Apple's $1 trillion rally hangs on earnings matching iPhone optimism

by Ryan Vlastelica

Apple Inc. has been on a tear in the stock market over the past few months, as iPhone optimism powers the shares to record highs. Investors will get a sense of whether that enthusiasm was warranted when it reports earnings after the bell Thursday.

Since the beginning of August, Apple’s stock is up more than 30% and its market capitalization has risen from $3 trillion to $4 trillion. Investors are encouraged by strong sales of the iPhone 17 as phone prices rise. An analysis from Counterpoint Research shows the iPhone 17 series outsold the iPhone 16 by 14% over their respective first 10 days on the market in the US and China. 

That appears to confirm the anecdotal indications of strong demand, at least initially. This is key because the iPhone accounted for more than half of Apple’s overall revenue in its previous fiscal year, which runs from September to September. Estimates for Apple’s quarterly earnings have jumped 7% over the past three months, while revenue expectations are up 4.3%. 

“These estimate revisions signal that analysts are expecting an earnings beat and that we could see a big move in Apple over the rest of the year,” said Randy Hare, director of equity strategy at Huntington National Bank, which has $223 billion in assets. “But first we need to see confirmation that iPhone demand is strong.” 

Perhaps more importantly, this year’s progress is expected to be a prelude to two even bigger developments that are coming around the corner: a foldable iPhone and enhanced artificial intelligence features.

“Apple stock always works best during the up part of an iPhone cycle, and right now it seems like we have three drivers of growth: people replacing older phones, higher prices, and more AI features that will be materializing going forward,” said John Belton, portfolio manager at Gabelli Funds, which has $35 billion in assets. “This suggests the growth runway could be longer than we thought not too long ago, and it seems like a fundamental sweet spot to be in.”

Tough Year

None of this should obscure the stock’s recent struggles. Apple shares are up just 7.7% in 2025, well below the 24% gain of the Nasdaq 100 Index. They just turned positive for the year last month. 

But that degree of underperformance also means the latest rally could have room to keep running on the back of strong results.

“If it surprises to the upside, that will get more people interested because the stock has trailed this year,” Belton said. “If it gets AI right, that could lead to further upside.” 

That’s why bulls need confirmation that Apple’s products are entering an upgrade cycles. Last quarter, Apple reported its fastest quarterly revenue growth in more than three years, in part due to iPhone strength. And last week, Loop Capital put a buy rating on the stock based on this thesis.  

Apple’s results come amid a busy week for tech. Microsoft Corp., Alphabet Inc. and Meta Platforms Inc. reported after the bell on Wednesday, with Alphabet climbing in post-market trading on better than expected sales, while Meta and Microsoft disappointed. Amazon.com Inc. joins Apple in reporting on Thursday.

However, Apple is unique among the biggest technology firms. It’s higher valued, slower growing and isn’t spending as aggressively on AI — which also explains why it doesn’t have much to show in the way of AI products.

The stock’s recent rally suggests investors have elevated expectations for Apple. It trades at 33 times estimated earnings, well above its 10-year average of roughly 22, making it the most expensive of the so-called Magnificent Seven stocks, save for Tesla Inc. 

It’s Apple’s tepid growth compared to its Big Tech peers that brings the valuation into question. The company is expected to show 6.2% revenue growth in its last fiscal year and is projected to hold that pace in fiscal 2026, according to data compiled by Bloomberg. That lags the overall tech sector’s expected revenue growth of more than 14% in 2025 and 13.6% in 2026, per Bloomberg Intelligence.

“I don’t love Apple, since it is expensive relative to the growth profile, but it is still worth having in a portfolio and it can keep working higher so long as it keeps beating estimates,” Gabelli’s Belton said. “Expectations are high, and we have to hope they’re high for a good reason.”

Tesla Inc. shares have more than doubled from their April low, with sentiment toward the stock buoyed by AI hopes. The shares are inching toward a fresh all-time high, their first this year, as Elon Musk outlines his AI vision for the EV maker.

Top Tech Stories

• The largest technology companies are betting on an AI future powered by gigantic complexes of data centers filled with humming servers.
• Microsoft Corp. is still suffering from a computing capacity crunch despite massive spending on data centers, a scenario that weighed on the company’s closely watched Azure cloud unit.
• Artificial intelligence startup OpenAI is preparing to file for an initial public offering as soon as next year that could give the company a market capitalization of $1 trillion, Reuters reported Wednesday, citing unidentified sources.
• California Public Employees’ Retirement System, the largest public pension plan in the US, is planning to vote against Elon Musk’s $1 trillion Tesla Inc. compensation agreement, delivering a setback for the company’s plan to award one of the most lucrative pay packages in corporate America.
• Warner Bros. Discovery Inc. Chief Executive Officer David Zaslav hosted a town hall meeting for employees on Wednesday and said the board would need a higher bid to justify a sale of the company, according to people who heard his comments.

Earnings Due Thursday      

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