Apple Q3 2025 Earnings Preview: iPhone Demand, Tariff Risks, and AI Strategy in Focus

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Apple is set to report fiscal Q3 2025 results on Thursday, July 31, with Wall Street watching closely as the company balances slowing iPhone demand, mounting tariff pressures, and the need to outline a credible artificial intelligence strategy. Despite ongoing macro headwinds, Apple’s Services business remains a key profit driver, while speculation around a major AI acquisition has added intrigue ahead of the call. Consensus expects modest revenue and EPS growth, but the bigger story is whether Apple can provide enough clarity on tariffs, demand trends, and AI investments to keep investors engaged in a stock that has underperformed broader tech peers this year.

The Street is looking for revenue around $88.9 billion, up roughly 3.7% year over year, and EPS of $1.42, up about 1.4%. Apple itself guided to low- to mid-single-digit revenue growth and gross margins between 45.5% and 46.5%, including a projected $900 million tariff impact. Analysts are generally clustered between $1.40 and $1.45 EPS, with some upside calls pointing to resilient Services revenue and a weaker U.S. dollar providing a small tailwind. Gross margin execution will be a critical metric, given both higher input costs and the effects of shifting demand.

The iPhone remains the centerpiece. UBS notes that iPhone sell-through declined 18% year-over-year in June following two strong months earlier in the quarter, as demand pulled forward on tariff fears. That still puts estimated June-quarter units around 45 million, up modestly year over year, but the fading momentum sets up a more challenging September quarter. Citi is projecting 45 million iPhone units in June but only 50 million in September, down from prior expectations of 52 million, citing softer-than-expected replacement demand. Morgan Stanley sees some upside from China promotions, estimating up to $4 billion in potential revenue lift, though risks remain given Huawei’s competitive resurgence.

Beyond iPhones, Services will again be the bright spot. Consensus expects around $27.5 billion in Services revenue, a figure that could represent double-digit growth and support margins well above the hardware business. UBS data from Sensor Tower shows App Store revenue growth of 12% in June, aided by FX tailwinds, while Bank of America points to a rising revenue-per-download figure as evidence of healthier monetization. With Services margins running north of 70%, any upside surprise here would go a long way toward cushioning softer iPhone results. Investors will be eager to hear updates on Apple Intelligence subscriptions and the rollout of AI-driven features across the ecosystem.

Tariffs are the wild card. Apple has estimated $900 million in added costs for the June quarter, with executives warning that the ultimate impact is uncertain given ongoing Section 232 trade investigations. While semiconductors and downstream products are currently excluded from some of the reciprocal tariffs, Apple continues to face a volatile policy environment. Citi notes that markets remain too complacent about tariff risks, suggesting further downside if enforcement expands. Goldman Sachs flags tariffs as a key overhang alongside risks to Apple’s advertising revenue. Any updated commentary from CEO Tim Cook on tariff exposure will be heavily scrutinized.

Artificial intelligence is another focal point. Apple has rolled out Apple Intelligence features since WWDC 2025, including AI-powered tools for Siri, Messages, and Photos. However, Needham cautions that Apple remains one to two years behind competitors and will likely need to boost CapEx significantly—potentially from $12 billion annually toward $30–$50 billion—to close the gap. Reports indicate Apple is weighing a partnership with Anthropic or OpenAI for Siri, and Wedbush has floated a potential $30 billion acquisition of Perplexity AI as a “no-brainer” move to jumpstart its AI strategy. Investors are watching to see if Cook signals a willingness to deploy Apple’s vast cash reserves for a bold M&A move rather than continued heavy buybacks.

Other storylines are also swirling. Reports suggest JPMorgan Chase is nearing a deal to take over Apple’s credit-card program from Goldman Sachs, potentially giving Apple a new financial services partner with scale. On the supply chain front, Apple announced a $500 million partnership with MP Materials to build a U.S.-based recycling facility for rare earth magnets, reinforcing its domestic sourcing narrative. Meanwhile, COO Jeff Williams is set to retire, with Sabih Khan taking over operations—another leadership shift at a crucial time.

Regulation also looms large. Reuters reported Apple is likely to gain EU approval for its App Store changes in the coming weeks, a move that would stave off daily fines but keep antitrust concerns in focus.

Valuation and sentiment heading into earnings are mixed. Apple’s stock is down nearly 10–15% year-to-date and trading around 28x forward earnings, a premium to peers despite modest single-digit revenue growth. Bulls, including Goldman and Wedbush, see resilient margins, Services growth, and potential AI catalysts as reasons to buy into earnings. Bears argue that tariff risk, slowing iPhone demand, and lagging AI investments make Apple vulnerable to any misstep.

Ultimately, the June quarter looks set to deliver modest growth, driven by Services strength and some FX tailwinds, while iPhone volumes show signs of strain after tariff-related pull-ins. The real test will be management’s commentary on tariffs, AI investments, and forward demand, which could swing sentiment sharply. For now, Apple remains a cash-rich giant navigating a more complex landscape, with Thursday’s results likely to determine whether investors focus on its near-term resilience or its longer-term innovation risks.