Smartphone sales have driven substantial revenue growth for major technology firms in recent years. However, 2025 may present notable challenges as consumer demand moderates and trade policy uncertainties intensify.

Apple (AAPL) is particularly exposed to these headwinds, experiencing slow growth amid tariff uncertainty. Recently, Apple received worse news from Counterpoint Research, which has revised its 2025 global iPhone shipment growth forecast downward to 2.5% year-over-year from an earlier projection of 4%. The adjustment is attributed to “renewed uncertainties surrounding U.S. tariffs” and weakening demand across North America, Europe, and parts of Asia.

Although smartphones were initially excluded from April’s reciprocal tariff announcement, the lingering risk has prompted Apple to increase production in India rather than China. Simultaneously, competition in China has intensified, with domestic manufacturers rapidly integrating advanced features such as artificial intelligence into their devices.

About Apple Stock

With a market capitalization of around $3 trillion, Apple continues to lead the consumer technology sector by seamlessly integrating hardware, software, and services. The company generates revenue through the sale of iPhones, Macs, wearables, and digital subscriptions via its global retail and online platforms.

Apple’s heavy investment in research and development, combined with its strong brand loyalty, contributes to its impressive profitability. It boasts net profit margins around 24%, far exceeding the industry average of 4%. This financial strength gives Apple a competitive edge.

However, despite its impressive margins, Apple faces several headwinds. Sales have been declining, particularly in China, due to intensifying competition from domestic brands. Additionally, some analysts argue that Apple is falling behind in AI innovation and product development, raising concerns about its long-term ability to lead in a rapidly evolving tech landscape.

Reflecting these concerns, Apple has underperformed over the past year, gaining just 2.3% compared to the S&P 500’s ($SPX) 12.6% return during the same period.

At the current price point, AAPL’s valuation is notably high, with a price-sales ratio of 7.6x, significantly above the sector median of 3x, suggesting the stock is expensive compared to its peers. 

iPhone Slowing Growth Amid China Heat 

Apple’s iPhone sales showed modest growth in the latest quarter but face mounting headwinds that could dampen demand in 2025. In fiscal Q2, iPhone revenue climbed 1.9% year-over-year to $46.8 billion, contributing to total quarterly sales of $95.4 billion, up 5% from a year earlier.

Despite this uptick, several factors point to softer demand ahead. In Greater China, revenues slid 2.3% as local competitors rolled out AI-driven features and government subsidy programs favored domestic brands. By contrast, revenues in the Americas and the Asia-Pacific regions both grew roughly 8%, fueled by continued U.S. strength and India-based production mitigating tariff impacts; Japan led all regions with a 17% jump.

Compounding these regional challenges, trade policy clouds the broader outlook. CEO Tim Cook warned that prospective U.S. tariffs on electronics could impose about $900 million of extra costs in the June quarter. Even though iPhones were spared in April’s reciprocal duties announcement, the uncertainty has driven Apple to shift a larger share of production from China to India and Vietnam.

As discussed earlier, Counterpoint Research forecasts global smartphone shipments will grow just 2% in 2025, citing tariff anxiety and weakening consumer appetite across North America, Europe and parts of Asia. With these crosscurrents, tariff risk, intensifying competition in China and cooling Western demand, Apple’s 2025 iPhone outlook appears increasingly challenged.

Where Apple Could Gain Momentum

Despite looming headwinds, there are still strategic positives for Apple. The $500 billion U.S. investment plan, including a new Texas factory for advanced server manufacturing and increased chip sourcing from Arizona, signals a long-term commitment to innovation and domestic production. Additionally, Apple is diversifying its supply chain by shifting iPhone production to India and moving iPad and Mac assembly to Vietnam. These steps reduce reliance on China, helping Apple mitigate geopolitical risks, avoid tariffs, and ensure more stable operations. While these changes may raise short-term costs, they enhance supply chain resilience and position Apple for stronger global competitiveness.

On the operating expenses front, rising R&D spending underscores Apple’s all-in push on AI integration across iPhones, Macs, and Vision Pro, with rumoured smart glasses to follow. Bloomberg’s Mark Gurman reports significant chip progress for these wearables. However, Apple’s late AI entry risks its AI ambitions aging like previously stalled concepts.

What Do Analysts Think About Apple Stock?

Wall Street remains cautiously optimistic about Apple’s growth prospects with a consensus  “Moderate Buy” rating. Of the 37 analysts offering recommendations, 18 give it a solid “Strong Buy,” three suggest a “Moderate Buy,” 13 advocate “Hold,” one “Moderate Sell,” and the remaining two give a “Strong Sell.” 

The average analyst price target of $231 suggests that the stock could rise by around 15% from current levels.