Apple Q2 2025 Earnings: Dividend Raised, $110B Buyback, But China Weakness Raises Questions

Ticker: AAPL (NASDAQ)
Market Cap: ~$2.8 trillion (as of May 2025)
Sector: Information Technology

Apple released its Q2 FY2025 earnings on May 2, 2025. The company beat expectations on earnings per share, grew its services segment, raised its dividend, and announced the largest stock buyback in U.S. corporate history. Yet, not everything was perfect — sales in China declined, and investors are still waiting for Apple’s big AI moment.

Let’s break it all down for Canadian investors.

🔢 Q2 2025 Financial Highlights (vs. estimates)

✅ Strengths

Despite an uncertain global economy, Apple delivered resilient performance across its core businesses, demonstrating why it remains one of the world’s most valuable companies.

Strong iPhone and Services Performance

Apple’s iPhone sales grew 2% year-over-year, reaching $48.6 billion. This is a major positive in a mature smartphone market where many competitors are seeing flat or declining unit sales. The launch of the iPhone 15 lineup has proven sticky, and Apple’s ability to command premium pricing remains unmatched.

The services segment continues to be a standout performer, with revenue hitting a record $23.9 billion. This includes the App Store, iCloud, Apple Music, Apple TV+, and more. Services now make up over 26% of total revenue, and margins in this segment exceed 70%, significantly higher than hardware margins.

Recurring Revenue and Ecosystem Strength

Apple’s strategy to build a closed, sticky ecosystem is paying off. With over 2.3 billion active devices globally, the company has a massive installed base to monetize. More users are subscribing to multiple Apple services, increasing ARPU (average revenue per user) and improving predictability of future cash flows.

Apple’s move toward recurring revenue gives it more stability and valuation strength, especially during hardware cycles or slower macroeconomic conditions.

Capital Return to Shareholders

Apple announced a 4% dividend increase to $0.26 per share and launched a $110 billion stock buyback program — the largest in U.S. corporate history. This reflects management’s confidence in the long-term health of the business and provides direct value to shareholders.

Canadian investors holding AAPL in USD or CAD (via a CDR) also benefit from this capital return strategy, though dividend income is subject to U.S. withholding tax unless held in an RRSP.

Financial Discipline and Balance Sheet Strength

Apple maintains over $55 billion in net cash and continues to generate strong free cash flow. This financial strength allows the company to invest in future innovations (like AI, chips, or wearables) while still returning capital and weathering downturns.

Overall, Apple remains a high-margin, high-return business, with a brand and ecosystem that’s nearly impossible to replicate.

⚠️ Weaknesses

While Apple’s headline numbers were strong, several underlying concerns could limit growth or weigh on valuation going forward.

Weakness in China

Perhaps the most significant red flag was a sharp drop in revenue from China, down 8% year-over-year. This is worrying because China has long been a crucial growth market for Apple, often contributing 15–20% of total revenue.

What’s driving the decline?

• Huawei is making a comeback with competitive 5G smartphones, winning back local consumers.
• Geopolitical tension between the U.S. and China is intensifying. Reports suggest government agencies in China are restricting iPhone use, especially in official settings.
• Slower consumer spending in China is weighing on premium electronics sales.

Apple’s premium pricing model is facing resistance in a region where national brands are gaining momentum. If this trend continues, it could drag down international growth.

Innovation Concerns

Another growing concern is the lack of perceived innovation. While Apple refines its products consistently, the iPhone has not seen a game-changing update in years. The Vision Pro, Apple’s mixed-reality headset, is seen more as a long-term bet and remains a niche product due to its $3,499 price tag.

Analysts and tech observers are increasingly comparing Apple’s pace of innovation unfavourably to rivals like Microsoft and Google, who are rapidly integrating AI into cloud, productivity, and search tools.

Without a compelling AI story or breakout new hardware, Apple risks being seen as a late adopter rather than a leader in the next wave of tech.

Overdependence on iPhone

More than 53% of Apple’s revenue still comes from iPhone sales. That level of concentration poses a risk. If upgrade cycles slow down — due to economic uncertainty or lack of innovation — overall revenue growth could stall.

This dependence also puts pressure on Apple to consistently deliver hits in a single product category, limiting diversification.

Regulatory Pressures

Apple faces increased regulatory scrutiny, especially in Europe. Under the Digital Markets Act (DMA), Apple is being pushed to open up its ecosystem — including allowing third-party app stores and alternative payment systems.

If enforced, these rules could impact the high-margin services segment, particularly App Store commissions, which are a key driver of growth.

Regulatory risks are mounting in the U.S. as well, with antitrust investigations targeting potential monopolistic behaviour.

AI Strategy Still Unclear

Unlike Microsoft and Google, Apple has yet to clearly articulate its vision for generative AI. While leaks suggest that iOS 18 will feature new AI tools, investors remain uncertain about Apple’s positioning in this space.

Without a compelling AI roadmap, Apple may risk falling behind competitors as AI reshapes user experience, devices, and cloud platforms.

🔮 Outlook and Growth Potential

Apple remains a long-term compounder, but it needs to address several challenges to maintain investor confidence. The most critical factors to watch over the next 6–12 months include:

• China revenue recovery
• The strength and rollout of iOS 18 AI features
• Performance of Vision Pro and future product launches
• Evolution of regulatory restrictions, especially in Europe

Despite near-term headwinds, Apple’s balance sheet, brand power, and service-driven margin profile make it one of the most defensive large-cap tech stocks available today.

🇨🇦 How Canadian Investors Can Buy Apple Stock

1. Buy AAPL on NASDAQ (USD)

Canadian investors can purchase AAPL directly in USD via brokerages like Questrade, Wealthsimple, RBC Direct Investing, etc.

⚠️ Currency conversion fees apply unless you hold USD in your account.

2. Buy Apple CDR on NEO Exchange (CAD)

• Ticker: AAPL.NE
• Traded in Canadian dollars
• Built-in FX hedge
• Fractional exposure = more affordable

CDRs are an accessible way for Canadians to own U.S. stocks without worrying about currency fluctuations or full share prices.

3. Buy ETFs with Apple Exposure

🧠 Final Take

Apple’s Q2 2025 results show strength in core products and services, strong free cash flow, and shareholder discipline. But the company is under pressure to prove its AI strategy, recover from China market weakness, and avoid becoming too reliant on the iPhone.

For Canadian investors, Apple remains a foundational stock — but staying informed about regulatory shifts and competitive dynamics will be key.