To The Moon

Apple Earnings To Watch: iPhone 17, Greater China, Services

Global consumer electronics giant $Apple(AAPL)$   is set to report its FY25Q4 earnings after the market closes on Thursday, October 30. With its market capitalization just a step away from the $4 trillion club, the market is optimistic about a sustained recovery in earnings growth.

Option Market Signals

With Apple's Q3 earnings report scheduled for October 30th, the derivatives market is painting a picture of confident optimism, a stark contrast to the high-anxiety pricing seen elsewhere in the tech landscape.

The most telling metric is the Put/Call Ratio, which has fallen to a robustly bullish 0.67. As the stock's price has climbed steadily since its last report in July, this ratio has concurrently trended downward, showing that traders have been adding to upside positions rather than hedging for a downturn. This suggests a strong consensus bet on a positive earnings outcome or firm forward guidance.

Perhaps more striking is the volatility picture. The current Implied Volatility of 28.28% has only just begun to lift off its historical floor, as evidenced by a low IV Rank of 20. This means that the "earnings premium" baked into option prices is in the bottom quintile of its 52-week range. Unlike other names where IV has exploded into the 90th percentile, the Apple options market is not anticipating a violent, outsized price swing.

Core Financial Indicators

~Revenue: Consensus estimates for this quarter are $102 billion, representing a 7.5% year-over-year (YoY) and 8.5% quarter-over-quarter (QoQ) increase. This is in line with previous guidance of mid-to-high single-digit YoY growth.

~Gross Margin: The consensus gross margin is 46.6%, an increase of 0.4 percentage points YoY and 0.6 percentage points QoQ, within the guided range of 46%-47%.

~Adjusted Net Income: Adjusted net income is expected to be $26.15 billion, up 4.7% YoY and 11.6% QoQ. The adjusted figure is used as the prior-year period's net income was impacted by a one-time $10.2 billion tax event.

Three Things to Watch

1. Can the iPhone 17 Series Substantially Boost iPhone Revenue?

Prior to the iPhone 17 launch, data from China's CAICT indicated that cumulative iPhone shipments in mainland China for July-August fell by 5% YoY. As China is a crucial market, this initially sparked concerns about this quarter's iPhone revenue.

However, following the iPhone 17's release, Counterpoint Research statistics show that sales in mainland China and the U.S. during the first 10 days of availability increased by 14% compared to the same period for the iPhone 16 launch, bolstering market confidence.

The iPhone business, Apple's largest revenue segment, has long been mired in a growth slump; last quarter marked its first double-digit YoY revenue growth in nearly two years. For this quarter, the market anticipates iPhone revenue of $49.34 billion, a 6.7% YoY increase, as growth slows back to single digits.

2. Can Greater China Revenue Outperform the Company Average?

Greater China remains a key market for Apple, historically accounting for over 20% of revenue and currently holding at 15%-18%. However, Greater China's revenue growth has underperformed the company's average for eight consecutive quarters, and the market continues to monitor its recovery. The current market expectation for this quarter's Greater China revenue is $16.4 billion, up 9% YoY, which would likely outperform the company's overall growth rate.

3. Will Services Revenue Growth Accelerate Sequentially?

As a critical business in the iPhone growth flywheel, Services accounted for 29% of revenue last quarter. Its high gross margin of 75.6%—compared to 34.5% for hardware—contributes a significant portion of Apple's profits.

But its YoY revenue growth has remained below 20% for 14 consecutive quarters, raising concerns about whether the Services business is hitting a growth bottleneck. According to the latest Wall Street expectations, Services revenue is projected to be $28.18 billion this quarter, up 13% YoY, but sequential growth appears to remain stagnant.

Summary

Compared to other "Magnificent 7" companies, the market's earnings expectations for Apple are often lower. This suggests that even if the results miss expectations, the potential downside for the stock is limited. An earnings beat, however, could stimulate its market cap to breach the $4 trillion mark.

A review of Apple's stock performance on its last 13 earnings days shows it fell seven times, including on all of the last four occasions.

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