Apple's Q3 Earnings: AI Integration, iPhone Sales, and Growth Potential in Focus

'A growth turnaround beginning': Here's what Wall Street expects from Apple's 3rd-quarter earnings

This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now. Have an account? Log in. Here's what Wall Street strategists say they expect to see from the tech giant for the third quarter. iPhone demand is likely stabilizing in China, according to supply-chain checks Wedbush conducted in Asia. That could set up the company to initially ship around 90 million iPhone 16s, higher than the consensus of 80-84 million, analysts said. Growth could also lie in Apple's AI initiatives, particularly with its partnership with OpenAI. Artificial intelligence incorporated into Apple products could add another $30 to $40 each share of Apple stock, Wedbush estimated. "We strongly believe June will be the last negative growth quarter for China with a growth turnaround beginning in the September quarter. China remains the linchpin of growth for Apple and now this key region is set to see growth once against starting with iPhone 16 in our view," the firm in a note in July. Wedbush reiterated its "outperform" rating on the stock and issued a price target of $275 a share, implying 24% upside. Apple looks on track to pull slightly more revenue than initially expected -- but investors will "mostly ignore" the earnings results and focus on guidance related to AI-enabled iPhones, revenue growth in China, and revenue growth on the services side of the business, BofA strategists predicted. AI should also drive more Apple users to scoop up new iPhones, the bank predicted in a note. "We see pent up demand and a meaningful number of older iPhones in the installed base, and the new AI features should help drive an upgrade cycle," it said. Analysts reiterated their "buy" rating on the stock and raised their price target to $256 a share, implying 15% upside. Apple could be fueling valuation growth through its huge stock buy-backs, as well as the company diversifying its product line and driving 'ecosystem lock-in,' such as by creating services like Apple Pay and Apple Care, Needham analysts said. The company also appears to be "maximizing revenue per AAPL user," they added, pointing to the firm's multiple subscription services, like Fitness + and Apple Music. Still, the company faces risks stemming from geopolitical tensions with China, and potentially weaker consumer demand as the economy continues to slow. iPhone users also aren't replacing their devices as frequently as they were before the pandemic, the firm noted, citing industry checks and conversations with former Apple employees. Needham reiterated its "buy" rating on Apple stock and raised its price target to $260 a share, implying 17% upside. Morgan Stanley's research team reiterated Apple as its "top pick", thanks to a large number of Apple users set to upgrade their devices. By the end of this fiscal year, there could be a record 700 million iPhones that are at least three years old, the bank estimated. The promise of Apple Intelligence, meanwhile, could help the firm sell as many as 235 million iPhones over the 2025 fiscal year, followed by 262 million iPhones in the 2026 fiscal year, analysts said. "Apple Intelligence is a clear catalyst for a multi-year product upgrade cycle," analysts added in a note. "Never in Apple's 40 year history has the iPhone installed base been so large (1.3b+ devices), replacement cycles been so extended (at 4.8 years), and a new technology been limited to such a small cohort of users (8% of the iPhone/iPad installed base) all at the same time." The bank's research arm reiterated its "overweight" rating on the stock and raised its price target to $273 a share, implying 23% upside. Apple is poised to lead tech firms in the consumer AI space, Oppenheimer said. "We believe that Apple's introduction of Apple Intelligence will position the company as the leader in the consumer AI experience," strategists said in a note, adding that the company's AI initiatives could result in faster-than-expected revenue and earnings growth. "We believe the excitement over Apple Intelligence can potentially accelerate hardware replacement and enable market share gain for iPhone, iPad and Mac." Analysts reiterated their "outperform" rating on the stock and raised their price target to $250 a share, implying 12% upside. Apple's financials results will likely look better starting in the September quarter, with the company on track to see 9% revenue growth in 2025, the European bank said. But investors are still waiting for Apple Intelligence to roll out before sentiment improves. Meanwhile, Apple's stock may not have much more room to climb, given how expensive shares are already priced, strategists added. "While numbers finally moving higher and hope for the AI iPhone will help sentiment, we see less scope for upside with the stock at a 30x+ p/e multiple," Barclays said, referring to the stock's high price-to-earnings ratio. "We do not think the iPhone16/AI features will be enough to drive a meaningful enough upgrade cycle to justify the valuation." The bank reiterated its "underweight" rating on the stock, but raised its price target to $187 a share, implying 16% downside.

