Apple Hit With Wall Street Downgrades as Tariff Pressures Mount and Growth Prospects Dim

Apple Inc. ended the week under pressure, with its shares tumbling 4.3% on Friday after two high-profile downgrades followed the company’s latest earnings report.

While the quarterly results were largely in line with Wall Street’s expectations, analysts flagged deepening worries over escalating tariffs, muted revenue forecasts, and the absence of a breakthrough growth catalyst. These concerns are shifting investor sentiment toward caution, even as Apple attempts to reassure markets.

Jefferies and Rosenblatt Securities both issued downgrades, citing tariff-related headwinds and the need for a new product cycle to reignite excitement around the stock. The downgrades came on the heels of Apple’s disclosure that it expects President Donald Trump’s China-era tariffs to add $900 million in costs to the company’s fiscal third quarter, a figure that highlights the mounting drag of geopolitical trade policies on Apple’s bottom line.

“Tariff impact will expand over time to create more earnings downside,” Jefferies analyst Edison Lee warned in a note that cut Apple to underperform—a rare bearish stance on one of the world’s most closely watched companies.

The $900 million in projected tariff-related costs marks one of the highest quarterly burdens Apple has attributed to import duties since the U.S.-China trade war escalated. Apple’s global supply chain, designed to maximize efficiency across China, India, and Vietnam—is now exposed to increased tariff-orchestrated uncertainty under Trump.

Jefferies noted that Apple’s guidance assumes existing tariffs remain static and do not broaden to cover imports from India and Vietnam, where Apple has been moving part of its assembly operations in recent years to hedge its exposure to China.

“These assumptions are unlikely to hold longer term, especially if there will be sectoral tariffs that are non-negotiable,” Lee added, pointing to the political risk looming over Apple’s manufacturing diversification strategy.

Weak China Sales and Tepid Outlook Deepen Worries

The earnings report also showed that sales in China fell short of expectations, reinforcing concerns that Apple is struggling in a market where local competitors like Huawei are surging and nationalistic sentiment is growing. Despite aggressive discounting and promotional campaigns in the region, Apple’s performance underscored its vulnerability to local market dynamics and geopolitical pushback.

More broadly, Apple told investors it expects revenue in the current quarter to grow in the “low- to mid-single-digit” range year over year. While modestly positive, the projection is notably cautious for a company that once routinely delivered double-digit revenue expansion. That forecast has led to renewed calls for Apple to deliver a new product that can re-energize growth and justify its premium stock valuation.

“Muted Growth” in an Unforgiving Market

Barton Crockett of Rosenblatt Securities also downgraded the stock, moving from buy to neutral, citing what he called “OK-muted growth” in a volatile regulatory and geopolitical environment.

“We’re left with a well-run company, with a need for an exciting new product to reinvigorate growth, trading at a premium multiple in a choppy tariff and regulatory environment,” Crockett wrote.

Crockett praised Apple’s resilience in iPhone sales, which outperformed some of the more pessimistic forecasts, and highlighted the company’s deep operational skill, particularly in its supply chain. But he emphasized that without a breakthrough, particularly one leveraging artificial intelligence, Apple risks being outshone by peers who are making more visible progress in AI-driven consumer applications.

“There needs to be an AI-driven sharp acceleration in iPhone sales for the stock to really outperform from here,” he said. “And as time has gone on, the argument for that seems to be fading.”

However, not all analysts are turning bearish. Citigroup’s Atif Malik viewed the results as decent given the broader trade environment, noting that Apple’s fundamentals “remain intact.” Malik described the guidance as conservative, suggesting that Apple could outperform if trade tensions ease or demand proves more resilient.

Even with some supportive voices, Wall Street is clearly more cautious about Apple than its mega-cap peers. Less than 60% of analysts tracked by Bloomberg now rate Apple as a buy, a stark contrast with names like Microsoft, Nvidia, or Alphabet, where bullish sentiment remains elevated. The downgrade from Jefferies brings the total number of “sell” ratings on Apple to four—a small but symbolically significant number for a company long seen as a market darling.

Apple’s declining analyst support also comes at a moment when Microsoft Corp. has surged ahead in both performance and perception. The software giant’s quarterly earnings were described as “blowout,” driving a rally that allowed Microsoft to surpass Apple in market value as of Friday’s open.

That symbolic shift further reinforces how investors are now looking for clear, AI-driven narratives—something Microsoft, with its heavy investment in OpenAI and integration of generative AI into core products, has leaned into with great effect.

The AI Gap and the Innovation Question

Apple’s next big opportunity likely hinges on its strategy for artificial intelligence. While the company has touted its custom silicon and on-device processing advantages, arguing that this makes AI more secure and private, there has yet to be a tangible, headline-grabbing product that channels those capabilities into consumer appeal. Competitors, meanwhile, have rolled out AI copilots, assistants, and integrations that have captured public and investor attention.

There are expectations that Apple may reveal more AI-forward features at its Worldwide Developers Conference (WWDC), but until then, analysts say the lack of a clear growth driver will continue to weigh on sentiment.