Source: Company Information; Leverage Shares analysis

While net sales are trending to close this FY with 12% growth, cost of sales and operating expenses are trending to close 10% and 6% higher respectively. While operating expenses – with over 54% being in research and development (R&D) since 2023 – has never seen a downtrend, cost of sales is seeing an uptick after two years of negative growth.

Overall, earnings per share is trending to show a solid 34% growth over the previous FY, which (if it turns out that way) would be a milestone.

In the earnings call, Apple CEO Tim Cook stated that the company expects tariffs to add $900 million to its costs for the current ongoing quarter. This might have been the genesis of the downward sentiment in the stock. However, when taken in context, this amount is a modest 3.63% of net income earned in Q2 2025 and 1.47% of that earned in 6M 2025. Even with a net effect of a 7% drag for the next two quarters, the net earnings per share trend would still be a double-digit increase over the previous FY.

Mr. Cook also elaborated that the company is already sourcing about half of the iPhones for the U.S. from its partners’ facilities in India, and most of its other products for the U.S. from similar facilities in Vietnam, where tariffs are lower than they are from China. For the rest of the world, the company continues to supply out of facilities in China.

Furthermore, there’s a strong likelihood that the company will continue to develop its U.S.-based supplier network. In the course of Q2 2025 (i.e. late February), the company had announced¹ that it will invest $500 billion over the next four years to promoting American manufacturing, which included:

• A 250,000-square-foot facility in Houston (Texas) to produce servers that support Apple Intelligence;

• A doubling of its U.S. Advanced Manufacturing Fund to $10 billion to support partners’ growth, which includes a multibillion-dollar commitment to produce advanced silicon in TSMC’s Fab 21 facility in Arizona;

• An “Apple Manufacturing Academy” in Detroit (Michigan), where Apple’s engineers will consult with small- and medium-sized businesses on implementing AI and smart manufacturing techniques.

With the wheels already in motion, it’s entirely likely that moves to divest from the company’s “China dependence” on manufacturing for the U.S. market (at the very least) would be accelerated over the next two quarters, which would be a net positive in terms of source/supplier diversification.

While there is a increased recessionary outlook in the wake of President Trump’s tariff war which – as outlined in an earlier article² – might last years, Apple’s products tend to carry a “brand equity” that might make it somewhat recession-proof among some customer segments. However, even if it were to be impacted by declining sales, its relatively strong sales figures despite the odds would likely make it the “best of a bad lot”, which means that investor sentiment would strengthen.

At least since 2022, China was long touted as its biggest “single market” growth driver after the U.S. With economic headwinds rising, it’s possible that this won’t hold true. Presently, the brand’s global appeal has essentially sustained sales figures elsewhere in the world, despite the slowdown seen in China in the two prior FYs.

In the FY so far, it’s a solid performance for the company by way of financials. However, while Mr. Cook stated that Apple expects revenue to grow in the low to mid-single digits in Q3 2025 – which is well in line with trends – there is a much-forecasted recession warning from several leading institutions. If the recession has global effects, then Apple could be vulnerable, since the company’s predominant products and services are consumer goods (as the China sales data is hinting). The next quarter’s data would clarify if Mr. Cook stays validated.

Given that there is little by way of rationale (beyond the recessionary outlook) to impart substantial decline, investor sentiment will likely soon return to impart some bullish momentum in the stock that would make its performance relatively stronger than that of the broad market again. At present, there is no strong reason for investors holding the stock to divest significantly, while those unexposed to the stock might see cause in the recessionary outlook to stay away. It could be argued that dividend-driven investors might find the stock favourable given that Apple stated that it will continue to plan for annual dividend increases. However, if only dividends were to be the factor influencing stock choice, energy stocks and financials typically deliver stronger dividends.

Professional investors in Europe might like to consider the +3x Long Apple ETP (AAP3) for magnified exposure during upticks of the stock’s trajectory while the -3x Short Apple ETP (AAPS) can be employed during downturns for magnified gains.

Footnotes:

1. “Apple will spend more than $500 billion in the U.S. over the next four years”, Apple Newsroom, 24 February 2025
2. “”Liberation Day” Tariffs: A Long-Term Strategy?”, Leverage Shares, 8 April 2025