Apple is going through a challenging time. When it announces its earnings this Thursday, investors will be looking for answers about two major concerns: the delay in launching important AI features and the rising tensions between the U.S. and China over tariffs.

Even though the recently launched iPhone 16e (priced at $599) saw strong demand between January and March especially before possible new tariffs, analysts still expect a small decline in iPhone sales. If that happens, it will be the second quarter in a row with falling iPhone numbers.

Tariff Trouble and Production Shift

So far, the Trump administration has kept electronics safe from tariffs. But new tariffs could be introduced soon. This uncertainty has hit Apple hard, its stock has dropped over 16% in 2024, wiping out more than $600 billion in market value. Since Apple makes 90% of its products in China, it’s now planning to move some of its iPhone production for U.S. buyers to India.

Experts think Apple will try to share the extra tariff costs across its supply chain and avoid raising prices too much. That way, it can stay competitive in the market.

Eric Schiffer, chairman of Patriarch Organization, said:

“Tariffs are a sword of Damocles for Apple dangling, disruptive and politically charged.”

AI Delays and Competitive Pressure

Unlike competitors like Samsung and Google, Apple has been slower in launching key AI features. Improvements to Siri, Apple’s voice assistant, have been pushed back to 2026. The company also had to pull an ad that showed AI features that aren’t available yet. AI is especially important in China, where Apple is losing ground to local companies like Huawei. While Apple has partnered with Alibaba to bring AI tools to China, it hasn’t given a timeline for when those tools will launch.

In fact, iPhone shipments in China dropped by 9% in the March quarter making Apple the only big phone company to report a decline there, according to IDC.

Strong in India, But Pressure Builds

On a positive note, Apple saw huge demand in India for its $599 iPhone 16e. This helped the company reach the 1 spot in global smartphone sales in the quarter, according to Counterpoint Research.

Still, analysts like Jacob Bourne from eMarketer believe Apple is behind in the AI race:
With tariffs threatening cost structures, Apple faces pressure to move faster on AI innovation and supply chain realignment  both of which are capital intensive.

Expected Growth in Other Areas

Despite all this, Apple is still expected to see a 4.2% rise in revenue for the January-March period, similar to the previous quarter. This growth is likely to come from two areas:

  • iPad sales are expected to grow by 9.1%
  • Services business, Apple’s second-largest money maker after the iPhone, is expected to grow 11.8%