• Apple's Q3 earnings face pressure from $900M in tariff costs and slower AI progress, but BofA maintains a Buy rating with a $235 target.
  • Gross margins are a key focus, with Q3 revenue expected at $90.2B and EPS at $1.45, slightly above consensus.
  • New high-end products, including a slim iPhone, could ease margin pressures later this year.

Tariffs and Regulatory Risks Weigh on Apple

Bank of America analysts warn that Apple Inc. is entering a challenging Q3 2025, with new U.S.-China tariffs estimated to add $900 million in costs this quarter. The bank maintains a Buy rating and a $235 price target, citing resilience in Apple’s product pipeline and services growth. However, regulatory scrutiny in both the U.S. and Europe—particularly around App Store policies and antitrust concerns—adds another layer of uncertainty.

"Gross margins will be the number to watch," said one analyst familiar with the report. "Apple has navigated tariff pressures before, but the combination of trade tensions and delayed AI features creates a tougher setup." The bank projects Q3 revenue at $90.2 billion and EPS at $1.45, slightly ahead of consensus estimates.

AI Progress Lags Behind Peers

While competitors race ahead with generative AI integrations, Apple’s next-generation Siri remains delayed, according to BofA’s research. The company has introduced some AI features, including ChatGPT integration and new image tools, but its broader AI strategy lacks the immediate impact seen from rivals like Google and Microsoft.

"Investors were hoping for faster execution," said a tech sector strategist. "Apple’s emphasis on quality over speed is understandable, but the market wants to see more tangible AI-driven growth." The delay could temporarily dampen investor enthusiasm, though long-term confidence in Apple’s ecosystem remains intact.

A Slim iPhone and Margin Recovery Ahead

Looking beyond Q3, BofA expects margin relief as Apple rolls out new high-end devices, including a rumored slim iPhone model slated for release this fall. The company’s supply chain diversification efforts—shifting some production out of China—could also mitigate future tariff risks.

"The product refresh cycle will be critical," noted an industry insider. "If Apple can deliver compelling hardware with better margins, the near-term headwinds may prove temporary." Meanwhile, services revenue—which hit a record 28% of total sales last quarter—continues to provide a stabilizing force amid hardware volatility.

Apple declined to comment ahead of its earnings release Thursday.