MW Apple's issues go deeper than tariffs, as analysts worry about AI challenges

By Britney Nguyen

Apple's stock was downgraded by both Rosenblatt and Jefferies on Friday, with the analysts citing Apple Intelligence delays and tariff uncertainty

Apple Inc.'s solid earnings report wasn't enough for some Wall Street analysts. Two downgraded the stock as they wait to see more from the company's artificial-intelligence efforts and brace for pain around tariffs.

Shares of Apple $(AAPL)$ were down by almost 4% during midday trading on Friday after the company's latest quarterly report offered minimal guidance on how the Trump administration's tariffs will impact financials.

Chief Executive Tim Cook said on the company's earnings call that Apple expects $900 million in costs in the June quarter as a result of the Trump administration's tariffs. He also said Apple expects most of the iPhones sold in the U.S. to come from India.

See more: Apple's $100 billion buyback disappointed some. Here's where it ranks historically.

While the March quarter was in-line with expectations, Jefferies analysts said in a note on Friday that they "believe tariff impact will expand over time to create more earnings downside," as they moved to an underperform rating on Apple's stock. This marked a quick reversal, as they had upgraded the stock to hold from underperform less than a month ago.

Beyond tariffs, the company's troubled Apple Intelligence rollout is also a cause of concern for some analysts.

The Jefferies team said that while Apple is at an advantage versus peers "to offer personalized AI services that would add value to customers" since it has a tightly knit ecosystem, the company is perhaps years away from showing the sorts of dramatic changes in smartphone hardware technology that would support "sophisticated AI capabilities."

"Hence, current expectations for Apple Intelligence to kickstart a super upgrade cycle are too high, in our view," Jefferies said, adding that Apple Intelligence will likely have a more gradual rollout.

The analysts added that Apple may also be limited from accessing the user data it needs from iPhone users, such as daily schedules and habits, to deliver on "highly personalized AI services."

Meanwhile, Rosenblatt analysts downgraded Apple's stock to a neutral rating on Friday, saying that for its "stock to really work there needs to be an AI driven sharp acceleration in iPhone sales."

The analysts said their previous buy rating on Apple's stock was based on "the assumption that [Apple's] AI implementation would spark an upgrade and replacement super cycle."

"The argument for that is fading, as Apple confronts its own inability to deliver promised features, and the AI feature set moves on to areas Apple is not even addressing yet."

But the fiscal second quarter "highlights a company with amazing supply chain skill, and better demand for iPhones than many had feared," according to Rosenblatt analysts. Apple reported iPhone sales of $46.84 billion for the March quarter, ahead of Wall Street's expectations for $45.97 billion.

"We're left with a well-run company, with OK-muted growth, a need for an exciting new product to reinvigorate growth trading at a premium multiple, in a choppy tariff and regulatory environment," Rosenblatt analysts said.

-Britney Nguyen

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May 02, 2025 12:50 ET (16:50 GMT)

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