Apple's Q3 Report: 3.9% Revenue Growth Expected, iPhone Demand Drives Optimism

Apple Inc. is scheduled to release its third-quarter financial report after the U.S. market closes on Thursday. Market expectations are for revenue of 89.1 billion dollars, a year-over-year increase of 3.9%, and earnings per share of 1.42 dollars, a year-over-year increase of 1.4%. Despite these projections, there is a notable divergence in opinions between market analysts and the broader market sentiment.

Analysts from Jefferies have reiterated their "hold" rating for Apple, setting a target price of 188.32 dollars. They anticipate that the iPhone shipment volume for June will be a key factor in the company's performance. This stance contrasts with the broader market sentiment, which appears to be more cautious about Apple's financial outlook. The discrepancy between the analysts' optimistic outlook and the market's more reserved stance highlights the complexity of predicting Apple's financial performance. While Jefferies' analysis suggests that the company's fundamentals remain strong, the market's cautious approach indicates that investors may be factoring in potential risks and uncertainties.

Jefferies analysts, led by Edison Lee, predict that Apple's June quarter performance will be robust due to strong iPhone demand. This prediction is supported by new data from major U.S. telecom companies, which show that device sales revenue increased by approximately 22% year-over-year, marking a significant acceleration from the 6% growth seen in the first quarter of 2025. This surge is attributed to consumer demand driven by pricing policies, benefiting brands like Apple, Samsung, and Motorola, which collectively accounted for 91% of U.S. smartphone sales in 2024.

Jefferies has also forecasted an 8% year-over-year increase in iPhone shipments for the June quarter, surpassing the estimates of 4% and 1.5% by Counterpoint and IDC, respectively. Additionally, Jefferies expects the prices of the iPhone 17 series to increase, although not enough to warrant a re-evaluation of the stock. The team predicts that the iPhone 17 Slim/Pro/Pro Max models will see a price increase of 50 dollars, while the base model will remain unchanged. This price adjustment is in response to an anticipated 20 to 25 dollar increase in the average bill of materials (BOM) cost for the iPhone 17, driven by tariffs and other factors.

Jefferies analysts note that if 40% of the iPhone 17 series sold in the U.S. are manufactured in China, the current tariff rates would increase costs by 8%. Even if Apple raises prices globally to offset these tariffs, the cost increase would still be around 2.5%, or approximately 25 dollars. Therefore, a 50 dollar price increase (excluding the base model) would barely cover the additional costs. The analysts also highlight that Apple plans to increase iPhone 17 production in India, with 18% of units to be manufactured there by the second half of 2025, rising to 25% by the first half of 2026, and potentially reaching 30% to 35% by the second half of 2026. The long-term goal is to produce 40% of iPhones in India to meet demand in the U.S. and India, while the remaining 60% will continue to be produced in China to serve other global markets.

Wedbush has maintained its "outperform" rating for Apple, with a target price of 270 dollars, expressing confidence in the company's ability to deliver strong financial results. Daniel Ives, leading the analysis, emphasizes that the market will closely watch Apple's performance, particularly the slight recovery in iPhone sales in China. Ives notes that this financial report is just a prelude to the September launch of the iPhone 17, and investors will be keenly interested in any insights into product prospects and demand expectations shared by CEO Tim Cook during the earnings call.

Ives and his team predict that the iPhone 17 will drive a significant increase in device sales as global users upgrade their devices. They estimate that out of the 1.5 billion iPhones currently in use, approximately 20% have not been upgraded for over four years. However, the team also raises concerns about Apple's artificial intelligence (AI) strategy, noting that the tech industry is focused on the commercialization of AI, a revolution that Apple has yet to fully engage with. A successful AI strategy could potentially add 75 dollars to Apple's earnings per share, but the team warns that investors and developers are growing impatient with Apple's lack of progress in this area. They urge Apple's management to address the AI-driven technological revolution or risk being remembered for a significant strategic error in tech history.