An Apple store that is undergoing renovations in Beijing. The company’s sales in the China region have fallen sharply as customers have shifted to local brands.
Apple reported the highest March-quarter revenue it has seen in more than two years, as people moved quickly to buy smartphones and other devices before new U.S. tariffs were announced in April.
The company said sales rose 5% to $95 billion, ahead of analyst expectations. Net income for the period was $24.8 billion, up nearly 5% from the January-to-March quarter last year. Apple released the iPhone 16e in the quarter, a lower-end phone that comes with limited artificial-intelligence features, a factor that helped drive demand along with pretariff buying, analysts said.
Apple was among the hardest-hit of the tech giants last month because of its exposure to China, a primary target of the Trump administration’s global tariff pressure. Most of Apple’s devices are assembled in the country, and investors are closely watching the company’s efforts to shift production to India and other countries.
Shares in Apple have recovered much of the value they lost after President Trump’s Liberation Day tariffs sent them spiraling, thanks to a pause on so-called reciprocal tariffs for smartphones. The administration continues to weigh other actions that could affect tech companies, and the company faces 20% duties on imports from China and 10% from those sent via India.
Other threats loom for Apple’s bottom line.
Sales of its hero product, the iPhone, have stagnated in part because customers in the China region have shifted recently to local brands, causing sales there to tumble. The trend could continue as U.S. brands lose their allure amid a protracted trade war. IPhone revenue makes up about half of Apple’s sales.
Stateside, a possible recession could hit Apple particularly hard among tech peers, because the company depends on people regularly upgrading expensive devices.
A quarter of the company’s operating profit comes from royalties Google pays to be the default search engine in Apple’s Safari web browser, according to estimates from analyst Craig Moffett of MoffettNathanson. Those payments of as much as $20 billion annually could disappear in the near future after a federal judge declared them illegal on antitrust grounds.
The market also shrugged off Wednesday’s news that a different federal judge hammered Apple about its App Store policies. Remedies she demanded could hit another high-margin revenue stream if developers en masse persuade customers to buy apps directly. The court prder could prove to be a distraction, as the judge took the extraordinary step of referring the matter for a criminal-contempt investigation because of Apple’s conduct.
Apple is not only looking to refresh its product lines, it is also trying to catch up in artificial intelligence, after making promises to deliver new AI capabilities to its devices that have been delayed repeatedly.
Write to Rolfe Winkler at Rolfe.Winkler@wsj.com