California, US: Apple is bracing for tough questions on Thursday as it prepares to release its fiscal second-quarter earnings, with scrutiny focused on delayed AI feature rollouts and the looming threat of US-China tariffs. Analysts expect the tech giant to report a slight dip in iPhone sales for a second consecutive quarter, despite a surge in demand for its affordable iPhone 16e in early 2025.
The company’s stock has already taken a hit this year, falling over 16% and shedding more than $600 billion in market value amid tariff fears. Although electronics have so far been exempted, US officials have signalled potential new levies, which could directly affect Apple, a company that manufactures about 90% of its products in China. To cushion the blow, Apple is reportedly shifting some iPhone production for the US market to India and may distribute tariff-related costs across its supply chain.
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“Tariffs are a sword of Damocles for Apple – dangling, disruptive and politically charged,” said Eric Schiffer, chairman of Patriarch Organisation, which holds shares in the company.
Apple is also under pressure for lagging behind competitors like Samsung and Google in delivering key artificial intelligence features. Upgrades to Siri, long requested by users and investors, have now been delayed to 2026. The company even pulled a commercial promoting AI functions that aren’t yet available.
These delays are particularly damaging in markets like China, where AI features are crucial to compete with domestic rivals such as Huawei. Apple has partnered with Alibaba to integrate AI services for Chinese users, but has not announced a timeline for launch.
According to IDC data, iPhone shipments in China dropped 9% in the March quarter — the only major smartphone maker to see a decline in the region. However, strong demand in India for the iPhone 16e helped Apple become the top global smartphone vendor in the quarter, according to Counterpoint Research.
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“Apple faces pressure to move faster on AI innovation and supply chain realignment – both of which are capital intensive,” said Jacob Bourne, analyst at eMarketer.
Despite these hurdles, Apple’s overall revenue is projected to rise by 4.2% year over year in the quarter ending March, driven by robust iPad sales and continued strength in its services business. iPad revenue is forecast to grow 9.1%, while services — Apple’s second-largest revenue stream after iPhones — are expected to post an 11.8% increase.
