Jefferies analysts have issued a cautionary outlook on Apple's upcoming fourth-quarter results, projecting potential shortfalls despite a recent surge in the company's share price. This analysis comes as the market grapples with a nuanced Google antitrust ruling and anticipates the impact of Apple's forthcoming AI-driven Siri service.

U.S. equities saw mixed reactions as the technology sector navigated conflicting signals, with Apple Inc. (AAPL) at the forefront. Despite an 18% rise in Apple's stock over the past three months, driven by optimism surrounding regulatory outcomes and future artificial intelligence (AI) initiatives, Jefferies analysts have issued a cautionary note, suggesting that the company's fourth-quarter fiscal year 2025 results may fall short of consensus expectations.

The Event in Detail

Jefferies projects Apple's fourth-quarter fiscal year 2025 revenue and Earnings Before Interest and Taxes (EBIT) to be 5% and 7% below consensus estimates, respectively. The firm attributes this potential shortfall to a "pull-in demand in 3QFY25," which could lead to a subsequent miss in the fourth quarter. Fundamental concerns underpinning Jefferies' "Hold" rating on Apple include a perceived saturated smartphone market, a lack of significant technological innovations, and rising Bill of of Materials (BOM) costs for AI features amidst uncertain consumer demand. Despite positive U.S. consumer survey results regarding the iPhone 17, Jefferies maintains a "downbeat outlook" on the device.

Conversely, Apple's recent stock rally has been supported by several factors, including tariff relief, positive interpretations of U.S. antitrust remedies, and anticipation surrounding an AI-driven Siri service. The company's third-quarter fiscal year 2025 performance saw revenue rise 10% to $94 billion, with iPhone sales growing 13.5% and services revenue reaching a record $27.4 billion, exceeding analyst expectations. The Street now forecasts nearly 7% revenue growth for the current fiscal fourth quarter, a significant increase from earlier estimates of approximately 3%.

Analysis of Market Reaction

The U.S. District Court's remedies decision in the Google antitrust case, issued on September 2, 2025, has been a key driver of investor optimism. Contrary to initial concerns, the ruling preserved Apple's estimated $20 billion annual revenue from Google for maintaining Google Search as the default engine on Apple devices. This critical financial arrangement, representing approximately 15% of Apple's operating profit and 20% of its Services segment revenue, was largely upheld. However, the court prohibited Google from entering into exclusive search contracts, limiting future agreements to a maximum of one year. This provision grants Apple increased leverage in annual renegotiations.

Following the decision, Alphabet's (GOOGL, GOOG) stock rose 7% to 8.5% in after-hours trading, while Apple's stock saw a 3% to 4% increase, signaling a net positive outcome for both tech giants. Wedbush analyst Dan Ives described the decision as a "monster win" for Apple, stating that a "black cloud" of worry over Apple's stock had been removed. Evercore analyst Amit Daryanani also highlighted that the annual renegotiation could boost Apple's leverage.

Furthermore, Apple's strategic pivot into advanced AI, particularly with the reported 2026 launch of an AI-driven Siri service based on a customized version of Google's Gemini large language model, has fueled investor enthusiasm. This collaboration, moving away from Apple's traditional in-house AI development due to internal delays and competition, is seen as a "win-win" scenario, potentially leading to a 15-20% re-rating of Apple's stock by some analysts.

Despite these positive catalysts, the recent unveiling of the iPhone 17 was met with a muted response from Wall Street, characterized by a "lack of investor enthusiasm" and a perception of "incremental upgrades" rather than revolutionary advancements. This has led to an immediate dip in Apple's stock price, underscoring investor sensitivity to innovation.

Broader Context and Implications

Apple's stock trades at an 8.5% valuation premium compared to its major technology peers, even while it currently exhibits the weakest short-term growth outlook among them. Jefferies finds Apple "unattractive" at "30x FY26E PE vs 15% CAGR," indicating a potential overvaluation relative to its projected growth. This contrasts with the broader market performance, where Apple's shares have climbed approximately 20% since mid-June 2025, more than doubling the gains of the S&P 500.

The ongoing evolution of the smartphone market, marked by increasing consumer fatigue with minor upgrades, presents a challenge for Apple. This sentiment has contributed to longer upgrade cycles and directly impacts Apple's sales trajectory. In contrast, Samsung (KRX: 005930) has experienced gains in U.S. smartphone market share, leveraging its diverse portfolio including foldable devices and integration of Google's Gemini AI, with its stock rising approximately 35% in Q2 2025.

Expert Commentary

Analysts hold varied perspectives on Apple's future trajectory. While Jefferies maintains a "Hold" rating, other firms express more bullish views.

"The ruling allows Google to continue paying Apple an estimated $20 billion annually to maintain Google Search as the default engine on Apple devices... This outcome was widely hailed by financial analysts as a "win" or "net positive" for both tech giants, removing a significant regulatory overhang."

Goldman Sachs maintains a "Buy" rating on Apple with a price target of $266, while HSBC reiterates a "Hold" rating and a $220 price target. MoffettNathanson upgraded Apple from "Sell" to "Neutral" with a new price target of $225. These diverse opinions highlight the complex interplay of regulatory, technological, and market forces shaping Apple's valuation.

Looking Ahead

Investors will closely monitor Apple's official fourth-quarter fiscal year 2025 earnings report, anticipated around October 30, 2025, for confirmation of Jefferies' concerns or a validation of the broader market's current optimism. The success and market adoption of the AI-driven Siri service in 2026 will also be a critical factor influencing Apple's long-term valuation and competitive positioning. Furthermore, the annual renegotiations of the Google search deal will provide continued insight into Apple's leverage and its ability to secure favorable terms for its highly profitable Services segment. The reception of the iPhone 17 in the market will also be scrutinized as an indicator of consumer demand for Apple's core product line.