Apple AAPL is set to report second-quarter fiscal 2026 results on April 30.
Apple expects second-quarter fiscal 2026 net sales to grow between 13% and 16% on a year-over-year basis. Gross margin is expected to be 48-49% in the second quarter of fiscal 2026. Operating expenses are expected to be between $18.4 billion and $18.7 billion.
The Zacks Consensus Estimate for fiscal second-quarter net sales is pegged at $109.48 billion, indicating year-over-year growth of 14.8%.
The consensus mark for earnings is pegged at $1.92 per share, up by three cents over the past 30 days. The estimate indicates a 16.4% increase from the year-ago quarter’s reported figure.
Consensus Estimate Trend
Image Source: Zacks Investment Research
AAPL’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 6.79%, on average.
Apple Inc. Price and EPS Surprise
Apple Inc. price-eps-surprise | Apple Inc. Quote
Let us see how things have shaped up prior to this announcement.
Apple’s iPhone Sales Likely to Rise Y/Y in Q2
Apple’s fortunes are heavily reliant on the iPhone, which is by far its biggest revenue contributor. The device accounted for 59.3% of net sales in the first quarter of fiscal 2026, wherein sales increased 23.3% year over year to $85.27 billion.
iPhone sales have been benefiting from strong iPhone 17 sales. Apple led the smartphone market with 21% share in the first quarter of calendar 2026, and shipments increased 5% year over year, per the latest data from the Counterpoint research. The company has been adding features to the iPhone line-up, including Apple Intelligence tools as well as Apple Creator Studio, which is driving iPhone sales. The company has introduced dozens of features, including writing tools and cleanup and made it available in 15 languages. Visual intelligence is helping users learn and do more with their content on iPhone. It is helping users search faster, take action and answer questions across their apps.
The Zacks Consensus Estimate for fiscal second-quarter iPhone net sales is pegged at $56.706 billion, suggesting 21.1% year-over-year growth.
AAPL’s Services to Drive Q2 Results
Services, which comprises Apple’s advertising business, AppleCare, Cloud Services, Digital content (Arcade, Music, Fitness+, TV, News+) and Payment services (Apple Card & Apple Pay), is riding on an expanding base of installed devices. Apple’s Services segment benefits from an expanding games portfolio and the growing popularity of Apple TV+. Apple’s strategy of adding new games on a continuous basis is driving its user base.
New features helped Apple Pay make a significant impact by eliminating well over $1 billion in fraud, while generating more than $100 billion in incremental merchant sales globally. Apple Pay is now available in 89 markets, while Apple Fitness+ has expanded to 28 additional countries and regions. Apple Arcade expanded its catalog of highly rated games with more than 50 new titles.
The consensus mark for the fiscal second-quarter Services revenues is pegged at $30.39 billion, suggesting 14.1% growth on a year-over-year basis.
Apple’s Mac Sales to Rise Modestly
Apple is expanding its MacBook portfolio with the launch of MacBook Air and MacBook Pro. The devices come at an opportune time as the iPhone maker faces stiff competition from the likes of Lenovo, HP HPQ and Dell Technologies DELL. The introduction of M5 Pro and M5 Max chips, built using a new Apple-designed Fusion Architecture, which connects two dies into a single SoC, boosts performance. The new MacBook Air is powered by the latest M5, which features a faster CPU and next-generation GPU with a Neural Accelerator in each core. The 14-inch and 16-inch MacBook Pro, powered by M5 Pro and M5 Max, adds superior performance and AI capabilities.
Per Gartner, worldwide PC shipments totaled 62.8 million units in the first quarter of calendar 2026, up 4% year over year. Lenovo led with 26.5% market share, trailed by HP and Dell Technologies with 19.3% and 16.5%, respectively. Apple had a 10.6% market share. The consensus mark for Mac revenues is pegged at $8.18 billion, suggesting 3% growth on a year-over-year basis.
AAPL Shares Underperform Sector; Valuation Stretched
Apple shares have dropped 0.3% year to date (YTD), underperforming the Zacks Computer & Technology sector’s return of 8.5%. While Apple shares have outperformed HP over the time frame, the shares have lagged Dell Technologies. YTD, HP shares dropped 11.2%, while Dell Technologies returned 71.7%.
Apple Stock’s Price Performance
Image Source: Zacks Investment Research
The AAPL stock is not so cheap, as suggested by the Value Score of F. In terms of the forward 12-month price/earnings, AAPL is trading at 30.21X, higher than the Zacks Computer & Technology sector’s 25.47X.
AAPL Stock is Overvalued
Image Source: Zacks Investment Research
AI Focus to Aid AAPL’s Prospects
Apple is fast catching up in the AI space thanks to its multi-year collaborative deal with Alphabet GOOGL. Under the agreement, the next generation of Apple’s foundation models will be based on Alphabet’s Gemini models and cloud technology. Apple Intelligence features, including a more personalized Siri, will now be powered by Alphabet’s models. However, Apple Intelligence will continue to run on Apple devices and Private Cloud Compute.
Apple Intelligence is expected to play a significant role in driving the company’s Services business. Apple has witnessed strong shipments of its devices in markets where Apple Intelligence has been available. The company believes growing adoption of Apple Intelligence among developers will drive strong demand for their apps. The addition of Google models, including Gemini, is expected to further boost the adoption of Apple models among app developers.
Conclusion
Apple’s prospects are expected to benefit from its strong iPhone and Services business. Apple’s expanding AI footprint, thanks to the GOOGL collaboration, bodes well for long-term prospects. However, stiff competition in the smartphone, PC and AI domains, along with a stretched valuation, is expected to remain an overhang on the stock.
Currently, AAPL carries a Zacks Rank #3 (Hold), which implies that investors should wait for a favorable point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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