Apple is set to release its fiscal third-quarter earnings after the market closes on Thursday, with investors closely watching iPhone sales trends and pricing decisions as the company approaches a leadership change. The report arrives with Apple shares near record highs, having reclaimed the title of the world's most valuable company from Nvidia.
Apple's stock has risen nearly 25% this year, briefly pushing its market capitalization above $5 trillion and outperforming other members of the so-called Magnificent Seven. Options markets suggest traders anticipate a roughly 4% swing in either direction following the earnings release, implying a potential move above $352 or below $328 by week's end based on Tuesday's close.
Revenue and Earnings Expectations
According to Visible Alpha, Apple is expected to report fiscal third-quarter revenue of $103.2 billion, up 15% year over year, with earnings per share of $1.87 compared to $1.57 a year earlier. LSEG data forecasts revenue of $108.65 billion, representing 15.5% growth—the strongest fiscal third-quarter sales expansion since 2021.
iPhone Demand and Pricing Strategy Under Scrutiny
Investors will focus on Apple's pricing strategy after the company kept iPhone prices unchanged despite rising memory and storage chip costs driven by AI data center demand. While Apple raised prices for iPads and MacBooks last month to offset higher component costs, it avoided increasing prices on its flagship smartphone. That decision helped Apple gain market share as rivals passed higher costs to consumers during a quarter when global smartphone shipments fell to their lowest level in 13 years.
Counterpoint Research data shows iPhone shipments rose 3% during the quarter, lifting Apple's global smartphone market share to nearly one-fifth. Analysts expect iPhone revenue to increase 20.8%, marking the strongest third-quarter growth since 2021. Mac revenue is projected to grow 8.7%, while iPad sales growth is expected to moderate to 5.2%.
Morgan Stanley recently raised its Apple price target to $364 from $360, noting that investors may be underestimating the company's revenue potential as recent price increases help offset higher memory costs. The brokerage stated that Apple's core product demand has been somewhat inelastic, with iPhone being the most inelastic product within Apple's ecosystem, followed by Mac and then iPad. This suggests recent price increases are unlikely to materially disrupt demand, especially given supply challenges at peers.
AI, Margins, and Pricing Outlook
Although Apple has avoided the massive AI infrastructure spending undertaken by some technology peers, investors will seek commentary on future pricing and profitability. Analysts expect profit growth to slow to 18.1% as gross margin eases to 47.9% from 49.3% in the previous quarter. Some analysts believe Apple's ecosystem and customer loyalty could help the company absorb future price increases without materially affecting demand. Apple has already raised prices for Apple Music and its Apple One subscription bundle, and analysts expect price increases when the next iPhone lineup is introduced, typically in September.
For context on broader market dynamics, Wall Street futures were mixed as the Fed decision and big tech earnings loom, while Amazon stock faces a potential 6% swing as its Q2 earnings test AI spending versus cloud growth.
Tim Cook's Final Earnings Call as CEO
Thursday's earnings call will mark Tim Cook's final quarterly results presentation as Apple's chief executive before he steps down on September 1 to become executive chairman. John Ternus, Apple's head of hardware and a 25-year company veteran, will succeed Cook as CEO. Investors are expected to seek further details from Ternus on Apple's strategy, particularly regarding the company's artificial intelligence roadmap and the delayed rollout of its redesigned Siri. Cook leaves the top role after 15 years during which Apple's valuation increased fourteen-fold, even as the company faced challenges in establishing major new hardware platforms beyond the iPhone and expanding adoption of products such as the Vision Pro headset.
This article is for informational purposes only and does not constitute financial advice.
