Tim Cook’s Final Earnings Call Could Send Apple Stock to Nearly $400

Apple (AAPL) is set to report its fiscal third-quarter earnings this week, and it is once again the largest company on Wall Street. Excitement and fear are brewing as this earnings release will show both the impact of new releases and rising component costs.

Bank of America expects things to go well due to iPhone build plans. Apple is reportedly working on foldable iPhones and an even more expensive MacBook model, with existing MacBooks costing more.

BofA likely expects these new releases and price increases to somewhat offset component cost increases and keep Apple's growth trajectory stable. That said, analysts aren't bullish across the board. This will be Tim Cook's last earnings call as CEO. Investors want to see Apple keep its magic even after Cook's departure, but that's yet to be seen.

What the Market Expects From Apple

BofA says investors are watching cost inflation, gross margin durability, and, of course, Cook's departure. The first two are what the earnings call will show clearly. Apple must show it can still sell products at a premium despite rising component costs. That means keeping margins growing or at least steady for now.

Memory chip prices remain elevated industry-wide; BofA models product gross margins dropping about 190 basis points sequentially in June. That's not too big of a drop, and Apple can explain its way out of it, especially if earnings and sales rise significantly.

Margins should easily recover in December with launches of higher-priced iPhones and tariff recovery.

BofA models revenue of $109 billion and EPS of $1.89, versus a consensus of $108 billion and $1.87, up 16% year-over-year (YoY), a hair below the upper end of the guidance range at 17%. iPhone revenue is expected to climb more than 20% YoY, with overall gross margin modeled at 48.2%.

Services revenue is projected to grow 14% due to iCloud and licensing income. Services gross margins should come in at ~76.5% for June and hover around 76% for September and December.

Apple Products are Getting More Expensive

Apple products are no longer a luxury like they were a decade ago. Price increases have been rare from Apple and have trailed general inflation and income increases, and almost everyone can own an iPhone.

That may change very soon due to rising component costs. Apple has to compete with dozens of AI companies while sourcing its components, and while long-term partnerships have made this easier, it's becoming more difficult. Apple is known for its prolific bargaining with manufacturers to bring prices down as much as possible and boost the bottom line. It worked five years ago when manufacturers didn't have many customers to sell to, but that no longer works today.

Companies are scrambling to get their hands on components, and it was only a matter of time until these component costs spilled over into consumer markets. This year will be the year when Apple starts passing those costs down.

What You Need to Watch

Apple needs to balance margin protection with growth. If it passes too much of these component costs to end consumers, it can massively tank its margins. Consumers are not enterprises, and a good chunk of people will skip upgrading their iPhones if it starts to cost $1,000+ instead of $799.

Apple is shifting its base iPhone release window, meaning no standard base iPhone 18 will debut in September 2026 alongside the Pro series. However, the Pro and Pro Max models are expected to cost $100-$200 more.

Price hikes are yet to start across the board for Apple's lineup, so you'll have to wait two to three quarters to see their full impact on Apple's top and bottom lines.

Where Analysts See AAPL Stock

BofA sees AAPL stock at $380, which is a 13% upside from the current price. Considering most mega-cap stocks are either down or barely up so far this year, a 13% gain from here is quite bullish. In fact, the highest price target on AAPL stock is $20 higher at $400.

Apple is the only mega-cap today that isn't going all-in on AI. Management has been measured, so I do expect meaningful gains from AAPL stock even if all the AI stocks correct. I'd prepare for a 1-3% beat on both lines.