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It seems that consumer tech giant Apple (AAPL) is no longer the apple of investors’ eyes anymore.
In addition to investor concerns that the company has fallen behind in artificial intelligence and blowback from President Donald Trump for its plans to move iPhone production to India, the latest and possibly most serious blow to its dominance in global consumer tech is the news that former design chief Jony Ive will team up with Sam Altman-led OpenAI to purportedly create a product or range of products powered by AI.
OpenAI purchased Ive’s hardware startup, io Products, for $6.5 billion, which will entail Ive assuming “deep design and creative responsibilities across OpenAI and io,” according to Altman. Hailed as his “spiritual partner” by Steve Jobs, Ive was the design genius behind iconic Apple products such as the iPhone and the iPad, to name a few.
So, what does this mean for Apple? The stock is down 20% on a YTD basis with a current market cap of $2.9 trillion. Does it have the wherewithal to bounce back? Let’s find out.
Apple Continues to be Financially Sound
Notwithstanding the recent developments, Apple’s financials remain as robust as ever.
Defying expectations once more, Apple posted quarterly results that surpassed analyst forecasts. The company reported total revenue of $95.4 billion, marking a 5.1% uptick compared to the same period last year. Profitability also improved modestly, as gross margin edged higher to 47.1% from 46.6% a year ago. Within its business lines, product sales rose 2.7% year-over-year to $68.7 billion, while services continued to accelerate, climbing 11.6% annually to generate $26.6 billion in revenue. Earnings per share increased 7.8% from the prior year, landing at $1.65, ahead of the $1.62 per share expected by the Street.
The tech giant ended the quarter with a robust cash position of $28.2 billion, comfortably outweighing its short-term liabilities, which were around $6 billion.
Finally, in a move to return value to its investors, Apple authorized a massive $100 billion share buyback and raised its quarterly dividend by 4%, bringing it to $0.26 per share.
Looking to the Future (Courtesy WWDC)
In a recent piece, I had made a case for Apple's long-term prospects and how its massive active user base of 2 billion and still hard-to-beat brand value give it an unmatched superpower to overcome any obstacles.
Also, contrary to common perception, Apple is not sleeping on AI.
In fact, Apple’s forward-looking focus is increasingly shaped by its initiatives in AI and machine learning. At the heart of its evolving product ecosystem lies the integration of Apple Intelligence, an effort aimed at making apps and features more intuitive and capable. This includes the development of its own sophisticated foundational models tailored to practical, everyday functions, as well as strategic collaborations such as the one with ChatGPT.
Also, the company’s proprietary Apple Silicon, equipped with Neural Engine technology, is engineered to support these AI capabilities seamlessly across both Apple’s own applications and those built by third parties. Furthermore, Apple is combining investments in its own infrastructure with selective use of external data centers to power services like Private Cloud Compute, which it views as a vital advancement in maintaining user privacy, while enabling next-generation AI experiences.
At the same time, while the company’s hardware segment is beginning to face some headwinds, the Services division continues to stand out as a primary growth engine. In the second quarter of its fiscal 2025, Services generated $26.6 billion in revenue, up 12% from the same period a year earlier, and delivered a gross margin of 75.7%. With more than a billion active paid subscriptions, this segment provides Apple with a reliable and scalable stream of recurring income, helping to cushion the impact of more volatile hardware sales. Because digital services benefit from high operating leverage, additional revenue incurs relatively low marginal cost, contributing to profitability.
In parallel, Apple has been working to mitigate risks related to international trade tensions and tariffs by pledging $500 billion in domestic investment over a four-year window. Part of this initiative includes building a cutting-edge server manufacturing facility in Texas. Beyond strengthening its U.S.-based production capabilities, these moves may also offer political benefits, aligning the
However, not only has Jony Ive’s OpenAI development resulted in worrying folds on the foreheads of Apple enthusiasts, but Google’s (GOOG) latest developer conference — Google I/O 2025 — has also put pressure on Apple’s own conference — the WWDC — to be a blockbuster. If it exceeds expectations, then it will restore faith of the investors, but if it falls short, the stock price decline will be prolonged, and will also raise questions about the company’s competitiveness in the long run. company more closely with national economic priorities.
What Are Analysts Saying About AAPL?
Overall, analysts have assigned a rating of “Moderate Buy” for Apple stock with a mean target price of $231.02. This denotes upside potential of about 18.3% from current levels. Out of 37 analysts covering the stock, 18 have a “Strong Buy” rating, four have a “Moderate Buy” rating, 12 have a “Hold” rating, one has a “Moderate Sell” rating, and two have “Strong Sell” ratings.
