Apple’s Indian Surge Masks China Stumbles in Strong Q1

Apple’s latest earnings report reveals a stark geographic divide: record iPhone sales in India propelled first-quarter growth, even as the company grappled with its seventh consecutive quarter of declines in China. The results underscore a critical pivot toward emerging markets as Apple navigates regulatory and economic headwinds in its largest market.

India: A Manufacturing and Sales Double Play
Apple’s Indian strategy is paying off. Shipments of over 3 million iPhones in Q1 2025 marked a 36% year-over-year surge, with the budget-focused iPhone 16e accounting for over half of all sales. The device’s affordability—enabled by zero-interest installment plans and retailer discounts—helped Apple leapfrog competitors to claim 4th place in India’s smartphone market, a first for the brand.

The financial impact is equally striking. Exports from India to the U.S. jumped as Apple shipped 600 tons of iPhones via air cargo, a move to bypass punitive tariffs on Chinese-made goods. This shift positions India as both a domestic growth engine and a key export hub, with production costs estimated to be 15-20% lower than in China.

China: Priced Out of Favor
In contrast, Apple’s China performance paints a bleak picture. iPhone shipments fell 9% year-over-year, with market share dropping to 13.7%—the lowest in years. Pricing emerged as a key obstacle: Apple’s reluctance to lower prices to qualify for government subsidies, coupled with stiff competition from local rivals like Xiaomi and vivo, has stifled demand.

The absence of Apple Intelligence in China—a software suite tied to premium upgrades—further hurt upgrade cycles. While the feature drove iPhone 16 series adoption in markets like the U.S. and Europe, its delayed launch in China left customers unimpressed.

Financials: Services and Hardware Carry the Load
Despite iPhone headwinds, Apple posted $124.3 billion in Q1 revenue, up 3.9% year-over-year, thanks to surging services and Mac sales. Services revenue hit $23.12 billion, a 14% jump, fueled by streaming subscriptions and AI-powered tools like Apple Music’s Genmoji.

Hardware also shone: Mac and iPad sales rose 16% and 15%, respectively, as the M4 chip’s performance gains drove demand. Gross margin hit a record 46.9%, aided by high-margin services and cost discipline.

The Road Ahead: Diversification and AI Innovation
Apple’s Q1 results highlight two clear priorities:
1. Accelerate India’s rise: With plans to expand manufacturing and capitalize on its 45% urban smartphone penetration rate, Apple aims to replicate its success in Southeast Asia and Japan.
2. Reset China strategy: Executives admitted pricing adjustments are “under review,” while awaiting potential government stimulus to revive demand.

Meanwhile, AI-driven features like Writing Tools and Genmoji are proving sticky: Apple noted record iPhone upgrade numbers in markets where these tools launched. This bodes well for long-term loyalty in premium segments.

Conclusion: India’s Growth Can’t Hide China’s Woes—Yet
Apple’s Q1 results are a mixed bag: India’s momentum and services dominance are undeniable strengths, but China’s prolonged slump—and its $40 billion annual revenue contribution—cannot be ignored. The company’s focus on supply chain diversification, aggressive pricing in emerging markets, and AI integration into its ecosystem positions it to weather near-term challenges.

However, sustaining growth hinges on resolving China’s pricing stalemate and accelerating adoption of Apple Intelligence there. Investors should watch for Q2 iPhone sales in China—projected to fall further—and Apple’s ability to offset losses with India’s 12% annual smartphone market growth. With services now contributing 18% of total revenue, the company’s future looks increasingly software-driven—a shift that could soften the blow of hardware headwinds.

In short, Apple’s Q1 was a win for resilience, but its next move in China will determine whether this becomes a story of triumph or transition.