In This Article:
Narratives can change pretty swiftly on Wall Street, dragging even the biggest companies into discussions that were largely ignored only a few months ago.
Apple (AAPL) , which earlier this year was under fire for failing to devote the proper resources to its AI investment thesis, made no mention of tariffs on its first-quarter conference call in January. In fact, just 10 days after President Donald Trump was inaugurated, CEO Tim Cook would say only that the world's biggest tech company was "monitoring the situation."
💸💰Don't miss the move: Subscribe to TheStreet's free daily newsletter 💰💸
Last night, however, during Apple's March-quarter earnings call, tariffs were mentioned 27 different times as Cook conceded that the administration's 145% levy on China-made goods, as well as baseline tariffs of 10% on virtually every other U.S. trading partner, would add a $900 million cost headwind to the current quarter.
That's shifted investor concern from Apple's AI investments to its supply chain, and the speed with which it can transition from overreliance on China-based production to avoid being caught in the crosshairs of the escalating trade war between Washington and Beijing.
Most U.S. iPhones this quarter will likely come from India, rather than China, Cook said, while other Apple hardware is expected to originate in Vietnam.
"What we learned some time ago was that having everything in one location had too much risk with it," Cook told investors late Thursday. "And so we have, over time, with certain parts of the supply chain, not the whole thing but certain parts of it, opened up new sources of supply. And you could see that kind of thing continuing in the future."
Apple still managed a solid March quarter, the second in its unusual fiscal calendar, with overall revenue rising 5% from a year earlier to $95.36 billion, topping Wall Street forecasts, and iPhone sales rising 2% to $46.84 billion.
The group expects current-quarter revenue to rise in the low-single-digits percent, suggesting an overall tally of between $86.6 billion and $90.1 billion, with profit margins narrowing to reflect the $900 million in tariff costs.
Related: Analysts revisit Apple stock price targets as Cook courts Beijing
KeyBanc analyst Nispel: Tariff overhang to extend
KeyBanc Capital Markets analyst Brandon Nispel, however, says the tariff overhang is likely to last well into the back half of the year and drag on Apple's share-price performance at the same time.
"We think Apple's tariff-mitigation efforts are likely better than most expect, but at the end of the day we believe it's likely a little-to-no-growth business, where expectations continue to call for an acceleration in growth into 2026," he said in a note published Friday.