'A growth turnaround beginning': Here's what Wall Street expects from Apple's 3rd-quarter earnings | Business Insider India

Investors are waiting on Apple to report its earnings for the third quarter. The results, which will be released after the closing bell on Thursday, will be critical for the iPhone maker, which has struggled with weak demand and rising competition in China over the past year. Still, analysts at multiple firms are still feeling optimistic for the company, given a slew of positive catalysts could be underway. In particular, Wall Street has its eye on growth in Apple Intelligence -- the company's coming AI system -- which is on the services side of its business, as well as demand for the iPhone 16. Here's what Wall Street strategists say they expect to see from the tech giant for the third quarter. Wedbush: 'Turnaround' story is beginning iPhone demand is likely stabilizing in China, according to supply-chain checks Wedbush conducted in Asia. That could set up the company to initially ship around 90 million iPhone 16s, higher than the consensus of 80-84 million, analysts said. Growth could also lie in Apple's AI initiatives, particularly with its partnership with OpenAI. Artificial intelligence incorporated into Apple products could add another $30 to $40 each share of Apple stock, Wedbush estimated. "We strongly believe June will be the last negative growth quarter for China with a growth turnaround beginning in the September quarter. China remains the linchpin of growth for Apple and now this key region is set to see growth once against starting with iPhone 16 in our view," the firm in a note in July. Wedbush reiterated its "outperform" rating on the stock and issued a price target of $275 a share, implying 24% upside. Bank of America: AI features to fuel demand for iPhones Apple looks on track to pull slightly more revenue than initially expected -- but investors will "mostly ignore" the earnings results and focus on guidance related to AI-enabled iPhones, revenue growth in China, and revenue growth on the services side of the business, BofA strategists predicted. AI should also drive more Apple users to scoop up new iPhones, the bank predicted in a note. "We see pent up demand and a meaningful number of older iPhones in the installed base, and the new AI features should help drive an upgrade cycle," it said. Analysts reiterated their "buy" rating on the stock and raised their price target to $256 a share, implying 15% upside. Needham: Ecosystem 'lock-in' to drive growth Apple could be fueling valuation growth through its huge stock buy-backs, as well as the company diversifying its product line and driving 'ecosystem lock-in,' such as by creating services like Apple Pay and Apple Care, Needham analysts said. The company also appears to be "maximizing revenue per AAPL user," they added, pointing to the firm's multiple subscription services, like Fitness + and Apple Music. Still, the company faces risks stemming from geopolitical tensions with China, and potentially weaker consumer demand as the economy continues to slow. iPhone users also aren't replacing their devices as frequently as they were before the pandemic, the firm noted, citing industry checks and conversations with former Apple employees. Needham reiterated its "buy" rating on Apple stock and raised its price target to $260 a share, implying 17% upside. Morgan Stanley: Big upgrade cycle coming Morgan Stanley's research team reiterated Apple as its "top pick", thanks to a large number of Apple users set to upgrade their devices. By the end of this fiscal year, there could be a record 700 million iPhones that are at least three years old, the bank estimated. The promise of Apple Intelligence, meanwhile, could help the firm sell as many as 235 million iPhones over the 2025 fiscal year, followed by 262 million iPhones in the 2026 fiscal year, analysts said. "Apple Intelligence is a clear catalyst for a multi-year product upgrade cycle," analysts added in a note. "Never in Apple's 40 year history has the iPhone installed base been so large (1.3b+ devices), replacement cycles been so extended (at 4.8 years), and a new technology been limited to such a small cohort of users (8% of the iPhone/iPad installed base) all at the same time." The bank's research arm reiterated its "overweight" rating on the stock and raised its price target to $273 a share, implying 23% upside. Oppenheimer: 'Dominating force' in AI Apple is poised to lead tech firms in the consumer AI space, Oppenheimer said. "We believe that Apple's introduction of Apple Intelligence will position the company as the leader in the consumer AI experience," strategists said in a note, adding that the company's AI initiatives could result in faster-than-expected revenue and earnings growth. "We believe the excitement over Apple Intelligence can potentially accelerate hardware replacement and enable market share gain for iPhone, iPad and Mac." Analysts reiterated their "outperform" rating on the stock and raised their price target to $250 a share, implying 12% upside. Barclays: Stock has room to fall Apple's financials results will likely look better starting in the September quarter, with the company on track to see 9% revenue growth in 2025, the European bank said. But investors are still waiting for Apple Intelligence to roll out before sentiment improves. Meanwhile, Apple's stock may not have much more room to climb, given how expensive shares are already priced, strategists added. "While numbers finally moving higher and hope for the AI iPhone will help sentiment, we see less scope for upside with the stock at a 30x+ p/e multiple," Barclays said, referring to the stock's high price-to-earnings ratio. "We do not think the iPhone16/AI features will be enough to drive a meaningful enough upgrade cycle to justify the valuation." The bank reiterated its "underweight" rating on the stock, but raised its price target to $187 a share, implying 16% downside.

