This year hasn’t been an easy one for Apple. The company has faced increasing pressure to improve its artificial intelligence, especially after a disappointing Worldwide Developers Conference (WWDC).
The AI problem sparked rumors that Apple is considering buying Perplexity, but that didn’t happen. According to Reuters, the company is in talks with Google about using its Gemini AI to improve Siri.
In addition to the AI problem, iPhones, which make up a huge chunk of Apple’s revenue, haven’t changed much in many years, making Apple’s customers reluctant to upgrade.
But things are turning around, and Apple got some great news recently. Google will be able to continue to pay $20 billion annually to keep Safari as the default search engine.
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Apple Q3 revenue grows 10% to $94 billion year over year
On July 31, Apple (AAPL) reported its results for Q3 of fiscal 2025.
During the earnings call, CEO Tim Cook said iPhone revenue was $44.6 billion, up 13% from a year ago, adding that this growth was caused by the “incredible popularity” of the iPhone 16 family.
Here are the Apple Q3 earnings highlights:
- Total revenue of $94 billion, an increase of 10% year-over-year
- Gross margin of $43.7 billion, an increase of 10% year-over-year
- Net income of $23.4 billion, an increase of 9% year-over-year
- Earnings per share (EPS) of $1.57, compared to $1.4 in Q3 2024
“We are very pleased with our record business performance for the June quarter, which generated EPS growth of 12 percent,” stated Apple CFO Kevan Parekh.
“Our installed base of active devices also reached a new all-time high across all product categories and geographic segments, thanks to our very high levels of customer satisfaction and loyalty,” continued Parekh.
Apple launches new products
On Sept. 9, Apple launched the new iPhone 17 line and the new iPhone Air. The company also released new versions of Watch and AirPods with improved features.
“The company’s new iPhone 17, iPhone 17 Pro, and iPhone 17 Pro Max now start at 256GB of storage, double the starting storage of the previous generation. Apple says that it’s offering these devices at ‘the same price’ as the previous generation, but the iPhone 17 Pro will see a tacit price increase because of the increased starting storage,” writes Noah Weidner for TheStreet.
More Tech Stocks:
- Analysts turn heads with Nvidia rival’s stock target after earnings
- Analysts unveil surprising Dell stock target after slump
- AI stocks face a reality check after a $1.5 billion implosion
- Analysts revamp Meta stock outlook before Connect conference
- Bank of America updates Dell stock outlook on CFO transition
Of all the products and features, one that stands out is AirPods 3 Live Translation. It reminds me how close we might be to developing a universal translator from “Star Trek.” We will see how good it is in practice once they hit the shelves on Sept. 19.
Bank of America analysts raise Apple stock target price
Following the launch of the latest iPhone line, Bank of America analyst Wamsi Mohan and his team updated their opinions on Apple shares.
The analysts said their buy rating for Apple is based on expected strong iPhone upgrade cycle in fiscal years 2025 and 2026, higher growth in services revenue, higher margins from more internally developed silicon, continuing capital returns, and risk around legal issues being manageable.
Analysts noted downside risk factors for Apple:
- Weaker iPhone cycle on consumer spending risk
- Weaker near-term services trajectory
- iPads/Macs reverting to pre-Covid levels
- Stronger dollar
- Antitrust lawsuit
- Potential trade conflicts, tariffs
Upside risks include:
- Stronger sales of Pro iPhone models
- Potential new products (AR/VR) and services
- Stronger than expected iPhone cycle
- Tailwinds from lower memory costs
- Faster-than-expected recovery in emerging markets
Mohan reiterated a buy rating and the target price of $270, based on approximately 32 multiple his estimate for earnings per share of $8.40 for calendar year 2026, which compares to the five-year historical range of 16 to 34 (median 27).
He stated: “We believe a multiple at the higher end of the historical range is justified given a multi-year upgrade cycle, large cash balance, and opportunity to diversify into new end markets, increasing mix and diversity of services.”
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