The Most Important Thing for Apple Stock (AAPL) Investors to Watch in 2025
Key Points
Apple is facing stronger competition from Chinese smartphone makers.
The company's revenue and earnings have flattened since 2023.
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Apple (NASDAQ: AAPL) used to be the most valuable company in the world. It used to be the undisputed bellwether of technology stocks. It used to be the dominant smartphone maker in the all-important China market. And it used to be the one name that you could count on to deliver outsize returns for your investment portfolio.
None of that is true any longer. And while Apple is still one of the "Magnificent Seven" stocks and has a market capitalization of $3.2 trillion, it's not the growth driver of recent years. Apple is down 14% so far in 2025, far below the greater market. Among its Magnificent Seven peers, only Tesla is having a worse year.
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AAPL data by YCharts
What will it take for Apple to turn things around? The stock is up 6% in the last month, giving investors some hope for the second half of 2025. Apple shareholders should be deeply concerned about Apple's falling market share in China, and that's the most important metric I'm watching for the rest of 2025, as it's critical to Apple's largest revenue stream and a market where Apple is showing vulnerability. Though it's not the only area of concern.
Image source: Getty Images.
Chinese smartphones are becoming a problem for Apple
Apple entered the Chinese smartphone market in 2010 and gradually increased its market share, topping $70 billion a year in 2022 and 2023. Apple had a huge advantage in China as U.S. sanctions restricted a Chinese competitor, Huawei, from American technology, and Apple's smartphones were the most advanced in the market. But that began to change in the second half of 2023 as Huawei launched new 5G phones with locally made chips, much to the surprise of even analysts who cover the industry.
There are also national subsidy programs in China that make smartphones more affordable, but they are only for phones priced below 6,000 renminbi ($838), which is below Apple's price point.
Apple's market share in China fell from 21% in the fourth quarter of 2023 to 15% in the first quarter of 2025, while both Huawei and Xiaomi have market shares of 19%, according to Counterpoint Research. That trend continued into the second quarter, as Apple sales in Greater China dropped 2% on a year-over-year basis, even as sales in other geographic areas rose.
| Region | Fiscal Q2 2025 Sales (ending March 29, 2025) |
Fiscal Q2 2024 Sales (ending March 30, 2024) |
Percent gain (loss) |
|---|---|---|---|
| Americas | $40.3 billion | $37.8 billion | 8% |
| Europe | $24.4 billion | $21.1 billion | 1% |
| Greater China | $16 billion | $16.4 billion | (2%) |
| Japan | $7.3 billion | $6.2 billion | 17% |
| Other Asia-Pacific | $7.3 billion | $6.7 billion | 8% |
| Totals | $95.3 billion | $90.7 billion | 5% |
Data source: Apple.
So, Apple's weakness in China is having a significant impact on the company's revenue growth.
Apple is profitable, but growth is weak
Apple was a popular growth stock when the company was, well, growing. But its revenue and earnings growth has flatlined since 2023.
AAPL Revenue (Annual) data by YCharts
The company is still getting strong revenue growth from its lucrative Services segment, which includes the App store, Apple Music, its iCloud services, Apple Pay and Apple Card.
| Segment | Fiscal Q2 2025 (ending March 29, 2025) |
Fiscal Q2 2024 (ending March 30, 2024) |
Percent gain (loss) |
|---|---|---|---|
| iPhone | $48.84 billion | $45.96 billion | 6.2% |
| Mac | $7.94 billion | $7.45 billion | 6.6% |
| iPad | $6.4 billion | $5.55 billion | 15.3% |
| Wearables, Home, and Accessories | $7.52 billion | $7.91 billion | (4.9%) |
| Services | $26.64 billion | $23.86 billion | 11.6% |
| Totals | $95.3 billion | $90.7 billion | 5% |
Data source: Apple.
The Services segment is one of the best things about investing in Apple because the company doesn't have to invest the same type of research and development into Services as it does in creating new advancements to the iPhone. Companies that want to post a new application in the App Store of make music available through Apple simply pay it a cut.
Apple's iPhone releases used to be closely watched because the company, in its heyday, made some revolutionary changes to smartphones. Things like the introduction to the App store, the launch of the Siri assistant, touchscreens, forward- and rear-facing cameras, and facial recognition encouraged people to trade in their iPhones for the latest model. But today's iPhones don't have the same kind of technological advancement, so people seem much more willing to hold on to iPhones for a longer period of time.
Considering that Apple makes the lion's share of its money on iPhone sales, that is a problem.
Tariffs are a huge concern
Apple makes most of its products in China, which is locked in a trade war with the United States that doesn't appear to be ending anytime soon. In fact, President Donald Trump has threatened Apple with a 25% tariff if the company doesn't move its iPhone production to the U.S. Apple is in the process of moving some of its production to Vietnam and India, but that's a long process and it doesn't shield Apple from the bulk of the tariff threat.
Apple is vulnerable on both ends of the trade war. In China, it's penalized for being a U.S. company and is battling for market share against companies that are making lower-cost products and taking advantage of government subsidies. In the U.S., its facing the specter of higher manufacturing and shipping costs, both which would either cut into the company's profit margins or force it to pass on costs to customers.
Looking ahead for the rest of 2025
Apple reports its fiscal third-quarter earnings on July 31. Investors should be watching if sales in Greater China continue to decline and how that affects Apple's overall revenue and income growth. Apple won't be losing money -- it still churns out profits and a small dividend like clockwork -- but it's no longer the growth giant that it was in the past despite trading at nearly 28 times forward earnings. Until Apple solves its China problem or creates a new source of revenue, investors shouldn't expect the stock to outperform the market.
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Patrick Sanders has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Netflix, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
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