Apple Q3 earnings on deck: Focus on China sales, AI-focused upgrades

Apple (NASDAQ:AAPL) is expected to show a 3% rise in third quarter revenue, when it reports results on Thursday, with investors focusing on China sales and iPhone upgrades incorporating artificial intelligence. Wall Street expects the Cupertino, California-based company to post EPS of $1.34 on revenue of $84.38 billion. Apple, in May, posted fiscal second-quarter results that were better-than-expected. Still, its revenue declined 4.3% as sales from China fell 8.1% year-over-year during the period, mainly as competition increased from rivals like Huawei. However, with the global smartphone and PC market recovery gaining momentum, most Wall Street analysts are optimistic, saying the tech giant's AI-focused upgrade cycle for its new iPhone series could give a boost to iPhone sales as well as other Apple devices like Macs and iPads. J.P. Morgan analyst Samik Chatterjee expects better than anticipated performance in China and other key regions, while TD Cowen analyst Krish Sankar said China share loss could be a headwind for iPhone revenue but expects a return to Y/Y growth by December quarter. "Despite the headwinds from macro and China share loss, early consumer interest in AI can accelerate iPhone and Mac back onto positive growth trends. Next iPhone launch event in Sep could be a catalyst," pointed out Sankar. He upped his sell-in forecast to 240M iPhone units for fiscal 2025. Similarly, Wedbush analyst Dan Ives said China is set to see growth once again starting with iPhone 16. Earlier in July, the China Academy of Information and Communications Technology also noted that shipments of foreign-based smartphones, including Apple's iPhone, in China jumped 10.9% in June year-over-year, according to a Reuters report. JPM expects Apple to reassure investors that the upcoming AI replacement cycle "earmarked to begin in earnest in FY25, and step-up further into FY26, is leveraging a more robust launchpad in FY24 with better-than-expected revenue drivers in iPhone as well as for the company in aggregate." The brokerage estimates Q3 revenue for Mac to $7.4 billion and iPad to $6.7 billion. Seeking Alpha analysts and Seeking Alpha's Quant ratings are cautious and rated the stock a Hold, while Wall Street analysts consider it a Buy. Over the last three months, EPS estimates have seen 19 upward revisions and six downward revisions, while revenue estimates have seen 19 upward revisions versus seven downward moves. The stock has gained over 13% so far this year, almost in-line with the 14% rise in the broader S&P500 Index.

