Long-time analyst Gene Munster believes that Apple's Q3 results will show that the iPhone business has stabilized, with Apple setting low bars for growth in the coming year.
Apple will be reporting its third-quarter financial results on July 31, and it should do well. In the view of analysts Gene Munster and Brian Baker of Deepwater Asset Management, it will show that the iPhone business has matured to stability.
When it comes to revenue, the expectations are in line with the Wall Street consensus, or slightly better at best, the analysts write. Part of this will be derived from iPhone revenues remaining stable for the period, with a marginal 2.1% year-over-year growth improving from the 1.9% from the Q2 2025 results.
To Munster and Baker, the modest uptick may be a good sign for September. Based on an average growth of 2.2% over the last three quarters, the analysts believe the general expectations of a 0.8% shrink in iPhone revenue could be too conservative for reality.
A level-ish AI playing field
Discussing artificial intelligence, the investor note starts hopeful, pointing out that no-one else had launched a breakthrough AI smartphone feature yet. In effect, Apple isn't really losing much ground to Android rivals with its slow Apple Intelligence effort.
During WWDC, Apple did reset the metaphorical bar for investors on AI. The pausing of an AI Siri upgrade signaled to investors not to expect groundbreaking AI features in the next year.
As a consequence, Apple has also set a very high bar for the Siri reboot itself. That upgrade will need to be a breakthrough experience for Apple to succeed, the analysts propose.
As for boosting Apple's AI field of influence, the analysts say that the possibility of a deal to acquire Perplexity has diminished over a few weeks. A part of this was the finance round in July that valued the company at $1.8 billion, which wouldn't normally happen if talks with Apple were productive.
Even so, a deal for twice that valuation is viewed as a "smart move" to help Apple move quickly to build on other AI models. It's also something that could help Apple properly enter the search market, despite protestations against the idea in late 2024.
There's also the "Comet" agent-based browser project which could boost the capabilities of Safari.
Tariff impact
One of the defining elements of 2025 so far has been tariffs, with the U.S. import tariff battle with China and the rest of the world causing financial turmoil.
The warning by CEO Tim Cook that Apple will be paying $900 million on tariff-related costs for Q3 spooked investors, and raised the specter of further impacts in subsequent quarters.
Apple's lack of commentary about future quarters despite being pressed is viewed by Deepwater as being Apple's standard operating procedure. It wasn't trying to hide, but was using its usual structure for financial outlook guidance.
The company's supply chain management, which helped it minimize tariff impacts earlier in 2025, should remind investors that Apple is skillful in the area. Something that will certainly help in upcoming quarters.
Apple will still maintain its work with trade officials, with a possibility of tariff de-escalation in upcoming U.S.-China talks.
There will be an impact, but it will probably be lower than investor expectations.
iPhone 17 Air
The next iPhone cycle is, as always, a big one for the company and investors. The iPhone 17 Air is the big change this time around.
Looking at earlier form factor changes, iPhone growth was positive. In one example, the iPhone 6 Plus screen size change is cited as helping push to 52% year-over-year growth for the 2015 financial year, versus 12% one year prior.
Double digit growth is doubted for the iPhone 17 Air cycle. However, it is believed that there should be some upside to current revenue growth expectations of 5.7%.
