Nov. 2 Could Be a Big Day for Apple Stock
Key Points
Apple's iPhone Duo sold out on its launch day, and orders are now backed up into January.
Management has warned of a lower gross margin and slower iPhone sales growth as memory costs soar.
Apple stock is expensive, leaving little room for error.
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Apple (NASDAQ: AAPL) has become only the second company in the world to reach a $5 trillion market cap. Investors love its dominance and resilience, but Apple is still proving how it can compete in an artificial intelligence-driven landscape.
The iPhone maker reports earnings on Nov. 2. Here's what to expect.
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More than AI
Apple is one of the most important tech companies in the world, but unlike most of its peers, it's not all-in on artificial intelligence (AI). Apple's edge is in its hardware, and that's where it's placing its bets. This strategy has worked for it in the past and helped it become perhaps the most dominant company in its space. Customers love Apple's user-friendliness, high quality, and design.
Image source: Apple.
Customers now anticipate new product releases and line up to buy upgraded devices. Apple just launched the iPhone Duo, its first foldable phone. It works as both a standard phone and a small tablet, and demand has been outstripping supply. It sold out on launch day two weeks ago, and it's already on order through January.
However, the company is investing in Apple Intelligence, its own AI. It recently launched a new Siri voice assistant as well as a home assistant called, fittingly, Apple Home. Here, again, its strength lies in the ability to sync all of your devices and have AI pull data from emails, documents, and more.
What could happen on Nov. 2
It's that time of year again, when the big tech companies give investors their latest financial data and update them about future expectations.
Apple will report 2026 fiscal fourth-quarter and full-year results on Nov. 2. Management is guiding for 10% sales growth at the midpoint and a 47.5% gross margin. Last quarter was when former CEO Tim Cook warned of a "100-year flood on the memory pricing," which is affecting costs and supply. The company is expecting a lower gross margin and a deceleration in iPhone sales growth, and management is attributing all of this to skyrocketing memory prices. Wall Street expects 10.6% sales growth for the quarter and $1.98 in earnings per share, up from $1.85 last year.
It will be the first time that new CEO John Ternus will be in the spotlight, and the market will be looking for updates about how the business is managing through inflation and the high memory costs.
Apple tends to beat on earnings, but on Nov. 2, it will be in the context of Apple stock soaring 27% year to date and trading at nearly 40 times trailing 12-month earnings. That doesn't leave any wiggle room for the stock, and if the market is unsure about its performance or guidance, the stock could take a hit.
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Jennifer Saibil has positions in Apple. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
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