Apple's Earnings Beat Expectations But Tariffs and AI Struggles Weigh on Investor Sentiment

Apple reported its strongest quarterly revenue in nearly four years, reaching $94 billion for the period ending June 28, driven by robust iPhone sales, rising services revenue, and strong international performance. The results marked a 10% year-over-year increase in revenue and beat analyst expectations, with earnings per share coming in at $1.57—surpassing the $1.43 forecast. Despite the impressive figures, the market response was subdued, with the stock climbing only slightly over 2% in after-hours trading. This muted reaction reflects ongoing investor concerns about long-term challenges, including tariff pressures and the company’s slow progress in the AI space [1].

CEO Tim Cook acknowledged the impact of U.S. tariffs on the company’s costs, noting that the burden for the current quarter was around $800 million—less than the $900 million he had previously estimated. However, the cost impact is expected to rise in the upcoming quarter, with Cook estimating an additional $1.1 billion in expenses due to ongoing tariff policies. Analysts have pointed to the uncertainty around trade policy and global supply chains as key concerns for Apple, with some suggesting the company must remain cautious to avoid further tariff risks [1].

Apple’s struggles in the AI arena have also raised concerns. The company has faced criticism for its slow adoption of AI technologies and a recent exodus of top AI talent, including the departure of Ruoming Pang, the leader of its AI division, to Meta’s “Superintelligence” team. Analysts such as Dan Ives have expressed frustration with Apple’s lack of progress, noting that the AI race is reshaping the tech landscape and that Apple appears to be lagging. Ives described Apple’s AI efforts as insufficient and warned that patience among investors is wearing thin [1].

While Cook has stated that Apple is increasing its internal AI investments, some analysts are calling for bold moves such as major M&A deals to close the gap. Ives and others have speculated that a potential acquisition of AI startup Perplexity could offer Apple a much-needed boost in AI capabilities, particularly in reinvigorating its voice assistant, Siri. Chatterjee, of Forrester, acknowledged the urgency of Apple’s AI challenges and suggested that the company may have to rely heavily on acquisitions to accelerate its timeline. However, no concrete steps in this direction have yet been announced [1].

The company’s recent performance, while strong, has been overshadowed by these broader structural issues. Apple’s stock has already fallen 17% year to date, and investors remain skeptical about the sustainability of the company’s growth. Analysts like Gene Munster have described Apple as a “show-me” story, highlighting the need for more tangible progress on AI, regulatory navigation, and global trade dynamics to restore confidence. As the tech giant navigates a complex landscape of political, economic, and technological shifts, the pressure is mounting for Apple to deliver more than just strong quarterly results [1].

Source: [1] Apple’s blowout earnings marred by tariff fears, a slow AI rollout, and the stock barely moves (https://fortune.com/2025/08/01/apple-earnings-tariff-ai-stock/)