Apple Stock Opens Lower as Earnings Are Unlikely to Change the Game

Wall Street is pinning some hope on the iPhone–Apple’s most revenue-generating device. Analysts are expecting $40.09 billion in iPhone sales, which would mark a 2% increase from the previous year. Estimates for services revenue–which includes revenue from Apple’s App Store, Apple Music platform, and other digital offerings–of $26.82 billion implies an 11% year-over-year increase.

Investors will be looking for much more than an earnings and revenue beat on Thursday, though.

“Apple is facing a host of headwinds that have driven underperformance this year,” Evercore ISI analyst Amit Daryanani wrote in a research note on Thursday. He rates Apple as Outperform with a $250 price target.

Apple stock has dropped 16% in 2025, greatly underperforming the S&P 500’s 8.5% gain. Investors have been looking for clarity on several issues the iPhone maker has faced this year, including tariffs.

President Donald Trump has implemented a wide array of import taxes to try and incentivize companies to manufacture in the U.S. So far, smartphones and other electronic devices have been exempt from the heftiest levies, but Apple has been working to get ahead of any negative impact that any tariffs may cause.

Despite Trump’s wishes, Apple CEO Tim Cook said on the May earnings call that the majority of iPhones sold in the U.S. will come from India–and that almost all iPad, Mac, Apple Watch, and AirPods products sent to the U.S. will come from Vietnam. Moving production isn’t cheap. At the time, Cook said that Apple was expecting a $900 million increase in costs for its June quarter due to tariff policies.

“Tariff and geopolitical pressures are adding incremental costs that either eat into margins or require Apple to accept slightly lower margin to keep prices steady,” BofA Securities analyst Wamsi Mohan wrote on July 28. He rates Apple as a Buy with a $235 price target.

On top of margin concerns, investors have been keeping an eye on iPhone sales in China after second-quarter Greater China revenue of $16 billion missed analyst estimates by almost $1 billion. iPhone demand in China took a hit during the period, as competition from smartphone companies like Huawei–which are less expensive and have focused on their own AI software–continues to grow.

While tariffs may weigh heavily on investors, Apple’s lagging AI software is arguably the company’s most significant issue.

Wall Street expected Apple to go through a major upgrade cycle for its devices after the company announced its AI program, dubbed Apple Intelligence, in June 2024. However, the software’s rollout has been slow–and Apple has repeatedly delayed the release of its highly-anticipated, AI-powered Siri assistance service. Meanwhile, Apple’s competitors Alphabet and Huawei have continued to release their own AI software.

“iOS is falling farther behind Android every quarter,” Needham analyst Laura Martin wrote in a note last week. “The iPhone is the anchor consumer product that drives hardware up-sells and services revs at AAPL, we argue. Therefore, if Android’s GenAI features and tools get too far ahead of iOS, this represents existential risk to AAPL.”

Martin rates Apple as a Hold without a price target.

In order to get ahead, Apple has reportedly held discussions to purchase AI startup Perplexity. (News Corp, the owner of Barron’s publisher Dow Jones, has sued Perplexity over claims of copyright infringement, which Perplexity has said it was “disappointed and surprised” by.)

“There is a belief they can develop anything internally better at Apple Park that an outside acquisition will give them; unfortunately we believe those days are gone….the time has come Apple needs to acquire Perplexity to significantly boost its AI platform,” Wedbush analyst Dan Ives wrote on Thursday. He rates Apple as Outperform with a $270 price target.