Michael M. Santiago
Apple (NASDAQ:AAPL) was upgraded to Hold from Underperform by Jefferies due in part to the possibility of a surprise growth in global iPhone sale during the third quarter of fiscal 2025.
However, the investment bank expects iPhone sales to slow during the second half of calendar year 2025 and points to potential downside in the ever-important services revenue segment.
Citing data from Counterpoint Research, Jefferies noted that global iPhone sales volumes increased 15% year over year during April and May, which was the strongest growth since 2021.
“That was after 12.5% growth in the Mar Q (also partly due to pulled-in demand and discounting in China),” said Jefferies analysts, led by Edison Lee, in an investor note. “We also est iPhone in China grew ~19% YoY during 618 promotions, driving ~10% YoY growth in the first 2.5 months of the Jun Q, due to targeted discounts and gov subsidies. This is a strong sign that AAPL is determined to defend market share in China, and Chinese consumers are still willing to buy iPhone at lower prices. We believe 40m units is likely the minimum AAPL is looking to maintain in China. Given the special situation in the last 3 months, we see potential upside surprise for AAPL’s 3QFY25 results.”
As a result, Jefferies increased its third quarter iPhone sales estimate to 49.4M, which implies year-over-year growth of 9%, compared to its prior forecast expecting 1% growth.
However, the outlook grows gloomier from there.
“Given the sales strength in the Jun Q, we expect demand in the Sep Q to suffer,” Lee said. “We’ve cut our Sep Q iPhone units by 11% to 46.3m, down 6% YoY. Our supply chain checks indicate the target production volume of iPhone 17 in 2H25 will likely be flat YoY. But we believe the sales could be at risk since there remains a lack of new features, and AI is not yet a game changer.”
Apple’s third quarter results, which cover the dates ranging from April 1 through June 30, are expected for release around July 31. A consensus estimate calls for revenue of $88.67B and earnings per share of $1.42.
Shares for the Cupertino-based company ticked up 1% during early trading on Wednesday, but are down 17% so far in 2025.