Apple has failed with its first foray into virtual reality.
The company is falling behind in artificial intelligence.
Apple stock trades at an expensive P/E ratio.
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Apple(NASDAQ: AAPL) has entered a rough patch. The smartphone and computer giant is down around 10% in the last 12 months, while artificial intelligence (AI) stocks are soaring.
Management has made some major missteps in virtual reality and false promises with its Siri and Apple Intelligence services. Revenue is growing slowly, and innovation seems to be lacking for this storied technology brand.
Is Apple in trouble? Here's why investors should be concerned about owning shares of this stock.
Image source: Getty Images.
Back in early 2024, Apple released the Vision Pro, an expensive virtual reality headset that it promised was the next evolution in computing. The device sold for $3,500 and had a futuristic ski-goggle look and aimed to replace the personal computer for people working at home. Apple has been researching virtual and augmented reality technologies for years, but this was its first large foray into the cutting-edge computing space.
Now in June 2025, the Apple Vision Pro looks like a total flop. The company had to scale back production because of weak demand, failed to attract developers to make applications for the device, and has sold fewer than 1 million devices (reportedly) since its launch. Even if it sold 1 million of these devices a year, that equates to $3.5 billion in annual revenue, compared to $400 billion in consolidated revenue for Apple. The device isn't going to move the needle financially.
The Vision Pro can officially be called a flop. New versions may change consumer sentiment, but Apple has failed in its first foray into the virtual reality space. This company is still being driven by the iPhone and iPhone software and services.
Speaking of smartphones, Apple has promised customers and investors that new AI-focused updates will be coming to Apple devices shortly. Bullish investors see this as a reason for customers to upgrade their iPhones, which has been a nagging issue for the company, as customers are sticking with older devices for longer.
As with the Vision Pro, Apple talked a big game around upgrades for Siri and Apple Intelligence products. However, the actual products released have been lackluster.
At its annual developer conference, the company delayed the launch of AI Siri to early next year. At the same time, AI competitors, such as Alphabet and OpenAI, are pushing forward with cutting-edge productivity tools, leaving Apple in the dust.
Apple does have some power in the relationship that will help get these AI tools onto its devices, but it looks like it missed the boat on AI, just as it missed the boat on cloud computing. This is why Apple's revenue has barely grown in the last few years, while the other technology leaders, like Alphabet, keep compounding to new heights.
Apple's business is still about the iPhone and its related software services. It will be for some time.
AAPL Price-to-Earnings Ratio (P/E) data by YCharts.
It's not like Apple trades at a cheap earnings ratio to reflect this stagnant growth. Apple has a price-to-earnings ratio (P/E) of 31, compared to Alphabet's, which is less than 20. This makes Apple stock extra risky at the moment. If earnings growth doesn't accelerate, Apple will be a disappointing stock to own over the next few years.
There are rumblings that could take Apple's earnings into negative territory over the next few years, too. Its high-margin fees on App Store sales are under threat as the United States courts ruled it had to allow alternative payment methods. The huge fee it gets from Google Search every year to be the default search engine on Apple devices is currently being decided by the courts as possibly anticompetitive. A verdict against Apple may mean the loss of more than $20 billion in high-margin revenue from this default payment every year.
Risks are piling up, innovation is stalling, and its P/E ratio is high. Therefore, investors may fail to find anything to like about Apple stock today as the company may be in trouble. Avoid buying it for your portfolio right now.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Brett Schafer has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy.
Is Apple Stock In Trouble? was originally published by The Motley Fool