Apple earnings preview: Growth potential linked to AI integration

China remains a critical metric for Apple's earnings, with analysts projecting a 2.6% fall in sales in the country. The world's largest company faces fierce competition from Chinese domestic phone makers, particularly Huawei. Apple is set to report its third-quarter earnings for the fiscal year 2024 after the US markets close on 1 August. The tech giant reclaimed its position as the world's largest company from Microsoft and Nvidia, with its market capitalisation standing at $3.36 trillion (€3.09 trillion) as of 30 July. Apple shares are up 17% year-to-date and have risen approximately 26% since its March quarter earnings release, thanks to the announcement of its largest-ever share buyback programme of $110bn (€191.6bn) and the long-awaited AI adoption. In the upcoming earnings report, investors will focus on two key metrics: the sales revenue in China and the development of Apple Intelligence. What lies ahead? According to several sources of consensus, the average forecast of Apple's third-quarter earnings revenue is $84.21bn (€77.52bn), up 3% from the year-ago quarter. Earnings per share are expected to be at $1.34 (€1.23), or an increase of 6.3% from last year. The estimated figure suggests that Apple will return to growth after the sales decline in the previous quarter. Sales in China may extend a decline China remains a critical metric for Apple's earnings, with analysts projecting a 2.6% sales decline in the country. According to research firm International Data Corp (IDC), iPhone shipments in China fell by 3.1% year-on-year in the second quarter, while Android phone sales rose by 11.1%. Apple faces fierce competition from Chinese domestic phone makers, particularly the top smartphone seller, Huawei. For the first time, Apple dropped out of the top five China smartphone sellers, while the local rivals Vivo and Xiaomi both recorded double-digit growth in the second quarter. Apple's market share in China shrank to 14% in the second quarter, down 2% from a year ago. Globally, Apple has also been losing market share to its Chinese rivals, with IDC data indicating that its market share fell to 15.8% in the June quarter from 16.6% a year ago. Apple Intelligence in spotlight Apple unveiled its AI plans at the company's Worldwide Developers Conference (WWDC24) in June, which boosted its shares surpassing Microsoft, and becoming the world's largest company again. Apple announced its partnership with OpenAI and referred to the AI services as Apple Intelligence, which integrates generative AI technology across its iPhone, iPad, and Mac. Investors are eager to see further AI developments in the upcoming earnings report. On Monday, Apple released the first version of Apple Intelligence with iOS 18.1, allowing developers to test the new features. The AI assistant is expected to enhance Siri, enabling the chatbot to generate emails and images. This advanced technology will only be available on newer handsets, starting with the iPhone 15 Pro, potentially driving a significant wave of handset upgrades. However, the testing period could be lengthy as Apple may have concerns about the stability of Apple Intelligence. Apple service to stay strong In the March quarter, the fastest-growing segment, Service revenue, reached $23.9bn, (€22.1bn), contributing to 26% of the overall revenue and significantly exceeding the estimated $23.27bn (€21.5bn). Apple Services, which include the Apple Store, Apple Pay, Apple TV+, Apple Music, Apple Arcade, and iCloud, have emerged as standout performers for the company. In the March quarter, the gross margin of the service segment surged to 75%, lifting Apple's overall gross margin to a record 47%. Wall Street expects Apple's gross margin to be just above 46% in the June quarter. Apple anticipates that overall sales will return to low single-digit growth, with its Services sales maintaining a stable pace of double-digit growth in the June quarter.

Apple's earnings are this week. Here's what to look out for. | Business Insider India

Apple will report third-quarter earnings on Thursday afternoon, the first official look at the company's performance since it announced its long-awaited artificial intelligence plans in June. The company's last results report was in May, and it all but avoided questions about AI. But since then, Apple has held its annual Worldwide Developers Conference, where it debuted Apple Intelligence and announced a partnership with ChatGPT. Now that the news is out, investors will be seeking further updates during the upcoming Q3 call -- and execs may be a lot less tight-lipped this time round. But AI isn't the only thing people will be listening out for. The Vision Pro headset, the iPhone's shaky performance in China, and its "services" growth were talking points in its last earnings call with investors -- plus its ongoing battles with government entities in the US and Europe. No doubt there will be questions on all those things, plus the rollout of its new lineup of iPads. Here's what we expect will be the highlights of Thursday afternoon's call. Expect questions about the Apple Intelligence delay Bloomberg reported Sunday that Apple Intelligence won't begin rolling out in September, as Apple first announced. It was expected to come out alongside the new iPhone and iOS 18, but will reportedly now be available in October. Although analysts said the delay is no big deal and shouldn't negatively impact iPhone 16 sales, investors might question which features will lead the rollout. Deepwater Asset Management analyst Gene Munster told Business Insider that the "most important point" related to Apple Intelligence will be how many features will be in that initial release -- and if Apple has developed new ones in the months since WWDC. "WWDC was almost two months ago, and in the world of AI, two months is like two years," Munster said. CEO Tim Cook will probably talk about China China was a hot topic during Apple's last earnings call, and it should be no different this time. "We're anticipating continued headwinds to iPhone sales from Chinese competition and slowing replacement cycles globally," William Kerwin, an analyst at Morningstar, told BI. CEO Tim Cook acknowledged in May that work needed to be done in China to help iPhones gain popularity over rivals like smartphone maker Huawei. "I think it has been, and is, the most competitive market in the world," Cook said during the Q2 call. The Wall Street Journal reported last Friday that Apple fell out of the top five smartphone shippers in China during the quarter as competitors like Vivo, Xiaomi, and Huawei experienced higher demand from local consumers. Cook said he was "very optimistic" about China in May; investors will want to hear more on Thursday. Updates on how devices launched this year are doing When Apple released its new iPad Air and iPad Pro models in May, analysts questioned how many Apple device owners, if any, would upgrade to the latest tablets. Unlike the iPhone, which Wedbush Securities' Dan Ives said is on track for a "golden upgrade cycle," iPad owners aren't usually rushing to get the latest model. And in February, the company debuted its first piece of new hardware in years with the $3,500 Vision Pro headset. While Cook told investors that it's "off to a good start," reviews have been mixed. More talk about its growth in "services" For Apple, services include subscriptions like Apple Music and Apple TV+, but in-app purchases and a multi-billion dollar deal that keeps Google as the default search engine on Safari are the main source of growth in the category. Apple talked about how well its services were doing in Q2, and Kerwin said analysts will be looking for continued "double-digit growth for the services business." Are you a current or recent Apple employee? Reach out to this reporter via email at [email protected] or Signal at @jordyhart.99.

