Tariffs will take a $900 million bite out of Apple next quarter, says Tim Cook

Apple’s earnings call offers a glimpse — a controlled, well-orchestrated glimpse, but something is better than nothing — into Apple’s inner sanctum. With a little bit of reading between the lines and knowledge of Apple’s past actions, you can learn quite a lot.

And this quarter’s earnings call didn’t disappoint.

The ‘color’ on tariffs

Yesterday was Apple’s Q2 2025 earnings day, and the company announced $95.4 billion in revenue, set a number of quarterly records in a range of countries including the UK, Spain, and India, achieved an all-time services revenue record of $26.6 billion, and, despite the saturated smartphone market, still managed to grow iPhone revenue by 2% compared to the year-ago quarter.

But one issue loomed large over the entire earnings call: Tariffs. And Apple CEO Tim Cook had quite a carefully crafted statement.

(Check out CNET’s regularly updated tariff pricing tracker.)

And the word of the day for this earnings call was “color.”

“Now let me walk you through the impacts of tariffs in the March quarter and give you some color on what we expect for the June quarter,” Cook told reporters and investors. “For the March quarter, we had a limited impact from tariffs as we were able to optimize our supply chain and inventory. For the June quarter, currently, we are not able to precisely estimate the impact of tariffs as we are uncertain of potential future actions prior to the end of the quarter.”

The key word there is “uncertain.” This is a very neutral way of saying that everything is a bit chaotic at the moment.

But Cook also came armed with some numbers.

Also: I calculated the hidden costs of an iPhone made in America. It’s not pretty

“However, for some color, assuming the current global tariff rates, policies and applications do not change for the balance of the quarter and no new tariffs are added, we estimate the impact to add $900 million to our costs.”

Adding our own color to this, for the third quarter of last year, Apple posted revenue of $85.8 billion. So about 1% of that revenue would be swallowed by these additional tariffs.

But not so fast. Remember, these are chaotic times, and Cook urged caution.

“This estimate should not be used to make projections for future quarters as there are certain unique factors that benefit the June quarter.”

In other words, these tariffs could have been a whole lot worse for the June quarter and could very well be worse for future quarters.

Kevan Parekh, Apple’s chief financial officer, also wanted to clarify the “color” that Cook added.

“Importantly, the color we’re providing assumes that global tariff rates, policies and applications remain in effect as of this call. And the global macroeconomic outlook doesn’t worsen from today for the current quarter.”

Also: Are tariffs about to make your next iPhone way more expensive? It’s complicated

Parekh continued with the color theme.

“Despite the overall uncertain environment, we will still be providing color at the total company level, subject to these assumptions and the risk factors that we referred to at the beginning of the call.”

And the color is quite positive, with Apple expecting gross margins to be in the region of 45.5% to 46.5%, despite $900 million in tariff-related costs.

Other nuggets

The Q&A session also brought out some interesting nuggets of information.

First up, as expected, the majority of iPhones sold in the US will be manufactured in India, while Vietnam will be the origin of almost all iPad, Mac, Apple Watch, and AirPods products sold in the US. As for sales to the rest of the world, China will continue to be the country of origin.

Also: 3 Apple devices you definitely shouldn’t buy this month (and 9 to get instead)

One analyst asked about what those “certain unique factors that benefit the June quarter” were, and the answer was “build-ahead inventory.” In other words, Apple preempted the tariffs as much as possible by manufacturing and shipping as much product to the US as possible ahead of their implementation. Cook also clarified that “the vast majority of our products, including iPhone, Mac, iPad, Apple Watch, and Vision Pro, are currently not subject to the global reciprocal tariffs that were announced in April,” because of the Commerce Department’s Section 232 investigation into imports of semiconductor tariffs.

So, that close-to-a-billion-dollar hit assumes that nothing changes on this front for at least the current quarter.

Given how fast things change, that’s quite a big assumption.

On the subject of price rises, Cook said that “on the pricing piece, we have nothing to announce today,” so for now, at least, it seems like Apple is absorbing the tariff costs.

Also: Why I bought a $5,300 Apple Mac Studio in the midst of tariffs news – and don’t regret it

Apple is also ramping up manufacturing in the US, and between the TSMC plant in Arizona and other smaller manufacturers, the company is getting some “19 billion chips coming out across 12 states,” along with glass and Face ID modules.

So, over at Apple HQ, there are plenty of uncertainties over tariffs and the wider global economy, a lot of hope that things at least stay as they are, and preparation for things to possibly get worse.

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