Apple reported revenue increased 5 percent to $95 billion in Q1, beating Wall Street analysts’ expectations. Net income was up by nearly 5 percent, to $24.8 billion, from the January-to-March period in 2024, and iPhone sales increased by 2 percent, helped by demand for the more affordably priced 16e model. Services were particularly strong, with $26.6 billion in revenue for the quarter, up from $23.9 billion year-over-year, also beating analysts’ expectations. But it isn’t exactly business as usual. CEO Tim Cook said tariffs will increase costs by $900 million in the June quarter.

Cook said on a call with analysts that “a ‘majority’ of iPhones sold in the U.S.” from April through June would come from India, “while ‘nearly all’ of the company’s other devices” sold here in Q2 — including iPads, Macs, the Apple Watch and AirPods — will come from Vietnam, The Wall Street Journal reports.

Apple began diversifying its supply chain away from China in 2017 in response to geopolitical tensions, trade wars, and a desire to avoid over-reliance on a single manufacturing sector. Despite that planning, the abruptness of newly imposed U.S. tariffs caught the company, along with many others, by surprise.

“Last month, shares of Apple plummeted after President Trump imposed tariffs of 145 percent on exports from China, where Apple makes 80 percent of the iPhones it sells, as well as tariffs on other countries that make iPads and Macs like Vietnam,” writes The New York Times, adding that “the tariffs erased about $770 billion of the company’s market value in four days.”

On the earnings call, Cook cautioned that the estimated $900 billion hit for the quarter ending in June “should not be used to make projections for future quarters, as there are certain unique factors that benefit the June quarter,” per Bloomberg.

While Apple shares “fell more than 3 percent in after-hours trading” after financials were announced, according to NYT, the Q1 performance was strong enough to allow the company “to return $29 billion to shareholders,” Apple CFO Kevan Parekh pointed out in the earnings release.

“Apple’s steady performance came amid turbulence,” notes NYT. “In just a few months, the company has had to navigate internal and external obstacles” that in addition to tariffs include a tough Vision Pro rollout and problems with Apple Intelligence.