Apple's earnings are this week. Here's what to look out for.

This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now. Have an account? Log in. Now that the news is out, investors will be seeking further updates during the upcoming Q3 call -- and execs may be a lot less tight-lipped this time round. But AI isn't the only thing people will be listening out for. The Vision Pro headset, the iPhone's shaky performance in China, and its "services" growth were talking points in its last earnings call with investors -- plus its ongoing battles with government entities in the US and Europe. No doubt there will be questions on all those things, plus the rollout of its new lineup of iPads. Here's what we expect will be the highlights of Thursday afternoon's call. Bloomberg reported Sunday that Apple Intelligence won't begin rolling out in September, as Apple first announced. It was expected to come out alongside the new iPhone and iOS 18, but will reportedly now be available in October. Although analysts said the delay is no big deal and shouldn't negatively impact iPhone 16 sales, investors might question which features will lead the rollout. Deepwater Asset Management analyst Gene Munster told Business Insider that the "most important point" related to Apple Intelligence will be how many features will be in that initial release -- and if Apple has developed new ones in the months since WWDC. "WWDC was almost two months ago, and in the world of AI, two months is like two years," Munster said. China was a hot topic during Apple's last earnings call, and it should be no different this time. "We're anticipating continued headwinds to iPhone sales from Chinese competition and slowing replacement cycles globally," William Kerwin, an analyst at Morningstar, told BI. CEO Tim Cook acknowledged in May that work needed to be done in China to help iPhones gain popularity over rivals like smartphone maker Huawei. "I think it has been, and is, the most competitive market in the world," Cook said during the Q2 call. The Wall Street Journal reported last Friday that Apple fell out of the top five smartphone shippers in China during the quarter as competitors like Vivo, Xiaomi, and Huawei experienced higher demand from local consumers. Cook said he was "very optimistic" about China in May; investors will want to hear more on Thursday. When Apple released its new iPad Air and iPad Pro models in May, analysts questioned how many Apple device owners, if any, would upgrade to the latest tablets. Unlike the iPhone, which Wedbush Securities' Dan Ives said is on track for a "golden upgrade cycle," iPad owners aren't usually rushing to get the latest model. And in February, the company debuted its first piece of new hardware in years with the $3,500 Vision Pro headset. While Cook told investors that it's "off to a good start," reviews have been mixed. For Apple, services include subscriptions like Apple Music and Apple TV+, but in-app purchases and a multi-billion dollar deal that keeps Google as the default search engine on Safari are the main source of growth in the category. Apple talked about how well its services were doing in Q2, and Kerwin said analysts will be looking for continued "double-digit growth for the services business."

