Wall Street Cautious on iPhone Sales Ahead of Apple Earnings, but AI Hopes Shine

As Apple Inc. (AAPL) prepares to report its fiscal first-quarter results after market close on Thursday, Wall Street analysts are expressing caution about iPhone sales but remain optimistic about the company's artificial intelligence (AI) initiatives. The tech giant's stock has had a tough start to 2025, in part due to concerns about declining smartphone sales in China. However, analysts expect Apple's AI-driven features and services to drive earnings growth and offset any weakness in iPhone sales.



Analysts' Cautious Stance on iPhone Sales
Analysts have been mixed in their outlook for Apple's iPhone sales, leading to a cautious stance on the company's overall earnings expectations. This is primarily due to concerns about declining smartphone sales in China and the lack of compelling Apple Intelligence and generative AI apps to accelerate near-term device replacement. Here are some specific factors contributing to this outlook:

1. Weakening iPhone sales in China: Apple's iPhone sales in China have been declining, with domestic rivals like Vivo and Huawei expanding their market share. According to Canalys, a research firm, iPhones sold in China aren't equipped with Apple Intelligence features due to regulatory hurdles, which has further impacted sales. JPMorgan analysts have warned that Apple is "already past its product cycle peak" and could continue to lose market share in the country.
2. Lack of compelling AI features: Apple's iPhones in China lack the Apple Intelligence and generative AI features available in other markets. This has led to consumer disappointment, as seen in the reaction to the iPhone 16 launch in China, where local users expressed their dissatisfaction on Weibo. The absence of these features may hinder iPhone sales and device replacement rates.
3. Increased competition: Apple faces stiff competition from local smartphone manufacturers like Huawei and Xiaomi, which have been launching devices with advanced AI capabilities. This increased competition may further impact iPhone sales and Apple's overall earnings.

Analysts' Earnings Expectations and AI Hopes
Despite the cautious stance on iPhone sales, analysts expect Apple to report strong earnings for the fiscal first quarter. They anticipate first-quarter revenue of $124.13 billion, up from $119.58 billion in last year's first quarter, and earnings per share of $2.35, up from $2.18. However, the cautious outlook on iPhone sales has led some analysts to downgrade Apple stock or remove price targets, indicating a more conservative outlook on the company's earnings potential.



However, analysts remain optimistic about Apple's AI initiatives, which they believe will drive earnings growth and offset any weakness in iPhone sales. Apple's AI-powered features, such as Siri and Apple Intelligence, are expected to enhance user experiences, improve productivity, and attract new users. The company's systemwide writing tools, enhanced Siri, improved photos app, and other AI-driven features are anticipated to drive earnings growth by simplifying and accelerating everyday tasks while maintaining Apple's commitment to privacy.



Geopolitical Uncertainties and AI Integration in China
Geopolitical uncertainties, particularly in China, have influenced Apple's iPhone sales and the potential impact of AI integration on the company's earnings. Apple is reportedly in talks with Chinese tech giants Tencent and ByteDance to integrate their AI models into iPhones sold in China. This collaboration could bring local generative AI services to Chinese users, potentially boosting iPhone sales and earnings. However, the success of this integration depends on navigating regulatory hurdles and consumer expectations.



In conclusion, Wall Street analysts are cautious about Apple's iPhone sales but remain optimistic about the company's AI initiatives. While concerns about declining smartphone sales in China and increased competition pose challenges, Apple's AI-driven features and services are expected to drive earnings growth and offset any weakness in iPhone sales. The company's AI-powered features, such as Siri and Apple Intelligence, are anticipated to enhance user experiences, improve productivity, and attract new users. However, geopolitical uncertainties and market competition pose challenges that Apple must address to maintain its foothold in China and capitalize on the potential of AI integration.