Morgan Stanley: Apple's Q4 financial report is expected to deliver good news, with service revenue resilience and tariff risk resolution being key factors
JP Morgan expects that Apple's upcoming fourth quarter financial report for fiscal year 2025 will show a positive trend, mainly due to the resilience of service revenue and the shift of production lines to areas outside of China to reduce tariff risks. Analysts point out that the growth rate of the service business has increased to about 13%, and the guidance for the fourth quarter indicates that this growth rate will remain at a similar level. Strong high single-digit growth in revenue is expected for the fourth quarter, and the potential increase in profit margins may exceed expectations, attracting investor attention
According to the Zhitong Finance APP, JP Morgan has released a research report indicating that Apple's (AAPL.US) upcoming fourth-quarter financial report for fiscal year 2025 is expected to show positive trends, primarily due to the resilient performance of service revenue and the company's efforts to shift production aimed at the U.S. market outside of China.
Analysts led by Samik Chatterjee noted in a report released on Monday: "Before Apple releases its third-quarter financial report, the impact of consumer adoption of 'external link payments' on service business growth is a core concern for investors. However, the growth rate of the service business in the third quarter increased to about 13%, and the guidance for the fourth quarter indicates that this growth rate will remain at a similar level, suggesting that the overall impact of 'external link payments' is quite limited."
It is understood that the introduction of the "external link payment" option in the Apple App Store stems from a federal court ruling. This ruling requires Apple to allow users to complete in-app purchases through external channels in iOS applications, which is also part of Apple's long-standing legal dispute with Epic Games.
JP Morgan also emphasized that Apple has quickly taken action to shift some of its production lines for products sold in the U.S. from China to countries like India and Vietnam, in order to minimize the impact of semiconductor-related tariffs.
Chatterjee stated: "Turning our attention back to the upcoming quarterly financial report and performance guidance, we expect strong high-single-digit revenue growth for the fourth quarter of fiscal year 2025, and the performance outlook for the first quarter of fiscal year 2026 will also confirm to investors that the company is in a positive product cycle. However, any surprises that exceed expectations, as well as upward adjustments to market consensus expectations, may come from improvements in profit margins—driven on one hand by easing tariff pressures and on the other by the profit structure optimization brought about by robust growth in service revenue. For investors looking to capture clear upside potential, Apple stock is quite attractive: the strong iPhone 17 product cycle will bring visible upward momentum, and the likely strong cycle of the iPhone 18 series (including the foldable iPhone) will further solidify this trend."
Apple is scheduled to announce its latest performance on October 30 at 10:00 AM Eastern Time. The market generally expects earnings per share of $1.77 and revenue of $102.19 billion. In the same period last year, Apple's earnings per share were $1.64, and revenue was $94.93 billion
