Apple overcomes Trump’s trade war, slow start in AI to deliver surprisingly strong quarter

An Apple store employee stands inside the store in New York on Feb. 5, 2021. (AP Photo/Mark Lennihan, File )

SAN FRANCISCO — Apple shook off a thicket of tariffs and a botched entry into artificial intelligence to accelerate its revenue growth during its springtime quarter, but the trendsetting tech company still faces a bumpy road ahead that could lead to higher iPhone prices.

The April-June results released Thursday came against a backdrop of adversity that has been raising worries about the trajectory of a longtime tech kingpin.

Despite the doubts, Apple remains a moneymaking machine.

The Cupertino, California, company earned $23.4 billion, or $1.57 per share, during its fiscal third quarter, a 9% increase from the same time last year. Revenue climbed 10% from a year ago to $94 billion. The company’s iPhone sales surged 13% from a year ago to $44.6 billion. All those numbers were well above the analyst projections that steer investors, helping to boost Apple’s recently slumping stock price by 2% in extended trading.

But the unexpectedly solid performance doesn’t necessarily mean it’s smooth sailing ahead for Apple.

President Donald Trump’s trade war targeting foreign-made products such as the iPhone and Apple’s stumbling start in the pivotal transition to AI is causing investors to question if the company will remain at the tech forefront as the industry moves into a new era.

Before Thursday’s report came out, Apple’s stock price had plunged by 17% so far this year to wipe out more than $600 billion in shareholder wealth and knock the company off its perch as the world’s most valuable company. Meanwhile, the shares of AI chipmaker Nvidia have surged 32% this year and the shares of AI pacesetter Microsoft have gained 27%, propelling the market value to $4 trillion.

Even though Apple remains highly profitable, the tariffs that Trump has already imposed on China and other countries cost the company $900 million during the past quarter, with even more financial pain looming as his administration threatens to ramp up the fees.

Apple softened the blow of Trump’s tariffs on products made outside the U.S. during the past quarter by shifting its production of iPhones from China to India. But the administration intends to impose a 25% tariff on goods from India, a move that could intensify the pressure on Apple to raise the prices on the next generation of iPhones expected to be released in September.

Meanwhile, Apple is still trying to fulfill the AI promises it made last year when it unveiled an array of new iPhone features built on the revolutionary technology, raising expectations that the shift would spur millions of people to upgrade their old devices. But Apple still hasn’t delivered on an AI upgrade that was supposed to smarten up its often-bumbling virtual assistant Siri, one of the main reasons underlying the lackluster growth of iPhone sales.

“There are two big questions looming over Apple: How are you going to rejigger your business model to deal with the new tariff backdrop and then what is the company going to do to drive an upgrade cycle for the iPhone?” said Melissa Otto, a stock market analyst for S&P’s Visible Alpha.

Michael Liedtke, The Associated Press