Apple has iPhone sales up in China for the first time in two years. Is the crisis over?

Sales of iPhones in China rose for the first time in two years at the end of the quarter, Counterpoint Research reported. This is a signal of a possible breakthrough in one of the key markets for Apple, according to CNBC. The company boosted demand by discounting top models and expanding its trade-in program. But the maker of iconic smartphones is finding it increasingly difficult to compete with local manufacturers, including because of problems with artificial intelligence.

Sales of Apple smartphones in China rose 8 percent year-on-year in the three months to the end of June, counted by Counterpoint Research. That marked the first growth for the company since the second quarter of 2023, noted CNBC.

According to Counterpoint analysts, the growth was driven by promotions in May, when Chinese online retailers offered discounts on the iPhone 16, Apple's most current line of smartphones. In addition, the company increased the amount it pays for older models under the trade-in program.

"The iPhone price drop in May was timely and generated a positive response as it occurred a week before the major 618 shopping festival," said Counterpoint deputy director Ethan Qi, whose report was quoted by CNBC. The annual 618 Festival takes place in China in June and is accompanied by large-scale sales at online stores and marketplaces. 

A return to growth in China will be encouraging news for investors, according to CNBC. Since the beginning of the year, Apple shares have fallen by almost 15% due to several negative factors

- US President Donald Trump has threatened to impose duties on Apple products and called for CEO Tim Cook to move iPhone production to the US. Analysts said it was virtually impossible.

- Competition in the Chinese market is heating up. Huawei, which has been weakened by U.S. sanctions, returned to the market in late 2023 with a new smartphone based on an advanced chip whose development previously seemed out of reach for the Chinese industry. Since then, Huawei has been aggressively ramping up domestic sales and making cautious moves toward international expansion. The Chinese company is wresting market share from Apple: in the second quarter, Huawei's sales grew 12% year-on-year, helping the company take the top spot in the smartphone market in China. It is followed by Vivo, with Apple taking only the third position.

"Huawei continues to enjoy high loyalty from its audience, with users upgrading older devices to the brand's new models en masse," said Counterpoint senior analyst Iwan Lam.

- The lack of full-fledged AI in the iPhone also puts the company at a disadvantage compared to Samsung, Huawei and Xiaomi.

Jefferies analyst Edison Lee on July 1 raised his rating on Apple shares from "below market" to neutral. He expects the company's second-quarter report to beat Wall Street expectations on revenue, mainly due to higher sales in China. He also raised his target price on the iPhone maker's shares from $170.6 to $188.3, still nearly 12% below the current value.

The analyst estimates that Apple's quarterly revenue will grow by 8% - higher than the company's promised "low-single-digit percentage growth" (low-single-digit percentage growth that's about 1-4%). However, Lee warns that strong iPhone sales in the second quarter (April-June) could turn into weaker demand in the third quarter.

"Sales could be jeopardized as new features remain scarce and artificial intelligence has yet to be a breakthrough factor," Lee writes in a note that is cited by Barron's. He also believes that the market is looking too nonchalantly at the risk of imposing duties on U.S. imports from countries where Apple has manufacturing facilities.

Craig Moffett of MoffettNathanson on June 30 reiterated a sell recommendation on Apple stock and maintained a $139 target price, implying a 35% drop from the closing price on July 3. The lag in AI adoption, or even the market's perception of such a lag, remains one of the main reasons why Apple's stock is significantly underperforming other members of the "Magnificent Seven" such as Microsoft and Meta Platforms, Moffett said.

Even though Apple in 2025 is one of the worst performing stocks of the "seven," two-thirds of analysts tracking the stock still recommend buying it. The Wall Street consensus target price is $229, up 7% from the current value.

This article was AI-translated and verified by a human editor