TLDR:
- Judge accuses Apple of ignoring App Store injunction, referring case for possible criminal contempt charges
- Apple must change App Store policies but disagrees with ruling and plans to appeal
- Wall Street analysts cut price targets on Apple stock due to tariff headwinds
- Tariffs could lower Apple’s earnings per share by 8% to 10% according to analysts
- Apple will report fiscal Q2 results on Thursday, with expected earnings of $1.62 per share on $94.25 billion in sales
Apple Inc. is facing legal troubles and tariff concerns that have sent its stock lower in after-hours trading. The tech giant received harsh criticism from a U.S. District Judge who accused the company of ignoring a court injunction related to its App Store practices.
Judge Yvonne Gonzalez Rogers rebuked Apple on Wednesday night. She stated the company had ignored an injunction tied to its U.S. App Store following a 2021 antitrust trial with Epic Games.
While Apple had largely won that trial, it was ordered to allow alternative payment processors for in-app purchases. These purchases have become a major revenue source for the App Store.
The judge noted that Apple continued to take a 27% commission on alternative payments, compared to its usual 30%. She also pointed out that Apple took steps to discourage the use of these alternative systems.
“Apple’s response to the Injunction strains credulity,” Rogers wrote in her ruling. “Apple, despite knowing its obligations, thwarted the Injunction’s goals, and continued its anticompetitive conduct solely to maintain its revenue stream.”
Legal Consequences Loom
The judge has referred the case to the U.S. Attorney for the Northern District of California for possible criminal contempt charges. This represents a serious escalation in the ongoing legal battle.
Rogers didn’t mince words in her assessment of Apple’s behavior. “In stark contrast to Apple’s initial in-court testimony, contemporaneous business documents reveal that Apple knew exactly what it was doing and at every turn chose the most anticompetive option,” she wrote.
The judge ordered Apple to comply with the injunction immediately. “This is an injunction, not a negotiation,” she emphasized.
Apple’s response was swift but brief. “We strongly disagree with the decision,” a company spokesperson told Barron’s. “We will comply with the court’s order and we will appeal.”
The news worried investors, causing Apple shares to fall 1.7% in after-hours trading on Wednesday.
Tariff Concerns Mount
Adding to Apple’s challenges, at least three Wall Street analysts have cut their price targets on the stock ahead of the company’s March-quarter earnings report, due Thursday.
Loop Capital analyst Ananda Baruah maintained a hold rating but reduced his price target to $215 from $230. His decision was based on iPhone supply-chain data.
Barclays analyst Tim Long cut his price target even more dramatically, down to $173 from $197, while maintaining a sell rating on the stock.
Long believes Apple’s March and June quarters are “likely okay” thanks to inventory stockpiling ahead of Trump tariffs. However, he expects the second half of the calendar year to be more challenging.
“We are lowering September-quarter and fiscal 2026 unit estimates for iPhones due to demand slowdown, potentially price hikes and Siri delay,” Long explained in his report.
Raymond James analyst Srini Pajjuri kept his outperform rating but lowered his price target to $230 from $250. Pajjuri warned that tariffs could lower Apple’s earnings per share by 8% to 10%.
“Our base case is for Apple to raise prices in the U.S., which will likely lead to some demand destruction,” he noted. Despite these concerns, Pajjuri views any stock pullback as a buying opportunity given Apple’s “unparalleled ecosystem” and “double-digit services growth.”
Apple will report its fiscal second-quarter results after market close on Thursday. Analysts expect earnings of $1.62 per share on sales of $94.25 billion, representing year-over-year growth of 6% in earnings and 4% in revenue.
For Apple’s fiscal third quarter, analysts currently expect earnings of $1.46 per share, up 5% year over year, on sales of $88.89 billion, up 4%.
The judge has called on Apple to make immediate changes to comply with the App Store injunction, emphasizing that it is “an injunction, not a negotiation.”
