another $100 billion¹ to its earlier $500 billion commitment over the next year to encourage its manufacturing partners to bring more of its production onto U.S. soil. It also announced that it will be funding its partner Corning in the setting up of the world’s largest smartphone glass factory in Kentucky such that the glass of every Apple phone and watch will be made in the U.S. With these commitments, it’s likely that the company is preparing a case to argue for an exemption in tariffs in the event that ongoing litigation in the U.S. Supreme Court doesn’t see the tariff hikes being declared an invalid exercising of power by the President.

How Apple balances production across its global network of partners in the face of tariffs remains to be seen while the tariff imbroglio remains a drama that continues to unfold. However, Apple’s continued success in its markets despite cheaper and allegedly better alternatives available raises an interesting question: even if tariffs remain and the price of its products were to increase in the U.S., does that necessarily mean that Apple wouldn’t continue to sell well?

This is a trillion-dollar question.

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