Apple Earnings: Tariffs Loom Large, but We Continue to Expect a Long-Term Exemption

We estimate a 25% gross downside risk to earnings and Apple’s intrinsic valuation.

William Kerwin, CFA 2 May, 2025 | 1:02PM
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An Apple logo adorns the facade of the downtown Brooklyn Apple store.

Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research.

Key Morningstar Metrics for Apple


What We Thought of Apple’s Earnings

Apple’s AAPL March-quarter revenue rose 5% year over year to $95.4 billion, with iPhone revenue rising 2% to $46.8 billion. March-quarter gross margin rose 50 basis points year over year to 47.1%. June-quarter guidance calls for modest year-over-year revenue growth and sequential margin contraction.

Why it matters: Results and revenue guidance were positive to us, but margin guidance was weak, resulting from an estimated $900 million impact from US tariffs. As primarily a hardware company, we see material risk for Apple from tariffs, both on profitability and longer-term demand.

  • Apple’s core devices are currently exempt from US tariffs, and the June quarter impact is primarily from accessories. Nonetheless, Apple remains at risk of a policy change. Positively, most US iPhone units are imported from India, which faces a lower current tariff rate than China (10% vs 145%).
  • Management noted no signs of customers accelerating purchases in advance of potentially higher costs from tariffs. We still surmise this is happening, but mostly on the margin. We also like that Apple is building up its own inventory to bring in lower-cost products as a precautionary measure.

The bottom line: We maintain our $200 fair value estimate for wide-moat Apple. We lowered our short-term profit forecast to reflect direct tariff costs, but maintain our base-case expectation for Apple to earn an exemption from US tariffs in the long term. We see shares as fairly valued.

  • We estimate a 25% gross downside risk to earnings and Apple’s intrinsic valuation if it were to lose its exemption and face the full brunt of tariffs. This gross estimate assumes no mitigation actions from Apple, and a 145% rate for imports from China.
  • We wouldn’t expect Apple to swallow this entire downside risk, as we would expect the firm to raise prices in the US and accelerate moving US import production into other countries like India.


The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

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William Kerwin, CFA  is an equity analyst for technology at Morningstar

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