Are expectations for Apple reaching a fever pitch? The tech giant achieved a historic milestone this week, briefly surpassing a $4 trillion market capitalization, joining Nvidia and Microsoft in this exclusive club. While shares fluctuated just below this mark, Apple’s resurgence from earlier this year is noteworthy, driven by a confluence of factors.
CEO Tim Cook’s strategic engagement with Washington, particularly around domestic manufacturing, alongside robust demand for the latest iPhone models, have fueled investor optimism. Adding to this momentum is a favorable ruling in a significant antitrust case, securing Apple’s lucrative search partnership with Alphabet’s Google. This backdrop makes Apple’s upcoming earnings report a pivotal moment, potentially validating a long-anticipated iPhone upgrade cycle and buying the company crucial time to refine its generative artificial intelligence offerings before scrutiny intensifies.
Bank of America analysts, in a recent note, express confidence in Apple’s long-term AI prospects, projecting that the company will emerge as an “eventual winner” in the AI space. Their bullish outlook anticipates a doubling of Apple’s earnings between 2024 and 2030, resulting in a price target increase to $320 per share. Echoing this sentiment, JPMorgan analysts earlier this week highlighted the “greater halo of positivity” surrounding Apple shares than at any point in the past year, citing expectations of “robust revenue and margins” that will reinforce a positive product cycle. They raised their price target to $290.
Despite these positives, some analysts remain cautious, citing concerns about the company’s AI rollout. The delays surrounding Apple Intelligence, the company’s generative AI suite, and the lack of a concrete roadmap for its AI-enhanced Siri, raise questions about future competitiveness. Moreover, the poaching of AI talent by competitors like Meta Platforms adds to these concerns. However, several factors allow investors to look beyond the AI uncertainty, at least for now.
The iPhone 17 Lineup: Demand Drivers
The initial performance of the iPhone 17 models, including the iPhone Air, has been promising, with lead times exceeding those of the iPhone 16 debut. Data from Counterpoint Research indicates a 4% year-over-year increase in Apple’s global smartphone shipments during the third quarter, describing the iPhone 17 series as “well received” with “record-breaking pre-booking across regions.”
Comments from T-Mobile’s former CEO, Mike Sievert, further support this narrative, with the company reporting record iPhone sales. Analysts at Baird suggest that this solid reception could translate to stronger-than-expected fiscal 2025 fourth-quarter results. Their channel checks point to a more robust iPhone refresh cycle, as lead times for the base iPhone 17 continue to surpass last year’s levels. Baird subsequently raised their price target to $280.
Navigating Trade and Tariffs
Apple’s adept management of tariff pressures also contributes to its positive outlook. In response to potential tariffs on iPhones manufactured outside the U.S., CEO Cook announced a significant investment in domestic manufacturing to strengthen ties with Washington. This strategic move helps Apple to mitigate potential cost increases or price hikes that could negatively impact demand, given its manufacturing footprint in China, a key market for the company.
Antitrust Resolution: A Google Lifeline
The favorable antitrust ruling allowing Google to continue paying Apple billions annually for being the default search engine on iPhones provides a significant boost. This decision, following a protracted legal battle, secures a lucrative revenue stream for Apple’s high-margin services division, encompassing subscriptions and licensing fees from offerings like Apple TV, iCloud, Apple Music, and the App Store.
Analysts estimate that Apple receives approximately $20 billion annually from Google as part of this agreement. TDCowen analysts emphasize that this ongoing search revenue stream from Google contributes to the positive sentiment surrounding Apple’s earnings, potentially serving as a template for AI chatbot integration moving forward.
Looking Ahead: A High Bar to Clear
Apple faces high expectations this earnings season, fueled by strong third-quarter results that saw the company achieve its biggest revenue growth since 2021, fueled by a record number of active devices across all product categories and strong performance in the services division.
According to consensus estimates from LSEG, Apple is expected to report EPS growth of 8% to $1.77 in its final quarter of the 2025 fiscal year, with revenue projected to rise 7.7% year-over-year to $102.24 billion. As Apple faces an increasingly competitive smartphone market, particularly in China, this earnings report will be crucial in solidifying investor confidence and demonstrating the company’s ability to navigate evolving market dynamics while maintaining its innovative edge.
While the staggered AI rollout remains a talking point, Apple’s history demonstrates its strength lies not in being first to market, but in delivering groundbreaking and refined products. As such, the focus will likely remain on Apple’s ability to continue to deliver leading-edge devices.
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