By Dan Gallagher

Apple could really use some of Steve Jobs's famous reality distortion field right about now.

For the world's most valuable company, a couple of pieces of reality have been clear for a while: Its current iPhone cycle is weak, with revenue from that product line up only 1.6% from a year earlier in the last six months of 2024. And despite weakness in the business that accounts for more than half of the company's revenue, Apple's stock has been a star -- outperforming most of its megacap tech peers over the past 12 months and until recently carrying a valuation premium to all of them.

But that premium has taken a hit over the past week following reports that Apple is delaying the rollout of significant artificial-intelligence enhancements to its Siri voice assistant. This "more personalized Siri" would have access to on-device data across multiple apps and would thus be key to delivering a truly AI iPhone. These features were widely expected to be included in the new iOS update to be unveiled at the company's Worldwide Developers Conference in June, especially since Apple previewed some of them at last year's conference.

But in a statement on March 7, an Apple representative said "it's going to take us longer than we thought to deliver on these features," adding that the company expects to roll them out "in the coming year." That leaves open the possibility that the AI-enhanced Siri upgrade might not come out until early 2026.

That admission curbed expectations of a major AI boost for the new iPhones launching this fall. "The delayed rollout of a more advanced Siri means Apple will have fewer features to accelerate iPhone upgrade rates in FY26," Morgan Stanley analyst Erik Woodring wrote in a report last week, referring to the fiscal year that ends in September of next year. That finally took some wind out of the stock; Apple's shares slid nearly 11% last week in the worst weekly drop the stock has seen since late 2022, according to FactSet data. That is also far worse than other megacap tech stocks fared in last week's tariff-induced selloff. The stock gained a fraction on Monday.

The funk may linger for a while. Apple typically says little about its products and software until it is ready to release them, and the company often saves its major software announcements for its June conference. Without an AI boost, this year's iPhone lineup may need some other sort of enhancement to ignite sales. That is possible, as the company is reportedly planning a thinner design for this year's models. But that won't be evident until its annual iPhone unveiling that typically happens in early September.

The news flow before then may not help much either. According to a report by Bloomberg on Friday, the Apple executive overseeing Siri delivered some rather stark comments to his team in an all-hands meeting, calling the delays embarrassing. Apple was already contending with a perception that it is playing catch-up in AI; Jefferies analyst Edison Lee downgraded the stock to a sell rating in January, citing in part its weak AI offerings. "Even if iPhone has new form factors in the next two years (slim for iPhone 17 and possibly a foldable 18), volume growth will likely be slower if AI takes longer to materialize," he wrote.

The recent selloff has brought Apple's share price to a multiple of a little under 28 times this year's projected earnings. That is about even with its five-year average and more in line with megacap tech peers, which could limit fallout for the stock from here. But with its AI story still a work in progress and a device business facing the prospect of damaging tariffs, Apple may also have a hard time convincing investors that now is the time to buy in.

Write to Dan Gallagher at dan.gallagher@wsj.com

(END) Dow Jones Newswires

March 18, 2025 05:30 ET (09:30 GMT)

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