Apple iPhone Sales Drop After Tariff-Induced Buying Spurt

Apple is scheduled to report third-quarter earnings on July 31. (Michael M. Santiago/Getty Images)

Demand for Apple’s iPhone 16 has taken a hit after shoppers rushed to get ahead of potential tariff-induced price increases and as the company’s artificial intelligence features lag behind expectations, according to an analyst at KeyBanc Capital Markets.

John Vinh wrote in a research note that according to internal data from KeyBanc, June iPhone sales dropped from the previous month and year.

“Our Key First Look Data reflects weaker iPhone sales at -6% y/y, with sell-through below normal seasonal trends (m/m) due to pull ins from tariff-related pricing concerns the last two months and generally weaker iPhone demand,” Vinh wrote. He rates Apple as Sector Weight without a price target.

Apple didn’t immediately respond to a Barron’s request for comment.

iPhone demand is incredibly important for Apple as that device brings in the most revenue for the company. For the second quarter, the smartphone accounted for $46.8 billion of Apple’s total $95.4 billion sales.

Wall Street has been concerned that iPhone demand would slow for two main reasons: tariffs and a slow AI rollout. The stock has now dropped 16% this year and 8% over the last 12 months.

Apple investors have been concerned that the increased prices of goods imported to the U.S. would discourage people from making nonessential and expensive purchases, such as iPhones. However, shoppers tried to get ahead of price increases before they took effect. Counterpoint Research reported in June that April and May iPhone sell-through grew 15% from the previous year to its highest level ever, as “tariff dodgers helped boost sales.”

That trend didn’t continue in June, Vinh wrote.

Apple could encourage iPhone upgrades by launching new AI software, but that has yet to happen as it delays features like the highly anticipated AI powered Siri.

“Apple AI is still a non-factor in buying decisions, with limited consumer interest,” Vinh wrote.

Wall Street will get updates on how iPhone demand is faring when the company reports third-quarter earnings on July 31.

Write to Angela Palumbo at angela.palumbo@dowjones.com