Apple likely to post higher revenue as discounts aid iPhone demand in China

July 31 (Reuters) - Apple will likely report on Thursday that it returned to revenue growth in its fiscal third quarter as it won back some customers in China with big iPhone discounts and sold more high-margin iPads thanks to a refreshed design. Sales of the iPhone, which account for nearly half of Apple's revenue, are expected to have decreased by 2.2% in the three months ended June, a big improvement from the 10.5% decline in the second quarter, according to LSEG data. Analysts said the worst may be over for the iPhone. They expect a strong upgrade cycle for the iPhone 16 series likely to come in September after Apple said in June it was gearing up to introduce AI features across its devices. Under pressure from a resurgent Huawei in China, Apple had in May offered discounts of up to 2,300 yuan ($317) on select iPhone models. This helped narrow iPhone sales declines in the country to 3.1% in the April-June quarter, according to IDC, from a decline of 6.6% in the first three months of the year. "The company's fate is turning around in the region," said CFRA Research analyst Angelo Zino, adding that Apple's AI plans should appeal to customers in the feature-sensitive market. After lagging rivals Microsoft and Alphabet's Google in the AI race for months, Cupertino, California-based Apple unveiled plans to bring OpenAI's ChatGPT to its devices and burnish its suite of apps including Siri with new "Apple Intelligence" technology. The commentary helped Apple regain the crown of the world's most valuable company it had lost for a few days to Microsoft. Apple's shares have risen nearly 30% in the past three months, though a recent market selloff led by megacaps led to the stock slipping more than 7% from its July 15 record. "Apple's AI strategy announcements were very well received globally and helped improve the declining consumer perception of the brand and generate excitement," said Nabila Popal, research director with IDC's Worldwide Tracker team. "I won't be surprised if there was a spike in iPhone 15 Pro and Pro Max models in the April-June quarter - that are Apple Intelligence ready," Popal added. Overall, Apple's revenue is expected to have risen 3.3% in the third quarter from a year earlier, after a decline of 4.3% in the second quarter. IPad sales likely jumped 14.1%, the fastest growth since the holiday quarter of 2022, after Apple launched a new AI-focused iPad Pro and a larger iPad Air in May to revive demand for a product line that had languished for the past two years. Mac sales are expected to have ticked up 2.6%, while its wearables and accessories business likely continued its slump with a decline of 6%. The company's services business - including App Store and subscription services such as Apple TV and Music - likely grew 13.2%. Growth in the segment has outperformed the company's mainstay hardware business in recent years and the services unit now accounts for more than a quarter of Apple's revenue. However, the outlook for the division has been muddied by regulatory scrutiny. The European Union's antitrust regulator has accused Apple App Store of breaching the bloc's Digital Markets Act (DMA), which requires Big Tech to ensure a level playing field for rivals and give users more choice. The company is also facing three investigations under the DMA. "Apple's services business has been a key part of the bull thesis on the stock. Its growth is particularly important given the very high marginal contribution of the business," Bernstein analyst Toni Sacconaghi said. ($1 = 7.2513 Chinese yuan renminbi) (Reporting by Aditya Soni in Bengaluru; Editing by Sayantani Ghosh and Shounak Dasgupta)

