TLDR
- Apple expects 4.2% revenue growth to $89.34 billion for April-June quarter despite tariff and AI pressures
- Company shifted iPhone production to India to avoid potential 25% U.S. tariffs on foreign-made devices
- iPhone sales in China jumped 8% during the quarter helped by discounts and trade-in programs
- Apple Intelligence rollout remains slow with Siri upgrades delayed until next year
- Nine of 12 analysts maintain buy ratings with consensus price target of $233, implying 10% upside
Apple heads into Thursday’s earnings report facing a challenging environment that tests the tech giant’s traditional strengths. The company expects to post 4.2% revenue growth to $89.34 billion for the April-June quarter.
President Trump has threatened 25% tariffs on foreign-made iPhones, targeting Apple’s reliance on overseas manufacturing. The company responded by shifting U.S.-bound iPhone production to India.
This supply chain pivot appears to be working. Indian smartphone production jumped 240% in the second quarter, largely driven by Apple’s manufacturing shift.
Analysts now expect the India strategy to limit tariff damage well below the $900 million Apple estimated in May. Some believe the company deliberately overestimated costs to create room for an earnings beat.
“Most companies we follow have made conservative assumptions by overestimating tariff costs,” said Jamie Meyers from Laffer Tengler Investments. The goal is usually to beat guidance.
China Sales Show Life
iPhone sales in China provided a bright spot during the quarter. Sales jumped 8% in the world’s largest smartphone market, fueled by steep discounts during the 618 shopping festival.
Government-backed trade-in subsidies and targeted iPhone 16 Pro promotions also helped drive demand. China remains Apple’s third-largest market despite ongoing competitive pressures.
Wall Street expects overall iPhone sales to rise 2.2% in the fiscal third quarter. This would improve from the 1.9% growth seen in the previous quarter.
Services revenue, Apple’s fastest-growing segment, is expected to climb 10.7%. This represents a slight slowdown from the 11.6% growth posted in January-March.
AI Race Concerns Persist
Apple’s cautious approach to artificial intelligence continues to worry investors. The company has been slow to roll out its Apple Intelligence suite compared to competitors.
Local Chinese companies like Honor are launching smartphones packed with AI features. These include generative AI photo editors that Apple has yet to match.
The long-awaited AI upgrade to Siri has been pushed back until next year. This delay raises questions about Apple’s ability to compete in what many see as the industry’s biggest growth opportunity.
Goldman Sachs remains optimistic about new AI features coming this fall. The bank expects live translation across Messages, Phone, and FaceTime to drive iPhone upgrades.
Morgan Stanley doesn’t expect Apple to mirror Google’s recent capital expenditure increases for AI infrastructure. Google raised its projected spending to $85 billion from $75 billion last week.
Of 12 analysts tracked by Visible Alpha, nine maintain buy or equivalent ratings on Apple stock. Only two have hold ratings while one analyst recommends selling.
The consensus price target sits near $233, implying 10% upside from Tuesday’s close around $211. Goldman Sachs maintains the highest target at $251.
Morgan Stanley keeps a buy rating and $235 target despite acknowledging key challenges ahead. The bank warns that Section 232 tariffs tied to national security could still impact Apple.
HSBC maintains a hold rating and $220 target, citing regulatory uncertainty. The bank notes “a number of challenges but cash keeps flowing” in its recent client note.
Sales of Apple’s other devices are expected to have slowed during the April-June period. This reflects broader weakness in categories like iPads and Macs.
The total volume of Indian-made smartphones jumped 240% in the second quarter, with Apple’s supply chain shift driving much of this growth according to Canalys research.
Apple reports fiscal third-quarter results after Thursday’s closing bell, with investors watching for tariff impact updates and AI investment plans.
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