Sven Hoppe/picture alliance via Getty Images
Wall Street is expecting answers on Apple $AAPL’s supply-chain challenges, iPhone sales, and AI advancements ahead of the tech giant’s third-quarter earnings report coming out Thursday after the market closes.
The tech giant surpassed Wall Street’s expectations for a fifth quarter in a row during its second-quarter earnings in part due to consumers rushing to buy its products before President Donald Trump’s tariffs could really take effect. Apple reported during its first quarter earnings of $95.4 billion in revenue, up 5% year-over-year, and quarterly diluted earnings per share of $1.65, up 8% year-over-year. Its stock has been down about 15% so far this year.
Whether Apple can emerge with another better-than-expected quarter is yet to be seen, but supply-chain constraints caused in part by tariffs and its lackluster advancements in AI don’t bode well for the iPhone maker.
Zacks Research projects Apple will report $88.92 billion in revenue, showing 3.67% year-over-year growth, plus an earnings per share of $1.42. It expects Apple’s iPhone and Mac sales to grow in its third quarter.
According to analysts polled by FactSet, the tech giant has a mean price target of $229.43. And according to The Street, analysts at Bank of America $BAC Securities said, “As we head into F3Q25 earnings aftermarket on July 31, we see client sentiment as fairly negative given uncertain impact from tariffs, U.S. DOJ investigation App Store headwinds, and slow progress in AI."
Apple’s stock closed at $214.05 on Monday.
Over the last few months, Apple has had top talent snatched or announce retirement plans, challenges to its supply-chain from tariffs, underwhelming product releases, and struggles to stay in the AI race. Plus, Apple is still dealing with mounting legal cases, including a domestic antitrust lawsuit and escalating fines for its app store in the European Union.
During Apple’s second quarter earnings call, CEO Tim Cook said tariff impacts could get much worse in the third quarter, adding that Apple could see a hike of $900 million in additional costs due to tariffs.
In May, the U.S. and China agreed to pause their sky-high tariffs and slash rates for 90 days. The U.S. lowered its tariffs on China from 145% to 30%. Now, the two are in the midst of renegotiating a trade deal.
After the announced pause, President Trump said he spoke to Cook about Apple’s investment in domestic production. “He’s going to be building a lot of plants in the United States for Apple,” Trump said from the White House.
Apple has been shifting its production from China to India, and Cook said during the second quarter earnings call that the company has no plans to change that. As of now, Apple makes 20% of its iPhones in India.
For the June quarter, Cook said, “we do expect the majority of iPhones sold in the U.S. will have India as their country of origin, and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch, and AirPods products also sold in the U.S.”
However, Apple will keep making its products in China for most product sales outside of the U.S., he said.
On the upside, Apple's seen a recent uptick in iPhone sales in China. The country's iPhone sales are finally seeing some growth, albeit not enough to project Apple to the top spot in the country’s smartphone market again. A recent report found that Apple’s second quarter iPhone sales placed the once market-dominating smartphone producer in fifth place in China’s market, trailing behind its biggest Chinese-based competitor Huawei.
In the previous reported quarter, Apple posted a 2% decline in its revenue in China, but things could improve in the third quarter as Apple begins to see more sales.
When it comes to AI, Apple is severely falling behind compared to its competitors.
A Bloomberg report from earlier this month found that Apple might bench its own artificial intelligence technology and instead use either Anthropic or OpenAI’s tech to power a Siri update due next year. Apple had shown off its new AI features in TV commercials before postponing their launch till 2026. At the end of June, Apple was sued by shareholders for overpromising on its AI functions for Siri, Reuters reported.
Last month, Apple held its annual Worldwide Developers Conference, and investors weren’t stoked about the tech giant's AI announcements. At the conference, Apple unveiled its Foundation Models framework, which gives third-party developers direct access to the on-device large language models that power Apple Intelligence and enables developers to build AI features that run entirely offline. Apple’s different approach to AI could prove fruitful, or put it even further behind its competitors, impacting its company image — and its earnings.
However, Zacks Research says Apple’s AI focus could help out its earnings, thanks to Apple Intelligence being available in some iPhone 16s, depending on the region.
—Shannon Carroll, Jackie Snow, and Catherine Arnst contributed to this article.
