Apple Inc. is bracing for tough questions from investors during its quarterly earnings call on Thursday, with analysts spotlighting delays in rolling out key artificial intelligence features and the potential fallout from escalating U.S.-China tariff tensions.

Despite a surge in demand for the newly launched, budget-friendly iPhone 16e in the January-March quarter, driven by fears of impending tariffs, Wall Street anticipates a slight decline in iPhone sales.

This would mark Apple’s second consecutive quarter of falling iPhone revenue, underscoring challenges for the tech giant’s flagship product.

The Trump administration has so far exempted electronics from tariffs, but signals from Washington suggest levies could be imposed soon.

With 90% of its products manufactured in China, Apple’s stock has taken a hit, dropping over 16% this year and erasing more than $600 billion in market value.

To counter tariff risks, Apple is reportedly shifting production of U.S.-bound iPhones to India, according to Reuters.

Analysts expect the company to distribute some tariff-related costs across its supply chain while minimizing price hikes to protect its market share.

“Tariffs are a sword of Damocles for Apple – dangling, disruptive and politically charged,” said Eric Schiffer, chairman of Patriarch Organization, a California-based private equity firm that holds Apple shares.

Unlike competitors such as Google and Samsung, Apple has been slow to deliver on key AI features it announced at last year’s developer conference. A major update to its voice assistant, Siri—a frequent request from users and investors—has been delayed until 2026.

Apple also had to withdraw a commercial that highlighted AI capabilities that aren’t yet available, underscoring its cautious and delayed approach to integrating AI into its products.

Apple’s cautious, privacy-focused approach to AI has slowed its rollout and put the company behind its competitors, according to Jacob Bourne, an analyst at eMarketer.

“With tariffs threatening cost structures, Apple faces pressure to move faster on AI innovation and supply chain realignment – both of which are capital intensive,” he added.

Overall, Apple’s revenue is projected to increase by 4.2% in its fiscal second quarter (January–March), maintaining a similar growth pace as the first quarter.

This growth is expected to be fueled by strong iPad sales and continued expansion in its services segment.