Malcolm Owen
Analysts at JP Morgan are looking more favorably at Q2 results, predicting that Apple may actually see increased revenue in Q3 thanks to short-term effects of the ongoing U.S.-China tariff battle.
Apple will be reporting its Q2 2025 earnings on May 1, to a background of a tariff war between the U.S. and China. Despite the noise, JP Morgan is still looking towards good results for the concluded quarter.
In the near-term view, a note to investors seen by AppleInsider proposes Apple will have a good quarter, thanks to a pull-forward of demand for iPhones, Macs, and other products. The early-year threat of tariffs will have modestly increased demand, causing early consumer upgrades as well as an increased influx of inventory by retailers.
This positive view has led to JP Morgan increasing its Q2 2025 forecast, raising the revenue from $93.5 billion to $95.8 billion, while earnings per share is upped from $1.59 to $1.66. These are both higher than the consensus of $94.2 billion and $1.61 respectively.
The change implies a revenue growth for Apple of 5.5% year-on-year, if it reaches the new value.
There is also an expectation for gross margins to remain resilient even though concerns are raised over tariffs. The report expects that margins it will track to 47.1%, in line with its consensus.
Q3 positivity
The Q3 results will be the most problematic for Apple, since it will be the one directly affected by the Donald Trump administration's introduction of global tariffs. That, and the tariff battle it caused with China.
JPM isn't too bothered about it, though. For the quarter, it offers better-than-feared expectations with a conservative guide of low single-digit growth.
The uncertainty of the tariff situation will cause some pull-forward from consumers and retailers. It's expected that, rather than wait and encounter higher prices, consumers and stores will be buying and stocking up on products before those tariffs become a pricing problem.
The analysts believe that there could still be a 6% year-on-year revenue growth for the third quarter. However it also anticipates Apple being conservative with its guidance, and to offer low-to-mid single-digit revenue growth for the period.
In that quarter, JPM tentatively forecasts revenues of $90.8 billion, against a consensus view of $89.2 billion. The gross margin will be slightly lower at 46.3% versus the consensus 46.7%, but the earnings per share is expected to be higher at $1.51 versus $1.48.
For investors, JPM's Q3 analysis is a fairly optimistic view of what could happen during a very turbulent financial period. Three months is a long time away to speculate on financials, especially given the rapid changes that happened to the markets during just a few weeks in April.
For the moment, JP Morgan rates Apple's shares as "Overweight" with a $245 price target.
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Christine McKee
Marko Zivkovic
Amber Neely
William Gallagher
11 Comments
Another “pull forward” that could hurt Apple is China deciding now (or soon) is the time to launch a gambit to take Taiwan. Trump has no credibility with anyone. No country is going to put their soldiers in harms way to support the US under his leadership. That means no country will support the US in defending Taiwan. In fact, Trump might not even try to defend Taiwan.
But I could see Trump blowing up TSMC fabs so the Chinese don’t get them.
I think panic buying has subsided. Those who haven’t bought, are gonna wait and see what happens as we get closer to a new iPhone launch. Where I have seen prices spike in the last 2 weeks has been groceries and gasoline prices are still not even close to what Donald has claimed they are at.
Another thing that might help to make the upcoming numbers look good is the weakening dollar. All of the uncertainty relating to tariffs, to US disinterest in global leadership (severe cuts to aid, State Dept., US embassies, Radio Free Europe) and disinterest in traditional alliances (e.g. NATO, Ukraine vs. Russia) has led to a weaker dollar, which will make global sales numbers look better when converted to dollars. Often in recent years Luca Maestri spoke of “FX headwinds” that made things look worse, but things are swinging in the other direction now. Unfortunately, the same uncertainty will probably make it difficult for Apple to be very optimistic with any forecasts, so the benefit of a weaker dollar will likely be overshadowed by that.
This is a great example of the sort of short-term business thinking that Apple usually tries to avoid. While a "pull forward of demand" can look great on the current quarter's report, it's just cannibalization of future earnings. This is nothing to be celebrated and certainly isn't a strategy that Apple would intentionally pursue. On the other hand, it's just the sort of thing that the oversupply of MBAs out there will cheer for because quarterly earnings!
In the best-case scenario, the US administration cancels the whole tariff thing and moves on to some other attention-seeking chaos. Later this year, iPhone 17 gets released, and sales are not quite as robust as they might've been, because some who would've bought them just bought an iPhone 16 instead. The clever folks at JP Morgan will then downgrade Apple stock, because of lackluster sales of iPhone 17. Headlines in the tech trades will speculate that Apple has lost its way with the iPhone 17, and the peanut gallery here will whine about incrementalism and how Apple is doomed and Tim Cook should resign. That's the best-case scenario.
More likely, there will still be tariff chaos when iPhone 17 is released, the price will be higher, sales will be lower, and the short-term thinkers will still be doing their short-term thinking.
Either way, a "pull forward of demand" is not anything Apple wants to see. As long-term thinkers, they know it's a problem, not a positive headline for quarterly earnings reports.