VALUATION HIGHLIGHTS

1. iPhone constitutes 43% of the Trefis price estimate for Apple's stock.
2. Services constitute 34% of the Trefis price estimate for Apple's stock.
3. Apple Watch,TV&Accessories constitute 10% of the Trefis price estimate for Apple's stock.

WHAT HAS CHANGED?

Apple's Q2 FY'25 earnings

Apple posted a better-than-expected set of Q2 FY'25 results. Revenue rose 5% year-over-year to $95.4 billion, while diluted earnings stood at $1.65 per share. Services revenues grew almost 12% year-over-year to $26.65 billion, while iPhone sales rose 2% from the year-ago quarter.

Note: Apple's FY'24 ended on September 28, 2024. Q2 FY'25 ended on March 29, 2025.

Tariff Impact On Apple

President Donald Trump’s wave of tariffs on key trading partners is likely to significantly affect Apple, which relies heavily on overseas manufacturing. The company expects a $900 million rise in costs for the June quarter due to these levies. However, CEO Tim Cook called the post-June outlook “very difficult” to predict, as the administration has been continuously tweaking trade policy.

Launch of iPhone 16 Series

Apple released its new iPhone 16 devices at a special event in September. The lineup offers relatively incremental improvements over last year’s models — primarily camera and processor upgrades. The iPhone Pro models feature slightly larger screens, but the real focus this cycle is on Apple Intelligence software updates. These updates, which include enhanced Siri capabilities, new writing assistance tools, and AI-powered image generation, are expected to roll out gradually over the next few quarters. In early 2025, Apple launched the entry-level iPhone 16e device, priced at $600.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Apple's value that present opportunities for upside or downside to the current Trefis price estimate for Apple:

iPhone revenues And margins post improvements

• iPhone Revenue and Gross Margin:
  We estimate that Apple's iPhone revenues will improve from $209 billion in FY'24 to around $245 billion by FY'31. However, if the company can improve its iPhone revenues to around $260 billion by the end of our review period, with gross margins rising to about 50% from our current forecast of 48%, there could be an upside of about 10% to our price estimate.

For additional details, select a driver above or a division from the interactive Trefis split for Apple at the top of the page.

BUSINESS SUMMARY

Apple makes money primarily by selling mobile phones, computers, and tablets to consumers worldwide. Apple's well-known consumer products include the iPhone, Mac, iPad, and Apple Watch. In addition to selling hardware, Apple makes money from services that include the App Store, Apple Music, and iCloud.

SOURCES OF VALUE

We believe the iPhone segment is more valuable than the Mac and iPad segments due to the following:

Large mobile phone market

The smartphone market is significantly larger than the tablet market, and margins in the smartphone business are also likely to be higher. About 1.22 billion smartphones were shipped globally in 2024, per Canalys.

KEY TRENDS

Mac Gains Traction

Apple's Mac computers have gained market share due to their superior product differentiation, proprietary Mac OS software and applications, speedy M-Series processors, and premium build quality. Apple has also been benefiting from the fact that it plays in the high end of the PC market, typically focusing on the lucrative $1,000+ price points rather than the commoditized low- and mid-range where a bulk of the volumes come from. Over FY'22, Mac Revenues reached an all-time high of $40 billion, although it declined to about $30 billion in FY'23 and remained roughly flat in FY'24 as the Covid-19-related boom eased.

Services Present A Growth Opportunity

Apple's Services business has grown 2x between 2019 and 2024, eclipsing the iPad and Mac to become the company's second-largest business segment with revenues of about $85 billion in FY'23. While the App Store remains the primary driver of growth, services such as Apple Music and Apple TV+ are also gaining traction. Apple's base of paid subscriptions on its platform has also been rising steadily, with over 1 billion active subscriptions as of late 2024.