Apple likely to post higher revenue as discounts aid iPhone demand in China

Apple will likely report on Thursday that it returned to revenue growth in its fiscal third quarter as it won back some customers in China with big iPhone discounts and sold more high-margin iPads thanks to a refreshed design. Sales of the iPhone, which account for nearly half of Apple's revenue, are expected to have decreased by 2.2% in the three months ended June, a big improvement from the 10.5% decline in the second quarter, according to LSEG data. Analysts said the worst may be over for the iPhone. They expect a strong upgrade cycle for the iPhone 16 series likely to come in September after Apple said in June it was gearing up to introduce AI features across its devices. Under pressure from a resurgent Huawei in China, Apple had in May offered discounts of up to 2,300 yuan ($317) on select iPhone models. This helped narrow iPhone sales declines in the country to 3.1% in the April-June quarter, according to IDC, from a decline of 6.6% in the first three months of the year. "The company's fate is turning around in the region," said CFRA Research analyst Angelo Zino, adding that Apple's AI plans should appeal to customers in the feature-sensitive market. After lagging rivals Microsoft and Alphabet's Google in the AI race for months, Cupertino, California-based Apple unveiled plans to bring OpenAI's ChatGPT to its devices and burnish its suite of apps including Siri with new "Apple Intelligence" technology. The commentary helped Apple regain the crown of the world's most valuable company it had lost for a few days to Microsoft. Apple's shares have risen nearly 30% in the past three months, though a recent market selloff led by megacaps led to the stock slipping more than 7% from its July 15 record. "Apple's AI strategy announcements were very well received globally and helped improve the declining consumer perception of the brand and generate excitement," said Nabila Popal, research director with IDC's Worldwide Tracker team. "I won't be surprised if there was a spike in iPhone 15 Pro and Pro Max models in the April-June quarter - that are Apple Intelligence ready," Popal added. Overall, Apple's revenue is expected to have risen 3.3% in the third quarter from a year earlier, after a decline of 4.3% in the second quarter. IPad sales likely jumped 14.1%, the fastest growth since the holiday quarter of 2022, after Apple launched a new AI-focused iPad Pro and a larger iPad Air in May to revive demand for a product line that had languished for the past two years. Mac sales are expected to have ticked up 2.6%, while its wearables and accessories business likely continued its slump with a decline of 6%. The company's services business - including App Store and subscription services such as Apple TV and Music - likely grew 13.2%. Growth in the segment has outperformed the company's mainstay hardware business in recent years and the services unit now accounts for more than a quarter of Apple's revenue. However, the outlook for the division has been muddied by regulatory scrutiny. The European Union's antitrust regulator has accused Apple App Store of breaching the bloc's Digital Markets Act (DMA), which requires Big Tech to ensure a level playing field for rivals and give users more choice. The company is also facing three investigations under the DMA. "Apple's services business has been a key part of the bull thesis on the stock. Its growth is particularly important given the very high marginal contribution of the business," Bernstein analyst Toni Sacconaghi said. ($1 = 7.2513 Chinese yuan renminbi) (Reporting by Aditya Soni in Bengaluru; Editing by Sayantani Ghosh and Shounak Dasgupta)

Apple's AI plan is turning investors into chillers

Apple's reveal of its AI strategy in June has sparked excitement and confidence in investors. Apple shares, which lagged at the start of the year, have jumped over 12% since before the announcement of its suite of AI tools, Apple Intelligence, during the Worldwide Developers Conference. Apple is set to report its fiscal third-quarter earnings on Thursday, but many of its numbers won't matter much to investors, according to Bank of America analyst Wamsi Mohan. Mohan said in a research note to investors Monday that "investors will mostly ignore" its sales figures and instead focus on executives' commentary on its upcoming AI-enabled iPhones as well as revenue growth in China. So far, Apple has clearly articulated an AI plan that's inspired investors' faith in its ongoing success. In contrast, Wall Street responded poorly to Google's vague commentary on how it will justify the tens-of-billions it's sinking into AI. But Apple's outline of its AI plans and goals during WWDC drove its recent stock rally, and similar commentary on Thursday would likely do the same. Apple could hit a couple snags, though. The company said this week that it's delaying the rollout of Apple Intelligence, pushing the debut date from September to October. And its China sales, which aren't suffering as drastically as they were at the beginning of the year, still face growing competition from Chinese smartphone maker Huawei. Apple has been growing in India, however -- and this could help make up the difference. Analysts polled by FactSet expect Apple's revenue to hit $84.4 billion in its upcoming quarterly earnings report, a 3% increase from the third quarter last year. Apple's expenditures are low compared to other tech companies spending big on AI. Google's costs totaled $13 billion in its recent earnings report and Meta and Microsoft are expected to rack up costs of $9.5 billion and $13.7 billion, respectively. Meanwhile, Apple is expected to report capital expenditures of $2.3 billion, according to FactSet estimates.

What You Need To Know Ahead of Apple's Earnings Report

UPDATE -- July 30, 2024: This article has been updated to reflect more recent analyst estimates and share price information, as well as news related to Apple Intelligence. Apple (AAPL) is set to report fiscal third-quarter earnings after the bell on Thursday, Aug. 1, with investors likely to be watching for sales results in the China region and updates related to artificial intelligence (AI). The iPhone maker is expected to report revenue of $84.44 billion, according to estimates compiled by Visible Alpha, which would represent about 3% growth from the year-ago period. Net income is projected to be $20.66 billion or $1.35 per share, an increase from the third quarter of 2023.