In its latest research note released Thursday, Barclays laid out its projections and insights for the technology sector heading into 2025. From the future of Apple to the state of networking and hardware, the investment firm offered a comprehensive overview of where the industry might be headed in the coming year. Here’s a breakdown of their thoughts on some of the most significant tech players and sectors.
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Apple: A Mixed Outlook with Room for Recovery
One of the most anticipated reports in the technology world will come on January 30, when Apple (NASDAQ: AAPL) reveals its fiscal first-quarter results. According to Barclays analysts, however, the results might show a “mixed” outlook at best, as the company faces challenges in multiple areas.
Despite Apple’s dominance in the consumer electronics market, the research note suggests that 2025 could be a tumultuous year for the tech giant. One of the key issues highlighted is the iPhone market. While there is an expectation of a recovery in iPhone sales, particularly as Apple’s installed base ages and users replace older devices, Barclays believes that growth will be “choppy.” Analysts note that Apple’s reliance on the iPhone for a significant portion of its revenue might be a double-edged sword as the company contends with a saturated market and potential slowdowns in consumer spending.
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Moreover, analysts at Barclays are also cautious about the broader regulatory environment. They believe that Apple’s App Store will face increased regulatory scrutiny, particularly in light of the ongoing investigations and potential antitrust cases around app store commissions. This could dampen the company’s profitability in this area, especially as global regulators continue to target tech giants for monopolistic practices.
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The company’s significant exposure to China, both in terms of sales and supply chain operations, remains another area of concern. As the political backdrop in China continues to shift, Barclays expects heightened risks related to tariffs, supply chain disruptions, and geopolitical tensions.
Networking: Returning to “Normal”
In the networking sector, Barclays predicts that the market will return to a more “normal” growth trajectory following the explosive expansion during the COVID-19 pandemic. The surge in demand for networking infrastructure during the pandemic, driven by remote work and increased reliance on cloud computing, was followed by a significant decline in demand last year. As we move into 2025, Barclays suggests that the sector is likely to stabilize and enter a more predictable phase of growth.
Arista Networks (NYSE: ANET) and Ciena (CIEN) continue to hold the firm’s Overweight ratings, reflecting confidence in these companies’ ability to capture market share in networking and cloud infrastructure. Juniper Networks (JNPR), which is in the process of being acquired by HP Enterprise (HPE), and Cisco (NASDAQ: CSCO) both maintained Equal-Weight ratings. Barclays’ analysts believe that Juniper’s transition could make it a more attractive acquisition target, but also note the sector’s mature growth stage could limit any sudden upside for Cisco.
Tech Hardware: IT Spending Poised for Recovery
Barclays appears cautiously optimistic about the tech hardware sector, with expectations of a recovery in IT spending in 2025. A resurgence in demand for on-premise infrastructure, coupled with the increasing adoption of private cloud services and the growing importance of artificial intelligence (AI), is expected to drive spending in this space. Analysts point to a shift in enterprise priorities, where companies will increasingly invest in infrastructure to support their AI-driven initiatives.
The firm maintained Equal-Weight ratings on companies like Pure Storage (PSTG), Dell Technologies (DELL), HP Inc. (HPQ), and NetApp (NTAP), signaling that these companies are well-positioned but face challenges in driving substantial growth in the short term. On the other hand, they kept their Overweight ratings on HP Enterprise and Nutanix (NTNX), indicating confidence in the strategic positioning of these firms within the cloud and data storage markets.
Tech Industrials: A Positive View with Selective Picks
In the tech industrial space, Barclays maintained a positive stance, particularly on companies that have strong market positions, diversified business models, and exposure to resilient end markets. They were particularly bullish on Motorola Solutions (MSI), which provides mission-critical communication equipment, and Axon Enterprise (AXON), a leader in body cameras and digital evidence management for law enforcement.
Barclays also kept an Overweight rating on Keysight Technologies (KEYS), noting that the company has a favorable setup heading into 2025. However, analysts maintained Equal-Weight ratings on Corning (GLW) and Zebra Technologies (ZBRA), citing concerns over cyclical weaknesses in the markets these companies serve. Both firms have exposure to markets that are expected to remain weak in the near term, limiting their growth potential.
Electronics Manufacturing Services (EMS): Strong Margins and AI Growth
Barclays’ outlook for the Electronics Manufacturing Services (EMS) sector is more optimistic. They expect EMS companies to benefit from improved margins, increased leverage from artificial intelligence applications, and a recovery in end markets. The firm maintained Overweight ratings on Celestica (NYSE: CLS), Flex (FLEX), and Jabil (JBL), which they believe are well-positioned for growth as the demand for consumer electronics, industrial applications, and cloud infrastructure accelerates.
Despite this positive outlook, Barclays issued an Equal-Weight rating on Fabrinet (FN), citing concerns about the company’s potential to lose market share in certain areas, which could limit its upside potential.
Harmonic: Downgraded Amid Broadband Concerns
Lastly, Barclays downgraded Harmonic (HLIT) to Equal-Weight from Overweight, as they expect depressed broadband growth to continue impacting the company’s prospects. The note highlights limited visibility within the cable end market and concerns over customer concentration as key risks for Harmonic in 2025.
A Year of Adjustments and Strategic Positioning
Looking ahead to 2025, Barclays’ report on the technology sector paints a picture of a year marked by adjustments and strategic positioning. Apple faces challenges with its core iPhone business and growing regulatory pressure, while networking companies are likely to return to steady growth after the pandemic-driven boom. In hardware, the rise of AI and on-premise infrastructure investment should provide a boost, but the pace of recovery remains uncertain. Tech industrials and EMS sectors appear well-positioned for growth, driven by market resilience and AI adoption, while companies like Harmonic face headwinds.
For investors, 2025 will be a year that demands a careful evaluation of company fundamentals, market trends, and macroeconomic factors that could impact growth. As always, the tech sector remains dynamic, and while risks abound, opportunities for growth are equally present. The key for investors will be identifying companies that are poised to capitalize on the broader trends shaping the industry.
