iPhone revenue for the June quarter is expected to grow 2.1% y/y, improving from the 1.9% growth seen in March. That modest uptick suggests Apple has found a bottom in its recent iPhone softness.

The focus this week will be the September and December quarters, where Street models anticipate a 0.8% y/y decline in September before returning to 2.4% y/y growth in December. That 2.4% growth compares to an average growth of 0.2% over the previous 10 quarters, with a wide range of -11% to +7%. The bottom line is iPhone is the most important part of the business, and results have been lumpy over the past couple of years. If we look back over the past three quarters, iPhone has grown on average by 2.2%, suggesting the September expectations of negative 0.8% are too conservative.

I expect commentary from Apple on September will likely be constructive given the iPhone trend over the past few quarters as well as the upgrade tailwind from the 2021 iPhone cohort, which grew 39% y/y. It’s fair to point out that the FY21 upgrade tailwind should have started to show up in the fall of 2024. In fact, we did see a meaningful shift in iPhone growth rates starting in the September 2024 quarter. From December 2022 to June 2024, iPhone revenue was on average down 1.7% y/y. Since the average iPhone user upgrades at around three years, that implies September or December 2024 is when we should have started to see an impact. In the three reported quarters since then, iPhone revenue has been up on average 2.2%, giving credibility that the FY21 cohort is having a positive impact on growth.

Despite a year of AI headlines across the industry, it’s important to note that no competitor has launched a breakthrough AI phone feature. That levels the field for Apple, meaning the iPhone is not losing ground to Android rivals on AI innovation. Third-party data suggests Apple’s iPhone share in China remains resilient, though uneven across price tiers. Taken together, the June quarter looks steady, and investors will listen closely for signs Apple can stabilize iPhone revenue in September before growth reaccelerates in December.

At WWDC in June, Apple effectively reset the AI bar for investors. As Craig Federighi told the WSJ, Apple paused on a shaky first version of AI powered Siri and shifted to building a more reliable V2 architecture. That sent a clear message to investors: don’t expect any new AI features in the next 12 months. Instead, Apple has set a high bar that next spring the Siri reboot will be a true breakthrough AI experience.

That low new AI announcement bar is bullish for the stock for the balance of 2025 given investors aren’t pricing in near term AI product surprises, which means there’s less risk of disappointment.

That said, I am still hopeful we do hear bigger things from Apple later this year. While it’s a long shot, I’m in the camp that during the Siri V2 buildout the company should make a bolder move via a meaningful new AI model partnership or bring in more AI capacity via an acquisition.

The standout idea continues to be acquiring Perplexity. Its last round was this month, valuing the company at $18B. The fact that they did a round despite likely being in talks with Apple suggests that the likelihood of a deal has diminished over the past few weeks. That said, I believe it would be a smart move for Apple, paying a 2x markup to the last round because it fits strategically for three reasons:

1. Perplexity builds AI tools on top of other models (GPT, Gemini), letting Apple more quickly build on other models;
2. it could boost Apple’s search ambitions, providing a hedge against the uncertainty of the Google deal and DOJ scrutiny; and
3. its agentic browser project, “Comet,” could power a smarter, more useful Safari that does tasks.

The topic of the next iPhone cycle is now front and center. Rumors suggest Apple plans to add an ultra-thin model dubbed “iPhone Air.” The Air would be the thinnest iPhone, about 29% thinner than the iPhone 16 or 15. The workhorse, thicker Pro and Pro Max options will likely remain and offer more tech.

The iPhone Air will prioritize sleekness over tech specs, targeting style conscious upgraders.

Historically, whenever Apple has introduced significant form factor changes, it has seen a positive impact on iPhone growth. For example, the move to a 37% larger screen with the iPhone 6 Plus in 2014 was behind the 52% y/y growth in FY15, compared to 12% growth in FY14.

While it is unlikely that iPhone grows at double digits in FY26 (the iPhone Air cycle), it is reasonable to expect upside to the current 5.7% revenue growth expectations based on the new form factor.

In the March quarter, Apple met estimates and maintained guidance, but the stock sold off around 4% on concerns about tariffs and the macro outlook. The conference call questions zeroed in on Apple’s exposure to U.S. China trade tensions. Three months ago Apple outlined that U.S. import tariffs on Chinese made products will cost the company roughly $900 million in the June quarter if they remain in force. That comment spooked investors and raised the question of what the impact would be after the June quarter. When six analysts pressed the company on the conference call about the topic, management’s response was understandable: they don’t comment that far out. From my experience with Apple, they almost never talk about their business more than three months out, which suggests the company was not trying to hide anything, rather they were sticking to their traditional outlook framework.

One important side note: Cook commented that Apple was able to minimize tariff impact in early 2025 through supply chain adjustments, but warned that predicting future policy changes is difficult. That is important because it’s a reminder that Apple does a world-class job at navigating the supply chain, a skill that will come in handy in the quarters to come.

As evidence of that world class approach, the company has navigated these trade challenges by shifting production out of China. Cook highlighted that a majority of iPhones sold in the U.S. in the March quarter were assembled in India, with iPads and Macs coming from Vietnam, a meaningful diversification away from China, where just five years ago nearly 90% of Apple devices were made. This supply chain diversification is a key reason Apple’s gross margins have stayed near record highs despite tariff costs.

As for the current state of trade affairs, Apple’s standing with the U.S. government appears to be a jump ball. On one hand, the company has stepped up its investment in the U.S., and on the other hand, President Trump has put more pressure on Apple to build iPhones domestically, an outcome that in substance is a fairy tale, although Apple may someday make a fractional number of phones in the U.S.

On tariffs, Apple will continue working behind the scenes with U.S. trade officials. Some relief might be on the horizon, as reports suggest tariff de-escalation could be a topic in upcoming U.S. China talks. The bottom line is that Apple will feel an impact from tariffs, but that impact will likely be less than what most investors are anticipating.

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