Bank of America Sticks With Apple as CEO Transition Looms

Apple's July 30 earnings call will mark the end of an era, as Tim Cook prepares to step down after 15 years as CEO. John Ternus, Apple's hardware chief, will take over leadership just as the company faces a period of operational and financial transition. For investors, this quarter's results are only part of the story-attention is shifting to how Apple will navigate margin pressures, product launch changes, and evolving market risks under new management.

Bank of America's Outlook

Bank of America is holding its buy rating and $380 price target on Apple stock ahead of the third-quarter report. The bank expects Apple to slightly outperform Wall Street's consensus, projecting $109 billion in revenue and $1.89 in earnings per share for the quarter, compared to consensus estimates of $108 billion and $1.87, respectively. That would represent 16% year-over-year revenue growth, near the upper end of Apple's own guidance.

iPhone sales remain the primary growth driver, with Bank of America forecasting more than 20% year-over-year revenue growth for the device. Services revenue is also expected to post double-digit gains, while gross margin is modeled at 48.2%, in line with company guidance. But the bank is already warning that the September quarter could be more challenging, as higher component costs and a staggered iPhone launch weigh on results.

Margin Pressures and Product Costs

Elevated memory chip prices are putting pressure on Apple's product margins. Bank of America estimates that product gross margins will fall by about 190 basis points in the June quarter compared to the previous quarter, and by another 280 basis points in the September quarter. This margin squeeze is expected to coincide with Apple's typical pre-launch slowdown, as consumers hold off on purchases ahead of new iPhone releases.

The bank sees these pressures as temporary. When Apple's new iPhone lineup-including a higher-priced foldable model-arrives in the fall, margins are expected to rebound in the December quarter. A potential $3 billion tariff recovery could also provide a one-time boost. Still, Bank of America cautions that the path through September may look weak on paper, and investors should be prepared for volatility.

Services and Revenue Timing

Apple's Services business continues to deliver strong profitability, with Bank of America modeling gross margins at 76.5% for the June quarter and expecting them to remain near 76% through year-end. However, App Store growth has slowed, rising just 3.2% year-over-year in Q3, down from 9.8% in Q2, based on SensorTower data cited in the bank's note. The bank expects iCloud and licensing revenue to offset this slowdown, and sees potential for company-wide gross margins to eventually reach 50% as Services becomes a larger share of the business.

This year, Apple is changing its iPhone launch strategy. The Pro, Pro Max, and foldable models will debut in September, but the standard iPhone and new iPhone Air are delayed until March 2027. This staggered release means some holiday sales will shift from the December quarter to the March quarter, potentially making Apple's fourth-quarter results look weaker than usual. Bank of America has already adjusted its estimates, projecting $106 billion in fourth-quarter revenue versus the Street's $114 billion consensus, with the launch timing as the main factor.

Leadership Change and Strategic Questions

Tim Cook's final earnings call is expected to draw close scrutiny from investors, not just for the numbers but for his comments on the CEO transition, the timing of the foldable iPhone, and Apple's artificial intelligence strategy. Cook will become executive chairman on September 1, while John Ternus, who briefly appeared on the last earnings call, will lead his first full call in October. The transition comes as Apple faces intensifying competition in China, regulatory scrutiny of its Google search deal, and questions about how it will monetize AI across its 2.5 billion active devices.

China remains a key risk, as Apple's market share faces pressure from domestic rivals like Huawei. The company's lucrative arrangement with Google, which pays Apple billions annually to remain the default search engine on Safari, is also under regulatory review. Meanwhile, Apple's partnership with Google to integrate Gemini into Siri is advancing, but investors are still waiting for clarity on how AI will drive new revenue streams or device upgrades.

For a broader look at how analysts are adjusting Apple stock targets ahead of earnings, see this coverage on HSBC's recent upgrade and price target increase.

For the quarter ended March 2026, Apple reported $90.8 billion in revenue and $23.6 billion in net income, according to its official filings. The company's Services segment contributed $23.9 billion, while iPhone revenue reached $51.3 billion. Apple's gross margin for the period was 45.6%, reflecting both product and services profitability. The company ended the quarter with $166.5 billion in cash and marketable securities.

Apple's evolving product launch schedule highlights how timing can affect reported revenue and investor expectations. When major product releases are delayed or staggered, sales that would typically boost one quarter may shift into the next, distorting year-over-year comparisons and seasonal patterns. For investors, understanding these timing effects is crucial when interpreting quarterly results, especially for companies with highly anticipated product cycles like Apple. This dynamic can also influence analyst estimates, stock price reactions, and management guidance throughout the year.