"Protection Against AI on Wall Street": What the Market Expects from Apple's Report

Wall Street’s skepticism toward big tech companies’ significant spending on artificial intelligence has made Apple the stock market’s star performer among the largest U.S. tech companies this year, according to Bloomberg. Since the start of 2026, the iPhone maker’s stock has risen nearly 22%. The company’s third-quarter earnings report, which will be released on Thursday after the market closes, could both reinforce Apple’s status as “a sort of AI safe haven” on Wall Street or remind investors of the challenges the company faces.

According to LSEG data cited by Reuters, in the company’s third fiscal quarter, which ended on June 30, analysts expect Apple’s revenue to have grown 15.5% year-over-year to $108.65 billion—slightly less than in the first three months of the year, but still potentially the best third-quarter result since 2021. The company’s net income, meanwhile, is forecast to increase by 18% compared with the same period last year.

However, these positive expectations are overshadowed by forecasts for the second half of the year, Bloomberg notes. Analysts believe that the growth rates of these metrics will soon slow to single digits. One of the main risks for Apple remains a decline in business margins. Bloomberg reports that the gross margin is expected to have fallen to 47.9% in the past quarter from 49.3% a quarter earlier, and the operating margin risks continuing to decline and turning negative by the end of 2026. This decline is directly linked to the artificial intelligence boom: massive investments by the tech sector in AI are driving up demand and prices for components, which inevitably impacts the company’s costs.

It’s also noteworthy that Apple has largely stayed out of the AI investment race. A year ago, the company was criticized for this, and its stock lagged behind major AI investors, such as Alphabet, and chipmakers. But now the momentum has shifted, and Apple’s strategy has become a source of strength, notes Bloomberg. In 2026, the company’s stock is on the rise: they have gained nearly 22% since the start of the year (with about 15% of that growth coming in July alone), outperforming the other members of the “Magnificent Seven” by a wide margin. The company has also regained its status as the world’s most valuable company: over the past few days, its market capitalization has repeatedly surpassed the $5 trillion mark.

The upcoming earnings report will also be Tim Cook’s last as Apple’s CEO. According to Business Insider, he is leaving the company as its undisputed leader: since 2011, when Cook took the helm, Apple’s market capitalization has grown by $4.6 trillion, and its stock has soared by 2,400%.

Business Insider reports that, in the upcoming earnings report, investors will be concerned about three main issues in addition to the numbers themselves. First and foremost, the market wants to know whether Apple will be able to continue protecting its profit margins amid a memory chip shortage without raising iPhone prices (in late June, the company had already announced price increases for a number of MacBook and iPad models due to rising component costs).

In addition, it is important for market participants to ensure that the new iPhone 17 lineup will be in demand—Wall Street expects Apple’s sales to grow precisely because of it. Finally, investors will be watching Apple’s recovery in China to assess how resilient the iPhone maker will prove to be in the face of competition from local rival Huawei.

The margin issue is particularly acute, as last month’s rally has made Apple shares extremely expensive, Bloomberg adds. The stock is trading at a price-to-earnings (P/E) ratio of 35 based on projected earnings for the next 12 months, which is close to the high set in January 2008, — it is also significantly higher than the iPhone maker’s long-term averages and represents a substantial premium to the Nasdaq 100’s P/E ratio.

"For Apple to maintain its current valuation, absolutely everything has to go perfectly, and any hiccup in the earnings report or during the earnings call could lead to a decline," warns Peter Andersen, chief investment officer at Andersen Capital Management.

In addition to the high valuation, Apple’s market capitalization surpassing the $5 trillion mark could also signal an imminent decline in its stock price, Bloomberg notes. “Every time Apple has crossed a new trillion-mark milestone, its stock has ‘underperformed the S&P 500 index over the following 6 and 12 months,’” wrote Baird analyst William Power.

Another risk to Apple’s stock price is the continued outflow of capital from AI-related companies, Bloomberg adds. If market sentiment improves and AI stocks come back into favor, Apple will almost certainly feel the pressure. “Apple has indeed benefited from the shifting trends in the tech sector, and it’s reasonable to assume that if the pendulum swings back—toward AI—the company could be very vulnerable,” said Dan Morgan, a portfolio manager at Synovus Trust. “If the results don’t exceed expectations, the company could suffer serious losses,” he added.

Ahead of its earnings report, Apple shares are down 1.8%. Nevertheless, most Wall Street analysts view the company’s outlook positively: of the 33 analysts who cover the iPhone maker’s stock, 33 recommend buying, 14 recommend holding, and four recommend selling.

This article was AI-translated and verified by a human editor