When Apple shares its Q2 earnings this week, all eyes will be on how the company is handling three big challenges: U.S.-China trade tensions, delays in rolling out AI features, and staying competitive in key markets like China and India. Even with strong sales of its cheaper iPhone 16e in early 2024, experts predict another drop in iPhone sales—the second in a row. Here’s what you need to know.
U.S.-China Trade Tensions Hit Apple Hard
Apple makes nearly 90% of its products in China. While iPhones haven’t been hit by new U.S. tariffs yet, the threat alone has hurt Apple’s stock, which fell 16% this year. That’s over $600 billion wiped off its value.
To avoid future tariffs, Apple is moving some iPhone production for the U.S. market to India. Analysts say the company might also ask suppliers to share the cost of tariffs to keep iPhone prices steady. Raising prices could scare off buyers, but absorbing the costs would squeeze profits.
“Tariffs are a huge risk for Apple,” says Eric Schiffer, a top investor. “They’re stuck between politics and keeping customers happy.”
Apple’s AI Delays: Falling Behind Rivals
Apple is lagging behind competitors like Samsung and Google in rolling out AI features. Upgrades to Siri, its voice assistant, are now delayed until 2026—a big letdown for users. The company even pulled an ad promoting AI tools that aren’t ready yet.
In China, where Apple is losing ground to Huawei, AI is a key selling point. Apple teamed up with Alibaba to offer AI services there, but without clear deadlines, customers are turning to local brands. iPhone sales in China dropped 9% last quarter, making Apple the only major brand to shrink in that market.
“Apple’s focus on privacy is good, but it’s slowing them down,” says analyst Jacob Bourne. “They need faster AI updates to compete.”
Bright Spots: iPhone 16e in India, iPad Sales, and Services
Not all the news is bad. The $599 iPhone 16e has been a hit in India, helping Apple become the world’s top smartphone seller last quarter. India’s price-sensitive market has been tough for Apple, but the 16e’s success shows they’re learning to compete without losing their premium image.
Apple’s services business—like Apple Music, iCloud, and the App Store—is also growing fast. Experts predict an 11.8% jump in services revenue this quarter, making it Apple’s second-biggest money-maker after iPhones. iPad sales are expected to rise 9%, thanks to new models and demand from remote workers.
What to Watch in Apple’s Earnings Report
Analysts expect Apple’s overall revenue to grow 4.2% this quarter, matching last quarter’s pace. But the real focus will be on how Apple plans to handle:
- Tariffs: Can they shift production fast enough to avoid price hikes?
- AI: Will they speed up their timeline to catch rivals?
- China: Can they stop losing market share to Huawei?
CEO Tim Cook will need to reassure investors that Apple can balance these challenges while keeping profits steady.
The Bottom Line
Apple isn’t in crisis mode yet. Its loyal customers, strong services growth, and $73 billion cash reserve give it a cushion. But with tariffs looming and AI delays hurting its reputation, the company needs to act fast.
This week’s earnings call will show whether Apple is just surviving—or ready to take back control.