Apple shares down ahead of the earnings 📉Will iPhone support the company?

Apple (AAPL.US) rounds out the Big Tech earnings week with elevated stakes: markets are highly sensitive to CAPEX and AI narratives after Microsoft’s sell-off. But Apple’s approach is different — less build-out of proprietary AI infrastructure, more partnerships, and monetization through its ecosystem. Over the past 12 months, the stock has lagged much of Big Tech, gaining just under 7%.

Market expectations

• Revenue: approx. $138.4–$138.5B (a record quarter versus the prior peak of $123.4B in fiscal Q1 2025; ~10–12% YoY, the strongest jump in years)

• EPS: approx. $2.67 (vs $2.40 a year ago, or ~+11% YoY)

• Gross margin: the market is focused on 47–48%

• iPhone revenue: approx. $78–$80B (>12% YoY)

• Services revenue: approx. $30B (~14% YoY)

These are numbers Apple doesn’t just need to “meet” — ideally it has to beat them, because the bar is high. The market’s reaction will ultimately hinge on the mix: iPhone performance, forward guidance, and the AI storyline. UBS has flagged that rising memory costs may not hit fiscal Q1 results meaningfully, but could show up in guidance for upcoming quarters — and that’s the type of risk markets often punish faster than a simple EPS miss.

iPhone 17 and the “supercycle”

This quarter covers the critical holiday selling season, and Wall Street wants confirmation that the upgrade cycle is accelerating — particularly among users with devices older than four years. The headline print could be solid, but if iPhone commentary sounds merely “okay,” the stock may struggle to find upside momentum.

What the Street is really looking for between the lines:

• whether demand skewed toward higher-margin Pro models,

• whether the upgrade cycle is genuinely speeding up,

• whether Apple is successfully activating a massive installed base of 300M+ iPhones older than four years.

The market mechanism is straightforward: if iPhone comes in below expectations, even strong EPS may not save the stock.

China

China has been a battleground for Apple — intense competition (Huawei and others), mixed macro conditions, and highly price-sensitive demand. At the same time, there are signs the picture may be improving. According to Counterpoint, Apple may have captured over 20% market share in China in Q4 — a potentially meaningful signal. If Apple confirms a rebound in Greater China revenue, markets could interpret it as removing a major overhang for the 2026 investment thesis.

Services

This is the segment that justifies Apple’s valuation premium. If Apple delivers steady, double-digit Services growth, the “resilience” narrative strengthens. If there’s even a hint of deceleration, the reaction could be sharp. At roughly 30x forward earnings, Apple cannot afford a soft read-through in this segment — even minor slowing is likely to be treated as risk.

AI: “Apple Intelligence”, Siri, and Gemini

This is where specificity matters. Apple needs to lay out a plan: what changes in Siri, what arrives in the spring and at WWDC, and how the company intends to monetize the AI layer (hardware vs Services vs ecosystem). Apple is positioning AI as an ecosystem feature, with Siri as a central control point.

The market wants concrete answers in three areas:

• how adoption of Apple Intelligence is tracking,

• how Apple plans to monetize it (device-led vs services-led),

• what the Siri roadmap looks like and what the Google Gemini partnership changes in practice.

Apple has to show it can translate AI into: a stronger upgrade cycle, higher iPhone pricing (mix/ASP), higher ecosystem retention, and potentially a new Services revenue stream. Ideally, results for the last quarter of the prior calendar year would already hint that AI is beginning to move the needle.

Apple stock (D1)

Recently, the stock stabilized around the EMA200 (red line). However, the chart is also forming a potential head-and-shoulders pattern, pointing to a possible bearish reversal. The neckline is near $248, reinforced by the last two local lows.

Source: xStation5