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Apple (AAPL -4%) is trading lower after reporting Q2 (Mar) results last night. The headline numbers were roughly as expected with a nice EPS beat. Revenue rose 5.1% yr/yr to $95.36 bln, which was a bit above analyst expectations. Apple also increased its share buyback authorization by $100 bln and its dividend by 4%. Given the size of Apple, these are not very large increases but good to see. Apple expects Q3 (Jun) yr/yr rev growth in the low-to-mid single digits (FactSet consensus +3.6%).

• iPhone sales came in above street estimates in Q2, a nice bounce back following a miss in Q1. Revenue rose 1.9% yr/yr to $46.84 bln vs $45.8 bln street ests. iPhone revs were driven by the iPhone 16 family. The iPhone active installed base grew to an all-time high in total and in every geographic segment. During Q2, Apple introduced iPhone 16e, a new entry level addition to its iPhone 16 lineup, powered by its latest generation A18 chip.
• Mac sales grew 6.7% yr/yr to $7.95 bln, driven by the latest MacBook Air, MacBook Pro and Mac mini models. This performance was broad-based with every geographic segment growing yr/yr. The Mac installed base reached an all-time high and Apple saw strong growth for both upgraders and customers new to the Mac. iPad revenue jumped 15.2% yr/yr to $6.40 bln, driven by the new M3-powered iPad Air.
• Wearables revenue was down 4.9% yr/yr at $7.52 bln, a bit light of street estimates. Apple was lapping a more difficult compare against the launch of the Apple Vision Pro in the year ago quarter as well as the Watch Ultra 2. Services revenue rose a healthy 11.6% yr/yr to an all-time record of $26.65 bln, a bit above street estimates.
• Turning to tariffs, Apple saw a limited impact in MarQ as it was able to optimize its supply chain and inventory. For JunQ, at current tariff rates, Apple estimates a $900 mln cost impact. Apple expects the majority of iPhones sold in the US in JunQ will have India as their country of origin and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch, and AirPods products sold in the US. China continues to be the country of origin for the vast majority of sales outside the US.

Overall, the MarQ results were pretty solid with a nice bounce back quarter for iPhone sales. In fact, most product categories are doing well. Also, Apple is doing a good job reconfiguring its supply chain to avoid tariffs as best it can. However, we think the $900 mln tariff cost estimate and its impact on margins in JunQ is the main reason for the stock being lower today. Also, Apple says it's tough to predict beyond JunQ at this point, which adds to the uncertainty. Hopefully, we get some tariff reductions soon.