Apple faces a $1.1 billion tariff hit amid strong iPhone sales

In the most recent quarter ending in June 2025, Apple experienced a notable increase in iPhone sales, generating $44.5 billion in revenue, surpassing analyst expectations of $40 billion and also exceeding last year's revenue for the same period. This rise can be attributed to a rebound in revenue from China, with iPhone sales rising from $14.7 billion to $15.3 billion. This performance comes after a period of struggle for the company, amid increasing competition, especially in artificial intelligence, and the uncertainties surrounding trade policies under President Donald Trump. CEO Tim Cook discussed the challenges posed by these tariffs during a call with analysts, indicating that the company expects $1.1 billion in tariff-related costs as they navigate these trade tensions, an increase from the prior quarter's $800 million. To counteract the potential impacts of these tariffs, Apple has shifted much of its production of US-bound iPhones from China to India, securing a more reliable supply chain and mitigating tariff exposure. Tim Cook highlighted that the majority of iPhones sold in the US now originate from India, reflecting a strategic move to adapt to the changing trade landscape. Despite these gains in hardware sales, concerns regarding Apple's innovation in artificial intelligence persist. Analysts have pressed Cook to clarify how the company envisions the integration of AI into its future products. Cook assured investors that the company retains its focus on AI, indicating good progress with Siri’s upgrades and committing to releasing a new version next year. However, Apple's advancements in AI appear limited compared to competitors like Microsoft and Meta, both of which saw significant stock increases recently due to their own AI investments. Investment in AI remains crucial for Apple as it seeks to maintain its position in the tech industry. Cook mentioned that Apple has acquired seven companies in the AI sector this year, albeit not all strictly within AI, to bolster their capabilities in this rapidly evolving field. Furthermore, the company is reallocating more resources towards AI development, aiming to enhance its utility across various applications that are currently seen as less impactful when compared to more sophisticated AI solutions like ChatGPT. It has become clear that, while Apple's iPhone division remains strong, the company must innovate and respond to AI challenges to ensure long-term viability in the marketplace.