Apple AI Delays, Rising Cost Pressures Trigger Price Target Cut From Bank Of America

Fears of looming tariffs are driving iPhone buyers to act early, likely fueling near-term sales for Apple Inc. AAPL.

Yet, behind the revenue bump, rising supply chain costs threaten to trim the Cupertino, California-based tech giant’s margins.

In a note released Thursday, Bank of America analyst Wamsi Mohan trimmed the company’s 12-month price target from $250 to $240, while keeping a Buy rating, citing tariff-driven cost pressures and delays in launching key artificial intelligence features.

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Tariffs Pull Demand Forward But Add Long-Term Strain

According to Mohan, fears of import tariffs may have triggered a pull-forward in iPhone demand, giving Apple’s upcoming March and June quarters a short-term revenue tailwind.

The firm slightly raised its 2025 revenue estimate to $412 billion, up from $411 billion.

However, the boost comes at a cost. Mohan lowered his 2026 revenue forecast to $440 billion, down from $450 billion, citing higher logistics and supply chain costs that could crimp margins later in the year.

“We only include higher supply chain costs and not the impact of reciprocal tariffs,” Mohan said, implying more downsides could arise if geopolitical conditions deteriorate.

Delays In AI Rollout Weigh On iPhone Upgrade Cycle

The firm also cut Apple’s earnings per share (EPS) projections, with 2025 EPS now expected at $7.25, down from $7.30, and 2026 EPS trimmed to $7.82 from $8.20.

Much of this adjustment stems from delays in launching AI-enabled Siri, a flagship feature that was expected to drive new iPhone upgrades.

The lag has prompted Bank of America to lower unit estimates for future iPhone cycles, as consumers potentially wait for more advanced features before upgrading.

Mohan noted that China may see AI iPhones earlier through local partnerships, and two major hardware updates—a slimmer “iPhone Air” in September 2025 and a foldable iPhone in 2026—could support form factor-driven replacement demand.

FX And Services Offer Cushion Amid Uncertainty

Bank of America sees upside from foreign exchange tailwinds, with a weaker U.S. dollar expected to boost both revenue and margins starting in the June quarter, though near-term hedging may dampen the full effect.

The report also cited Apple’s Services business as a reliable growth engine. With strong demand in subscription-based offerings like iCloud, Apple Music and the App Store, the segment continues to deliver high-margin recurring revenue that helps insulate overall earnings.

On the hardware side, while wearables may face softer demand due to economic sensitivity, Mohan expects iPhone and Mac sales to remain resilient, calling these segments more “inelastic” amid broader macro headwinds.

Market Reaction

Shares of Apple traded 0.6% higher to $206 on Thursday, though the stock remains nearly 8% below its pre-tariff announcement level on April 2. Since hitting record highs in late December 2024, shares have fallen 22%.

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