Earnings Preview | Apple's Q3 results will be announced on Thursday: Will Cook take a bow, and can the iPhone support the final "big test"?

According to Zhitong Finance APP, Apple Inc. (AAPL.US) is expected to announce its financial report for the third quarter of fiscal year 2026 after the U.S. stock market closes on Thursday, July 30, 2026. According to Visible Alpha's consensus expectations, Apple's total revenue for Q3 has been slightly revised upward since late January, but remains flat compared to the previous quarter at $108.1 billion. Market sentiment seems to reflect stable iPhone demand, improvements in the Chinese market, and ongoing upgrades among U.S. users.

This financial report coincides with the Federal Reserve's interest rate decision and the "super event week" when tech giants are releasing their earnings, drawing significant market attention. Looking back at the previous quarter, Apple's revenue for the second fiscal quarter reached $111.2 billion, setting a historical high for the March quarter with a year-on-year growth of 17%; diluted earnings per share were $2.01, a year-on-year increase of 22%, both exceeding expectations. The iPhone 17 series contributed $56.99 billion in single-quarter revenue, and the services business also set a new record of $30.98 billion.

As we enter the third fiscal quarter, market expectations are becoming more moderate. According to Visible Alpha's consensus expectations, total revenue is expected to be around $108.1 billion, roughly flat compared to the previous quarter. Bank of America is more optimistic, predicting revenue could reach $109 billion and earnings per share of $1.89, both slightly above Wall Street consensus, with a year-on-year growth of about 16%, close to the upper limit of the company's previous revenue guidance of 14% to 17%.

Expected Moderate Growth Performance, iPhone Leading the Charge

The iPhone remains the core engine of growth. Since late January, the expected iPhone shipment for fiscal year 2026 has been revised upward to 258 million units, an increase of 18 million units compared to January 2025. Currently, the market expects third-quarter iPhone sales to reach $53 billion, a year-on-year increase of about 20%, with total sales for fiscal year 2026 reaching $251.2 billion, and further increasing to $274.4 billion in fiscal year 2027.

UBS pointed out that Apple is the only leading smartphone manufacturer that did not raise prices in the second quarter, which helped it gain market share in key markets such as the U.S., Europe, and China. Meanwhile, rising component costs—especially the price increase of storage chips—have instead boosted consumer preference for high-end models.

Overall, there remains significant uncertainty at the supply chain level, but driven by the replacement cycle, the iPhone business is expected to continue showing positive momentum this quarter and in the future.

It is worth mentioning that this will be a milestone power transition ceremony, as Tim Cook will host his last earnings call as CEO. Starting September 1, the new CEO, John Ternus, who comes from a hardware engineering background, will officially take over.

High-Margin "Ballast" Service Business May Slow Down

The high-margin services segment is expected to remain stable in the third quarter, at $31.4 billion. The gross margin for the services business exceeds 70%, far higher than the 37% gross margin for product business. Given the large existing user base, the market is highly focused on the company's statements regarding service business growth and the contribution of Apple Intelligence in fiscal year 2026 in the third-quarter report. Apple has been relatively cautious in its investments in AI infrastructure, with capital expenditures remaining stable Bank of America expects service revenue in the third quarter to grow by 14% year-on-year, noting that revenue from the App Store has slowed from 9.8% growth in the previous quarter to 3.2%, but strong performance from iCloud and licensing businesses is expected to offset this impact.

UBS stated that, on a constant currency basis, service revenue is expected to grow by about 13%, but growth potential is limited due to challenges with App Store revenue and payments related to Google search.

Apple Intelligence Will Be the Focus

The upgrade of Apple Intelligence features and the pace of new product releases are also focal points. Apple recently conducted a comprehensive upgrade of its AI strategy at WWDC26, and this financial report will serve as a litmus test for its commercialization and cost control.

Apple clarified at WWDC26 that while basic AI features are free, some high-load features (such as image generation and advanced Siri AI interactions) will have daily usage limits due to reliance on powerful private cloud servers. Users wishing to unlock higher limits must subscribe to the iCloud+ service (or the Apple One bundle that includes this benefit).

The unique "Capital-Light" AI approach is also worth noting. Giants like Microsoft, Meta, and Google are causing market concerns about profit margins due to tens of billions or even hundreds of billions in AI capital expenditures (CapEx), while Apple adopts a "light asset" strategy, using a hybrid architecture and external collaborations, with a model of "edge-first + private cloud as a supplement," sharing more complex search and generation requests through deep cooperation with external large models like Google Gemini.

Additionally, the crucial outlook for the "back-to-school season" and holiday sales peak will serve as important indicators for various business segments. At the same time, whether Apple will utilize its over $100 billion cash reserves for stock buybacks, increase dividends, or pursue acquisitions is also a point of interest.

Apple's stock price has risen 11.3% since May and 26.3% since January 2026. The market consensus expects a price-to-earnings ratio of 34 times for fiscal year 2027, with a target price of $337, implying a return rate of 3.5%. Whether the third-quarter report and performance outlook can validate the upgrade cycle and drive the stock price to outperform the market remains to be seen