Apple Q3 earnings today: Analysts want updates on AI progress, iPhone demand, with the stock down 16%

Apple is poised to report its fiscal third-quarter earnings, with investors closely scrutinizing the company's AI strategy and the financial implications of tariffs, particularly as the stock has lagged, down 16% year-to-date. Analysts expect revenue of $89.3 billion and EPS of $1.43, seeking updates on AI progress—potentially including a Perplexity deal—and insights into supply chain shifts to India to offset tariff costs, which may lead to future iPhone price increases and impact margins. The report is critical, as a positive outcome could drive a significant stock rebound, similar to recent movements in Microsoft and Meta.

Analysis

Apple's upcoming fiscal third-quarter earnings report is a pivotal event, set against a backdrop of significant stock underperformance, with shares down 16% year-to-date. Investors are focused on two primary headwinds: a perceived lag in artificial intelligence strategy and the margin impact from geopolitical tariffs. Consensus estimates project revenue of $89.3 billion and EPS of $1.43, but the narrative will be driven by management's commentary on its AI roadmap and supply chain adjustments. Analysts are divided on the urgency of AI, with some, like Wedbush's Dan Ives, viewing a potential Perplexity acquisition as a crucial move to remain competitive, while Morgan Stanley's Erik Woodring argues Apple's core business is not materially threatened in the near term. To mitigate tariff costs, Apple has materially shifted production, with iPhones assembled in India now accounting for 44% of US imports in Q2, up from 13% a year prior. This strategic pivot, alongside a $500 million investment in US-based MP Materials, is critical for protecting profitability, though analysts from Jefferies and Bank of America anticipate future iPhone price hikes to fully offset cost pressures. The market's reaction will be heavily benchmarked against recent post-earnings rallies from peers Microsoft and Meta, heightening the stakes for Apple to deliver a convincing strategy.

Key Decisions for Investors

• Investors should scrutinize management's commentary for any definitive updates on its AI strategy, as a tangible plan or partnership announcement, such as with Perplexity, could serve as a major stock catalyst.
• Monitor forward guidance on gross margins closely for insights into how effectively the supply chain shift to India is mitigating tariff impacts, and listen for any discussion of future product pricing power.
• Given the stock's 16% year-to-date underperformance relative to peers, a position in Apple carries elevated event risk; a failure to address key AI and margin concerns could lead to further downside, while a strong report could trigger a significant relief rally.
• Pay attention to revenue figures from Greater China, estimated at $15.19 billion, as this remains a key variable for assessing demand and geopolitical risk.