Jason Snell on Apple’s Q2 FY 2025 and Frustrating Analyst Call

Jason Snell, with some excellent analysis (in addition to his usual visualizations of Apple’s numbers):

Another way Apple can reduce the impact of tariffs is by changing which global factories it uses to build products destined for the U.S. market. “For the June quarter, we do expect the majority of iPhones sold in the U.S. will have India as their country of origin,” Cook said, “and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch, and AirPods products also sold in the U.S.” He said that if you’re outside of the U.S., you’re most likely to be buying products made in China.

Cook also commented briefly on Apple’s philosophy in dealing with the issues of trade wars between various countries: “Obviously, we’re very engaged on the tariff discussions,” he said. “We believe in engagement and will continue to engage.” Elizabeth Warren take note, I guess.

Apple also put a number on how much it will be affected by tariffs during its next fiscal quarter: $900 million. Yes, that’s nearly a billion dollars, but when you consider that Apple just generated $95.4 billion in revenue and that it’s expecting to grow from the $85.8 billion it generated during last year’s third quarter, a $0.9 billion step back doesn’t seem like a massive amount. The company also said it would probably lose a couple of points of gross margin as part of the deal.

And, regarding the analyst call (of which Snell also posted his usual very helpful transcript):

Credit to that brave analyst, Richard Kramer, who didn’t bother asking a ninth question about tariffs, but instead asked Cook head-on about the fact that Apple had failed to live up to its promise of shipping a more personalized Siri as a part of Apple Intelligence.

Cook’s answer was a canned response emphasizing the features Apple did ship, and “We need more time to complete our work on these features so they meet our high-quality bar. We are making progress, and we look forward to getting these features into customers’ hands.” Which is true, but not exactly informative.

Kramer, who is going to get an analyst gold star for this, also asked Cook about the various court cases that might really impact Apple’s business. Regarding yesterday’s court ruling in the Epic case, Cook said, “We strongly disagree with [it].... We’ve complied with the court’s order, and we’re going to appeal.” He declined to discuss Google’s case and the potential loss of search-engine referral revenue altogether.

But, and I think this is important, Cook did not wave off the suggestion that these were serious issues. “We’re monitoring these closely, but as you point out, there’s risk associated with them, and the outcome is unclear.”

It would be kind of ridiculous if Cook did wave off the suggestion that these were significant issues. A federal judge has referred the company to federal prosecutors for criminal contempt and she flatly stated in her ruling that VP of finance Alex Roman perjured himself multiple times.

These analyst calls are largely a waste of time. The questions are obtuse and the answers are obfuscating. But it was frustrating yesterday that the first eight questions were all about Trump’s tariffs. Cook said what he had to say about them early in the call. Only Richard Kramer had the backbone to ask any of the other interesting questions facing Apple — and he was the analyst who asked both those questions. But they stuck his questions at the very end of the call. (I think because Apple vets the questions, Apple orders them?) If you want to listen, Kramer’s first question (re: Siri/AI delays) starts at 48:30 on Apple’s recording of the call, and his second (re: legal cases) starts at 51:00.

It’s like all the analysts but Kramer had their fingers in their ears and eyes closed and were chanting “Everything’s normal for Apple, everything’s normal for Apple, everything’s normal for Apple...” No one even asked about the material impact of Apple being required to immediately change the App Store guidelines (in the US) to allow unfettered link-outs to the default web browser to make purchases and sign up for subscriptions. You’d think that would be a question.

★ Friday, 2 May 2025