Apple Inc. experienced the largest stock market sell-off in history following the release of a mixed earnings report. In his remarks, Apple CEO Tim Cook’s warnings on the negative consequences of continuing tariffs piled onto investor fears. The technology giant’s revenue for the quarter ended March 31 totaled $95.4 billion, beating Wall Street estimates by $840 million. Warnings about the visceral reality of the tariffs raised an alarm among investors. Consequently, some of those segments missed earnings, leading to steep drops in their stock prices.
On the company’s recent earnings call, CEO Tim Cook pointed to $15 billion of that growth coming from the company’s services business. He admitted that the business was struggling elsewhere. In particular, he pointed out that he was unable to even project tariff effects beyond this June quarter. This uncertainty contributed to investor apprehension.
Mixed Earnings Performance
Apple’s recent quarterly earnings were a nice reminder of that, as they started with a little surprise of good and bad. The company saw 15% y-o-y growth in iPad revenue, signaling that demand is picking up for Apple’s tablets. On the flip side, revenue for wearables, home and accessories was down 5%. In light of slower consumer spending in these categories, this decline caused concern over broader consumer spending trends.
Though the results were mixed overall, Cook noted that their services division was one of the shining stars of the quarter. The company’s services segment has experienced an incredible 12% jump in revenue year-over-year. This eclipse of the services segment includes such classics as Apple Music, iCloud, and the App Store. This increase was especially impressive because it represented 2x the company’s total revenue growth.
“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.” – CEO Tim Cook
Stock Market Reaction
Immediately after the earnings release, Apple stock went under intense selling pressure. After enjoying an impressive rally that lasted for eight straight sessions, the stock has given back a bit of steam. On Friday, shares were trading down around $205 due primarily to a selloff caused by investor fears of the effects of tariffs.
Analysts noted that Apple was the only company of its size to see such a clear downside move in the regular trading session following an earnings report. Nvidia looms large as an exception to this trend. The stock now hovers at year-to-date lows near $170. This level is very important, in concert with a major technical aspect at $168.60 per Fibonacci retracement analysis.
The next support level for AAPL stock is at $196. This level is now a potential area of resistance, which could affect trading ranges going forward. Analysts pointed to $180 as an additional layer of support just above the 61.8% Fibonacci retracement level around $178.
Future Outlook and Tariff Concerns
Tim Cook’s recent remarks about tariffs were the source of much hand-wringing among investors and analysts. Continued trade wars and looming U.S. tariffs on foreign imports have all stakeholders abuzz with talk and excitement. They are positively poring over what these things might do to future margins, specifically on Apple stuff.
Cook’s admission that he did not foresee any negative tariff impacts beyond the June quarter served only to deepen investor fears. Dissatisfaction boiled over following the company’s earnings release. Investors are concerned about the effect of tariffs recently enacted under the Trump administration.
Although still mixed, recent economic indicators – including the April U.S. Nonfarm Payrolls – have been stronger than anticipated. This increase provided an artificial lift to any market index associated with Apple, thus compounding the market’s complexity. Despite Apple’s strong performance, analysts are still closely watching how outside forces, such as trade policies, will impact Apple’s business in the future.