Wedbush analysts believe Apple's internal AI development is a failure and Tim Cook should instead strongly consider paying big bucks to acquire Perplexity.
Apple will be releasing its Q3 2025 financial results on July 31, and analysts are offering their hot takes ahead of the event. In the case of Wedbush, Apple should do well, but it could've done better.
Wall Street is expecting good main numbers from Apple for the quarter, with a bit of buoyancy derived from Chinese revenue improvements, a note to investors seen by AppleInsider explains.
Checks in Asia by the analysts show that there has been stable demand for iPhone in the quarter, and it's done better in China as well. Services is, as usual, expected to provide strong growth.
When it comes to the fourth quarter and the iPhone 17 line's launch in September, Wedbush anticipates it will be the center of attention for the post-results analyst call. CEO Tim Cook is expected to be asked for commentary on the upcoming quarter, though he typically won't comment on future product and service launches as per company policy.
The iPhone 17 should result in a spurt of iPhone unit growth from pent-up demand, the analysts believe. This is in part due to an allegedly aging install base, with about 20% of the world's 1.5 billion active iPhones not being replaced in an upgrade in over four years.
AI is the white whale
A big part of the note is the elephant-in-the-room that is artificial intelligence. Apple has considerable trouble getting Apple Intelligence where it wants to be, in part stemming from the delayed Siri upgrade underpinning the initiative.
Remembering back to WWDC, Wedbush said that the event was odd in that it barely mentioned AI, while practically all other tech giants on the block have enthused about it.
It is apparently "crystal clear" that Apple's AI innovation isn't coming from within Apple Park itself, the analysts believe. This despite Apple's insistence that it can internally develop better than anything an outside acquisition could provide the company.
Insisting that the time for this style of working has passed, Wedbush calls for Apple to bite the bullet and make the "no brainer" deal to buy Perplexity and its AI platform. Apple simply cannot catch up with its internal teams, the analysts continue, and that they should buy Perplexity even if it's a $40 billion deal.
If Cook and Co don't move to make AI work, even as an acquisition, Apple faces living with a "historic strategic black eye."
While developing the AI is difficult, it is something that could end up being lucrative to investors. It is estimated by Wedbush that, if Apple can get the monetization strategy for AI right, it could be worth up to $75 per share.
Overall, Wedbush maintains an Outperform rating and a $270 price target.
