China no longer plays in its favor

Apple has closed its fiscal fourth quarter of 2025 with $102.5 billion in revenue, surpassing the psychological barrier of $100 billion in a quarter for the first time. Earnings per share have reached $1.85, 13% more than a year ago. Wall Street expected less, so the stock is up 4% outside market hours

It is the best quarter in Apple’s history. It is also the one that best exposes its dependence on China.

Why is it important. Apple is already worth more than $4 trillion, the third company to reach that valuation after NVIDIA and Microsoft. Its results affect hundreds of suppliers in its production chain. But the growth of the iPhone, which still accounts for half of its revenue, has slowed.

China is both a threat and an opportunity:

1. If you regain traction there, the rally continue.
2. If not, services will have to compensate more and more. And they are not infinite.

Yes, but. ‘Greater China’ (a region that includes mainland China, Macau, Taiwan and Hong Kong) is the only region that has fallen compared to the previous year. Revenues in that market have been $14.5 billion, 4% less year-on-year and well below the $16.4 billion expected by analysts. Tim Cook has tried to soften the blow by promising that they will grow again in the first fiscal quarter thanks to the iPhone 17but the numbers sing: Apple is losing ground where it hurts most.

Besides, Chinese brands are winning the battle of prestige on their own territory. Manufacturers like Huawei, Xiaomi or Vivo are no longer cheap alternatives and have started to position themselves as premium options, with special emphasis on the former. Apple is no longer the only status symbol in a market that manufactures many of its products.

The money trail. The Services division has reached $28.75 billion this quarter, 15% more than last year. It is a historical maximum and the figure that really sustains Apple’s growth. In the full fiscal year, Services have exceeded $109 billion, another record.

• iPhone: 49 billion (+6%).
• Services: 28,750 million (+15%).
• Mac: 8,726 million (+13%).
• iPad: 6,952 million (practically flat).
• Home, wearables and accessories: 9,013 million (-0.3%).

In this last division are Apple Watch, AirPods, HomePod, Apple TV…

Services already represent 28% of total revenues but their very high margin compared to hardware means that they generate close to 50% of operating profit. Services, after all, do not require complex supply chains or rely on product cycles.

In detail. The tariffs have cost $1.1 billion in the quarter and are expected to reach $1.4 billion in the next. Kevan Parekh, the chief financial officer who has replaced Luca Maestri, has projected revenue growth of 10% to 12% for the December quarter — the first of Apple’s fiscal year — with iPhone sales growing by double digits. Analysts expected only 6%.

Cook has highlighted the “very strong demand” for the iPhone 17, launched in September alongside the iPhone Air. They have also mentioned supply constraints, suggesting that they could have sold more if they had been able to make more.

The backdrop. Apple depends on China in two directions:

1. As a consumer market.
2. And as a production center.

This double dependence is a geopolitical vulnerability that has become more evident with the trade war. The company has tried to diversify its manufacturing towards India and Vietnambut China remains irreplaceable in the short term.

Meanwhile, in China, Apple is no longer perceived as the only aspirational brand. Local manufacturers have improved a lot in design, cameras and software, which leads to an improvement in perceived value. And they’ve done it while Apple navigated years of incremental iPhone updates.

Featured image | apple, Li Yang

In Xataka | Ode to rounded corners, the visual element that has proven Steve Jobs right once again