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

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. Photo by Godofredo A. Vásquez/AP Photo/Postmedia files

Article content

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.

Article content

Since the beginning of August, Apple’s stock is up more than 30 per cent and its market capitalization has risen from US$3 trillion to US$4 trillion. Shares were up 0.6 per cent in afternoon trading Thursday.

Article content

Article content

Article content

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 per cent over their respective first 10 days on the market in the United States and China.

Article content

Article content

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 seven per cent over the past three months, while revenue expectations are up 4.3 per cent.

Article content

“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 US$223 billion in assets. “But first we need to see confirmation that iPhone demand is strong.”

Article content

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.

Article content

Article content

“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 US$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.”

Article content

Article content

Tough Year

Article content

None of this should obscure the stock’s recent struggles. Apple shares are up less than nine per cent in 2025, well below the 23 per cent gain of the Nasdaq 100 Index. They just turned positive for the year last month.

Article content

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

Article content

“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.”

Article content

That’s why bulls need confirmation that Apple’s products are entering an upgrade cycle. 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.