Apple set to beat Q3 estimates as BofA sees margin dip as transitory

Apple Inc ( NASDAQ:AAPL XETRA:APC ) is expected to beat consensus estimates for its fiscal third quarter, according to Bank of America, even as the bank takes a more conservative view of iPhone seasonality tied to a staggered launch schedule.

BofA said investor focus will center on component cost inflation, the durability of gross margins, and the transition following the end of Tim Cook's tenure as CEO.

The bank forecasts fiscal third-quarter revenue of $109 billion and earnings per share of $1.89, above Street estimates of $108 billion and $1.87, implying revenue growth of 16% year over year, compared with Apple's guidance range of 14% to 17%.

BofA said iPhone build plans, including for Pro models, remain robust. However, the analysts have factored in a more conservative outlook given the staggered rollout this cycle: Pro, Pro Max and a foldable model launching in September, with the base model and Air arriving in March. Higher prices are also part of that calculus.

The bank noted the Street may not be fully reflecting this launch timing in its estimates. On margins, BofA models product gross margin declining 190 basis points sequentially in the June quarter to 36.8%, with a further 280-basis-point drop in the September quarter to 34.1%. The bank views this as transitory, projecting a recovery to 38.5% in the December quarter as new iPhones, including the foldable, launch at higher prices, with a potential added boost from roughly $3 billion in tariff recovery.

Overall company gross margin is modeled at 48.2% for the June quarter, within Apple's guided range of 47.5% to 48.5%. For fiscal fourth quarter, BofA is well below Street on reve...