Apple's Strong Q3 Earnings, Growth Prospects, and Strategic Investments Support Buy Rating

Apple's strong financial performance and growth prospects justify a Buy rating from William Power at Robert W. Baird, with a price target of $230. The company's Q3 revenue growth of 9.6% YoY, driven by iPhone sales, and a record number of active devices, support the rating. Apple's services segment also showed strength, with revenue surpassing estimates and growing 13.3% YoY. Strategic investments in AI and a strong balance sheet further justify the rating.

Title: Apple's Q3 Earnings Highlight Strong Financial Performance and Growth Prospects

Apple Inc. (AAPL) reported its third-quarter fiscal 2025 earnings, showcasing robust financial performance and growth prospects. The company's adjusted earnings per share (EPS) of $1.57 beat the Zacks Consensus Estimate by 10.56% and increased 12.1% year over year [1]. Net sales climbed 9.6% year over year to $94.04 billion, surpassing the Zacks Consensus Estimate by 5.75%.

Key Performance Highlights

# Revenue Growth
Apple's revenue growth was driven by strong performance across various segments. Product sales, which accounted for 70.8% of total sales, climbed 8.2% year over year to $66.61 billion. Services revenues grew 13.3% year over year to $27.42 billion, representing 29.2% of total sales [1].

# iPhone Sales
iPhone sales were a significant contributor to Apple's revenue growth, increasing 13.5% year over year to $44.58 billion and accounting for 47.4% of total sales. The company saw iPhone sales growth in every geographic segment, with double-digit growth in emerging markets such as India, the Middle East, South Asia, and Brazil. The strong demand for the iPhone 16 family drove this growth [1].

# Mac and iPad Sales
Mac sales of $8.05 billion increased 14.8% year over year, while iPad sales decreased 8.1% year over year to $6.58 billion. Both Mac and iPad sales accounted for 8.6% and 7% of total sales, respectively [1].

# Wearables, Home, and Accessories
Wearables, Home, and Accessories sales decreased 8.6% year over year to $7.4 billion, but still accounted for 7.9% of total sales. This segment saw a 0.85% increase compared to the Zacks Consensus Estimate [1].

# Geographic Sales
Greater China sales increased 4.4% year over year to $15.37 billion, Japan revenues grew 13.4% year over year to $5.78 billion, and Rest of Asia sales soared 20.1% year over year to $7.67 billion. Europe's sales grew 9.7% to $24 billion, while Americas' sales were $41.2 billion, up 9.3% [1].

Financial Strength and Outlook

Apple's gross margin expanded 20 basis points (bps) year over year to 46.5%, despite a sequential contraction of 60 bps due to tariffs. Operating expenses rose 8.3% year over year to $15.52 billion, driven by a 10.7% increase in research & development expenses and a 5.2% improvement in selling, general & administrative expenses. The operating margin expanded 40 bps on a year-over-year basis to 30% [1].

As of June 28, 2025, Apple's cash and marketable securities stood at $132.99 billion, while term debt was $91.78 billion. The company returned nearly $27 billion in the reported quarter through dividend payouts ($3.9 billion) and share repurchases ($21 billion) [1].

For the September quarter (fourth-quarter fiscal 2025), Apple expects net sales to grow mid to high single digits year over year. The company expects the Services year-over-year growth rate to be similar to that of the June quarter. Gross margin is expected to be 46-47% in the fourth quarter of fiscal 2025, including a tariff impact of $1.1 billion. Operating expenses are expected to be between $15.6 billion and $15.8 billion [1].

Conclusion

Apple's Q3 earnings demonstrate strong financial performance and growth prospects, driven by robust iPhone sales and a resilient Services segment. The company's strategic investments in AI and a strong balance sheet further justify its positive outlook. William Power at Robert W. Baird has given Apple a Buy rating with a price target of $230, reflecting the company's potential for continued growth and profitability.

References

[1] https://finance.yahoo.com/news/apple-q3-earnings-beat-estimates-170900644.html