Analysts expect Apple’s revenue to come in at $84.419 billion and adjusted net income to be $20.67 billion. Adjusted earnings are likely to be $1.344 per share, according to Bloomberg's unanimous expectations.
Apple is expected to report its fiscal Q3 2024 earnings on Aug 1 after market close. Apple’s overall performance can be attributed to its increasing focus on AI, which has made analysts more optimistic about its future prospects.
The recently held WWDC revealed Apple Intelligence, a personal intelligence system combining generative models with users’ personal context, has generated significant optimism about its prospects. The upcoming AI-enabled iPhone 16 is expected to boost device sales in the upcoming quarters.
Q3 Fiscal Year 24 Earnings Outlook
Analysts expect Apple’s revenue to come in at $84.419 billion and adjusted net income to be $20.67 billion. Adjusted earnings are likely to be $1.344 per share, according to Bloomberg's unanimous expectations.
Previous Quarter Review
On May 2, Apple reported its Q2 results. Its EPS of $1.53 exceeded Wall Street expectations of $1.51. The company’s revenue was $90.75 billion, beating Wall Street forecasts of $89.99 billion.
Its services revenue rose 14.2% year-over-year to $23.87 billion, a record. Meanwhile, iPhone sales fell 10.5% year over year. AAPL shares closed up more than 2% on the day the results were released and have been on an uptrend since then.
iPhone To Be Key Apple Earnings’ Driver
The iPhone is projected to be a key driver of this performance, with estimated sales of approximately 44 million units, leading to $39.9 billion in revenue, surpassing the consensus of $38.9 billion. Strong performance in China and other key regions is expected to contribute significantly to these numbers, as indicated by several third-party data providers that have reported a rebound in units sold over the past two months.
Looking ahead to the fourth quarter, JPMorgan analyst Samik Chatterjee forecasts revenue of $95.5 billion and earnings per share of $1.62, both ahead of the consensus estimates. This projection marks the second consecutive quarter of year-over-year revenue growth, following a decline earlier this year.
The iPhone, Services, and Mac segments are expected to lead the charge, while the Wearables, Home, and Accessories segment might experience some decline.
Consequently, we see little risk of Apple not being able to meet 3Q consensus total sales growth estimates and anticipate management to point to similar growth in 4Q. We expect upbeat commentary about the initial reception from the developer community on recent AI initiatives that are core to the next iPhone launch.
Meanwhile, our most recent Apple survey suggests low consumer interest in recently launched AI features, and though this study shows no immediate catalyst for iPhone growth next year, we envision at least a 5% increase in unit shipment for fiscal 2025, fueled by our thesis of an improvement in China.
AI is Apple’s Next Ace
According to Chatterjee, Apple is in a strong position to leverage this upcoming AI cycle, particularly through its iPhone and overall revenue performance.
"We expect Apple to reassure investors that the upcoming AI replacement cycle earmarked to begin in earnest in FY25 (Sep-end), and step-up further into FY26, is leveraging a more robust launchpad in FY24 with better than expected revenue drivers," says Chatterjee.
He expects a revenue beat for both iPhone sales and the company’s total revenue, which could ease investor concerns about Apple’s premium valuation multiple. For the third quarter, Chatterjee anticipates Apple’s revenue to reach $85.3 billion, slightly above the consensus of $84.4 billion. Earnings per share are expected to be $1.38, compared to the consensus of $1.34.
While Apple’s stock has rallied in recent months, Chatterjee sees room for further upside. He believes that the AI cycle presents untapped opportunities, particularly in improving margins, increasing iPhone volumes, and potentially extending the replacement cycle beyond FY26.
Chatterjee believes there is untapped potential within Apple’s AI strategy. He outlines three key areas that investors might be underestimating:
Margin Boost: The preference for premium iPhones among early adopters has historically led to impressive gross margin improvements, and this trend could continue despite investor concerns about component costs.
Volume Expansion: The AI-driven upgrade cycle is not confined to North America. Apple's reach could extend globally, driving volumes beyond expectations and marking a departure from the patterns seen in the 5G cycle.
Prolonged Growth: With leading-edge AI features slated for iPhones post-FY26, Apple might witness an extended period of growth, possibly outstripping current expectations.
As Chatterjee states, “Our Dec-2025 price target of $265 only assumes a 26x earnings multiple on CY26 estimates as they already embed the tailwinds of the AI replacement cycle.”
With these factors in play, Apple’s upcoming earnings release could be the spark needed to propel its stock to new heights.
