Track Hyper | Apple's Q2 fiscal performance: How to achieve through the cycle

Author: Zhou Yuan / Wall Street News

On May 1st Eastern Time (May 2nd Beijing Time), Apple Inc. released its financial report for the second fiscal quarter of 2025, ending March 29.

The report shows that despite the sluggish global consumer electronics market, Apple still demonstrated its resilient ability to navigate through cycles with solid performance: achieving revenue of $95.4 billion, a year-on-year increase of 5%; net profit of $24.78 billion, a year-on-year increase of 4.84%; and a gross margin that rose to 47.1%, reaching a nearly three-year high.

This report reveals Apple's growth logic centered around a "high-end product matrix + service ecosystem closed loop."

However, due to the impact of tariff issues, Apple expects revenue for the third fiscal quarter to achieve low to mid-single-digit growth. Apple estimates that gross margin will decline, stating that the gross margin for the third fiscal quarter will be between 45.5% and 46.5%, which is below analysts' expectations of 46.58%.

On May 1st Beijing Time, Apple's stock closed at $213.32, up 0.39%, with a market capitalization of $3.19 trillion.

From a regional perspective, revenue from the Greater China region was $16.002 billion, a year-on-year decrease of 2.26%, ending three consecutive quarters of growth; revenue from North America was $40.315 billion, a year-on-year increase of 8.16%.

According to a Canalys report, in the first quarter of this year, Apple's iPhone shipments declined after its traditional peak season, reaching 9.2 million units, a year-on-year decrease of 8%, with a market share of 13%, ranking fifth in the Chinese market, mainly due to strong competition from local manufacturers such as Huawei and Xiaomi.

Apple's main business is divided into two parts, simply put, "hardware + software."

As the core segment accounting for 70% of total revenue, Apple's iPhone achieved a global market performance far exceeding the slight 1.5% increase in the global smartphone market in the first quarter—an impressive 10%, with a market share of 19%, ranking first in the world (data source: IDC).

The premium capability of the iPhone continues to transcend cycles.

During the reporting period, iPhone revenue was $46.8 billion, a year-on-year increase of 2%; according to the "Global Premium Smartphone Market Analysis Report" released by Counterpoint in April, the iPhone's market share in the global premium market (priced over $600) reached 72%.

Although the return of the Huawei Mate 60 series has enhanced the competitiveness of domestic phones in the Chinese high-end market, the iPhone 15 Pro series, with its titanium body, A17 Pro chip, and the stickiness of the iOS ecosystem, has still converted 45% of Android users switching devices into Apple users.

Market public information shows that Apple plans to fully shift iPhone production in the U.S. market to India to avoid high tariffs between China and the U.S. Currently, India accounts for 20% of Apple's iPhone production capacity, which is expected to double to over 40% by 2026.

Mac revenue was $7.95 billion, a year-on-year increase of 7%; among them, the iMac and MacBook Air equipped with the M3 chip became the main contributors to this segment's revenue, with sales in the education market growing by 15%; iPad achieved revenue of $6.4 billion, a year-on-year increase of 15%, marking the highest growth rate since 2022 Among Apple's hardware devices, revenue from wearables and accessories saw a slight decline, achieving $7.5 billion in revenue for the quarter, a year-on-year decrease of 5%, mainly affected by the high base brought by the release of the 2024 Apple Vision Pro and Watch Ultra 2.

Although Apple hardware accounts for the largest share, the year-on-year growth of its core business, the iPhone, has become quite limited; the service business rooted in the iOS software ecosystem has seen revenue growth far exceeding that of the iPhone, serving as the "perpetual motion machine" that creates Apple's trillion-dollar ecosystem business value.

Apple's service business has maintained rapid growth for nearly five years, achieving revenue of $26.6 billion for the quarter, a year-on-year increase of 12%, accounting for 28% of total revenue; the number of paid subscribers has surpassed 1 billion, becoming a stabilizer for Apple through cycles. This data indicates that 1 in every 15 people globally pays for Apple services, highlighting the stickiness of its ecosystem.

What areas did Apple not perform well in during the reporting period?

First and foremost is the Apple Vision Pro, a product line that has fallen short of the "boastful" expectations set by Apple CEO Tim Cook, with no killer applications for spatial computing emerging.

The global smartphone user upgrade cycle has extended to 42 months (data source: Counterpoint). Among iPhone 15 series users, while 68% are upgrade users, new user growth is weak.

In particular, the 2025 McKinsey Consumer Report shows that Generation Z (born 1995-2009) contributes 37% of total social retail sales, and their consumption concept is undergoing a deep transformation from "symbolic consumption" to "value consumption."

A survey by the People's Think Tank shows that over 70% of Generation Z chooses to "be frugal and save whenever possible," while the "premature consumption" group accounts for only 5.9%.

How will the consumption characteristics of the younger generation affect Apple's performance?

According to the "Generation Z Technology Consumption White Paper" released by Tencent Marketing Insights, as high as 43% of Generation Z prioritize "the balance between price and performance" when purchasing electronic products, with only 18% willing to pay a premium for brand; iResearch's "2025 Generation Z Communication Consumption Report" indicates that 89% of post-95s place great importance on "cost performance," far exceeding their concern for brand awareness.

McKinsey's "cutting remarks": According to McKinsey's "2024 China Consumer Trends Survey," Generation Z places importance on "practicality" and "cost performance" at rates of 68% and 57%, significantly higher than other generations.

Despite this, Apple's Q2 2025 financial report still shows relatively bright performance.

This essentially represents Apple's exploratory approach to the "post-smartphone era": as the industry falls into stock competition, Apple proves that the key for technology companies to navigate through cycles lies in building a business system where "devices are the entry point, and ecosystems are the barriers" through the strategy of "high-end hardware solidifying the foundation and service ecology releasing long-term value."

From the high-end premium of the iPhone to the billion-dollar scale of the service business, from the globalization restructuring of the supply chain to precise adjustments in regional markets, Apple's financial report showcases a counter-cyclical business wisdom: not pursuing aggressive sales growth, but enhancing product premiums through technological research and development, binding user lifetime value through ecosystem construction, and hedging external risks through localization strategies For the industry, the enlightenment from Apple's path is that in the current context of slowing technological innovation cycles and escalating geopolitical tensions, a company's core competitiveness has upgraded from a single product advantage to a systematic capability of "product + technology + ecosystem + region."