July 30 is Tim Cook’s last earnings call as Apple’s CEO. He’s been running the company since 2011, and when he gets off that call, John Ternus takes over. That alone makes this quarter worth paying attention to, beyond the usual revenue-and-margins conversation.Bank of America published its preview note ahead of the July 30 report and kept its buy rating and $380 price target. The bank expects Apple (AAPL) to beat Wall Street’s numbers for the quarter. But the more interesting part of the note isn’t about June. It’s about what comes next.Bank of America reiterates buy on Apple stock ahead of Q3 earningsBank of America analyst Wamsi Mohan models fiscal third-quarter revenue of $109 billion and earnings per share of $1.89, both slightly above the Street consensus of $108 billion and $1.87, as TheStreet reported. That would put revenue growth at 16% year over year, near the top of Apple’s own guidance range of 14% to 17%.iPhone demand is driving most of it. The bank expects iPhone revenue to climb more than 20% year over year in the quarter. Services continues growing in the double digits. Gross margin is modeled at 48.2%, right in the middle of Apple’s guidance range of 47.5% to 48.5%.The June quarter looks fine. It’s the September quarter that Bank of America is already flagging as the one to watch.Apple gross margins face near-term pressure from component costsMemory chip prices are still elevated across the tech industry, and Apple isn’t immune. In the June quarter, the bank models product gross margins dropping roughly 190 basis points compared to the previous quarter. In the September quarter, that decline gets worse, another 280 basis points down, as higher component costs hit at the same time the company goes through its typical pre-launch slowdown before new iPhones ship.More Apple:Apple stock move vindicates Palantir CEO warning for AI industryApple’s iPhone cost problem reveals AI’s hidden billApple’s 2027 hardware refresh sends Wall Street a warningThe bank sees this as temporary. When the new iPhone lineup hits in the fall, including the foldable model coming at a higher price point, margins are expected to recover sharply in the December quarter. A potential $3 billion tariff recovery benefit could help, too. But the path through September is going to look ugly on paper, and Bank of America is calling it out directly so investors aren’t caught off guard.Services margins are a different story. The bank models Services gross margins at 76.5% for the June quarter and holding steady around 76% through the rest of the year. One thing worth watching: App Store growth slowed sharply, coming in at 3.2% year over year in Q3, down from 9.8% in Q2, according to SensorTower data cited in BofA’s note. The bank expects iCloud and licensing to offset that weakness. Over time, as Services becomes a larger share of Apple’s overall revenue mix, the bank sees potential for company-wide gross margins to eventually reach 50%.Apple’s staggered iPhone launch will shift seasonal revenue patternsThis is probably the most important operational change Bank of America is flagging. Apple is not releasing all its new iPhones at the same time this year.The Pro, Pro Max, and foldable models are coming in September as expected. But the standard iPhone and the new iPhone Air are being pushed to March 2027. That’s a meaningful departure from how Apple has historically launched its lineup, as TheStreet reported.Here’s why that matters for investors tracking the numbers. Historically, Apple’s December quarter has been its biggest because the whole iPhone lineup ships in the fall and drives a surge in holiday sales. If half the lineup doesn’t ship until March, some of that December quarter revenue moves into the March quarter instead. The September and December results could look weaker than investors are used to seeing, while early 2027 gets a boost it typically wouldn’t.Bank of America is already reflecting this in its estimates. It models fourth-quarter revenue of $106 billion versus the Street consensus of $114 billion. That’s an $8 billion gap, and the staggered iPhone launch is the main reason.
This is probably the most important operational change Bank of America is flaggingSheldon/Getty Images
Tim Cook’s final earnings call and the Apple CEO transitionThe July 30 call is historic in a quiet way. Tim Cook has been Apple’s CEO for 15 years. He took over from Steve Jobs in 2011 and oversaw its growth into the world’s most valuable company. On Sept. 1, he becomes executive chairman. John Ternus, who led Apple’s hardware engineering, takes over as CEO, according to CNN.Ternus was on the Q2 earnings call briefly, saying there was “an incredible roadmap ahead.” He’ll lead his first full earnings call in October. What Cook says on July 30 about the transition, the foldable iPhone launch timing, and Apple’s AI direction will be dissected closely because it’s the last time investors get to ask him those questions in that context, according to Fox Business.What Apple investors are watching on China, AI, and the Google dealThe June quarter result isn’t really the story this time. Bank of America’s note makes that clear. The questions investors are lining up are bigger than whether Apple beats by a few cents.China is one of them. Domestic competition from Huawei and other Chinese smartphone makers has been intensifying, and Apple’s market share there has faced real pressure. Any commentary from Cook on demand trends in China will move the stock.The Google search deal is another. Apple earns billions every year from Google for making it the default search engine on Safari. That arrangement is under regulatory scrutiny, and the rise of AI assistants is starting to shift how people search. If that revenue stream is at risk, it affects Apple’s Services growth story in a meaningful way.And then there’s AI. Apple has 2.5 billion active devices and a partnership with Google to integrate Gemini into Siri. The capabilities are improving. But investors still don’t have a clear answer on how Apple plans to actually make money from AI. Whether that drives upgrades, expands subscription revenue, or creates something entirely new is the question the company hasn’t fully addressed.Related: Top analyst resets Apple stock price target ahead of earnings