Apple Inc Set to Surpass Third Quarter Estimates Despite Margin Pressures and Launch Delays

Apple Inc is positioned to exceed consensus estimates for its fiscal third quarter, according to analysts at Bank of America, despite the firm adopting a more cautious stance on iPhone seasonality linked to a staggered product launch schedule.

The investment bank indicated that investor attention will concentrate on component cost inflation, the sustainability of gross margins, and the leadership transition following the conclusion of Tim Cook’s tenure as chief executive officer. Bank of America projects fiscal third quarter revenue of $109 billion and earnings per share of $1.89, surpassing Street estimates of $108 billion and $1.87. This represents revenue growth of 16% year on year, compared with Apple’s guidance range of 14% to 17%.

The bank noted that iPhone production plans, including those for Pro models, remain strong. However, analysts have incorporated a more conservative outlook owing to the phased rollout scheduled for this cycle. Pro and Pro Max models, alongside a foldable device, are set to launch in September, whilst the base model and Air variant will arrive in March. Higher pricing structures have also been factored into these projections.

Bank of America suggested that the market may not have fully accounted for this launch timing in current estimates. Regarding profitability, the bank models product gross margin declining 190 basis points sequentially in the June quarter to 36.8%, followed by a further 280 basis point decrease in the September quarter to 34.1%. The bank characterises this weakness as temporary, forecasting a recovery to 38.5% in the December quarter as new iPhones, including the foldable model, launch at elevated prices. A potential additional boost of approximately $3 billion from tariff recovery may also support margins.

Overall company gross margin is modelled at 48.2% for the June quarter, falling within Apple’s guided range of 47.5% to 48.5%. For the fiscal fourth quarter, Bank of America sits well below Street expectations on both revenue and earnings, forecasting $106 billion and $1.88 per share against consensus of $114 billion and $2.01. The bank attributes this divergence primarily to more conservative iPhone unit assumptions tied to the staggered launch.

On the services segment, Bank of America expects fiscal third quarter revenue growth of 14% year on year, consistent with guidance. App Store growth has decelerated, with SensorTower data showing 3.2% year on year growth in the quarter, down sharply from 9.8% in the previous quarter. The bank anticipates this softness will be offset by strength in iCloud and licensing revenues.

Bank of America reiterated its Buy rating on Apple with a price objective of $380, based on 37 times its calendar 2027 estimated earnings per share of $10.29. The bank has also raised its fiscal 2027 and 2028 earnings per share estimates to $9.91 and $10.89, respectively. Apple is scheduled to report fiscal third quarter results after market close on 30 July.