• Deepwater Asset Management’s Gene Munster said expectations are modest going into earnings, and that he will watch what incoming CEO John Ternus has to say about AI.
• UBS most recently said the earnings setup is strong but only sees limited upside in the long run.
• The revenue consensus estimate for the iPhone maker is $109.58 billion, and earnings per share (EPS) stand at $1.94.

Ahead of Apple Inc.'s (AAPL) earnings report, Deepwater Asset Management’s Gene Munster stated on Thursday that his expectations are modest and that he would be closely watching what the next top boss, John Ternus, has to say, especially on artificial intelligence.

“Ternus is the upside case: Can Ternus start to convince investors that he will bring new AI innovation, and when will we see those products? If successful, AAPL multiple will go up,” Munster stated in a post on X.

Bloomberg reported last week that Ternus has already overhauled Apple’s hardware engineering group around a new AI platform designed to speed up product development and improve device quality, which is indicative of his plan to deploy AI quickly throughout the company to improve its operations.

A Look Closer At Apple’s Numbers

Munster expects iPhone sales, the main driver of revenue, to grow 22% in the second quarter (Q2), above Wall Street's 20% estimate, citing demand from China. For the third quarter (Q3), he expects the company to guide sales growth of 10% to 12% year-over-year, compared to the Street expectation of 9%. 

“I believe the difference is iPhone,” Munster said.

The revenue consensus estimate for the iPhone maker is $109.58 billion, and earnings per share (EPS) are at $1.94, according to data from Fiscal AI. Apple has beaten revenue estimates for 10 consecutive quarters, while EPS has topped estimates for five.

Sourcing Components 

Munster is also watching out for how the component environment impacts margins in the second half of the year, amid high demand from AI data centers.

“I expect them to talk down margins by 50bps q/q, The Street is looking for an 80bps decline,” he said.

Earlier this week, UBS analyst David Vogt praised the company for its ability to secure key components such as silicon and memory to meet iPhone demand. He believes Apple's earnings should be strong, benefiting from the rollout of personal devices like the MacBook Neo and iPhone 17.

But in the long run, the company is subject to risks from product delays, less innovative offerings, a decline in iPhone unit shipments, macro weakness dampening product demand, especially in China, he said.

Vogt had hiked his price target by $7 to $287 and maintained a ‘Neutral’ rating.

How Did Retail Traders React? 

On Stocktwits, retail sentiment about AAPL turned ‘neutral’ from ‘bearish’ over the last 24 hours.

One user on the platform thinks the stock could hit $300 if the forecast is good.

Another user expects the earnings to be “huge.”

Of the 48 Wall Street analysts covering Apple, 32 have rated it ‘Buy’ or higher, 14 ‘Hold,’ and two ‘Sell’ or lower, per Koyfin data.

At the time of writing, AAPL was up 1.4% at $273.82, while trading volume was nearly 23 million shares, below its three-month average of 45.47 million.

AAPL stock has fallen marginally year-to-date, while gaining nearly 27% over the last 12 months.

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