Ahead of Earnings, Is Apple Stock a Buy, a Sell, or Fairly Valued?

Apple is set to release its fiscal third-quarter 2026 earnings report on July 30. Here’s Morningstar’s take on what to look for in Apple’s earnings and the outlook for its stock.

Key Morningstar Metrics for Apple

• Fair Value Estimate
  : $290.00
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

Apple Earnings Release Date

• Thursday, July 30, before the start of trading

What to Watch for in Apple’s Q3 Earnings

• iPhone sales continue to drive results, and iPhone revenues are growing phenomenally well in 2026. We expect another strong quarter of growth for both the iPhone and Apple as a whole.
• Profitability will be the key metric for investors this quarter. In light of skyrocketing memory prices, Apple elected to raise prices midyear 2026 in an unprecedented move. We’ll be looking for the impact to margin from memory cost headwinds, and any forward commentary on the impact management expects from price increases.
• Artificial intelligence is also top of investor minds, and Apple announced its revamped Apple Intelligence strategy in June 2026. We expect this to come into play more in the December quarter, after an expected new iPhone release, but management commentary will be something to watch.
• Finally, this will be the last quarter with Tim Cook as CEO, with John Ternus taking the reins on Sept. 1. We like the appointment of Ternus, and expect continuity.
• Overall, we see Apple as lightly overvalued, compared with our $290 per share fair value estimate, as we think AI optimism has modestly outpaced the benefit we expect it to have on device sales.

The following are excerpts from Morningstar’s company report on Apple.

Fair Value Estimate for Apple

With its 2-star rating, we believe Apple stock is moderately overvalued compared with our long-term fair value estimate of $290 per share. Our valuation implies a fiscal 2026 price/earnings multiple of 33 times, a fiscal 2026 enterprise value/revenue multiple of eight times, and a fiscal 2026 free cash flow yield of 3%.

We project 10% compound annual revenue growth for Apple through fiscal 2030. The iPhone will be the most significant contributor to revenue over our forecast, and we project 10% growth in iPhone revenue over the next five years, including superb 20% growth in fiscal 2026, double-digit pricing-led growth in 2027, and mid-single-digit growth longer-term.

Services are Apple’s next-biggest revenue contributor in our forecast, and we anticipate more than 10% services revenue growth over the next five years. Operating margins will rise with gross margins in our forecast, reaching 36% in fiscal 2030 from 32% in fiscal 2025. We anticipate strong growth in research and development expenditures, which are key to Apple’s value and moat.

Read more about Apple’s fair value estimate.

Economic Moat Rating

We assign Apple a wide economic moat, stemming from customer switching costs, intangible assets, and a network effect. Apple’s ability to deliver cutting-edge products with tightly integrated hardware and software, along with its software ecosystem’s ability to lock in customers, results in impressive profit margins. We also see immense design prowess at Apple, most impressively in the deep integration of hardware, software, and semiconductors to create best-in-breed products.

Furthermore, we see Apple’s adept ability to introduce and succeed with new form factors (like smartwatches and VR headsets) as a defense against disruption risk. Finally, we see a virtuous cycle between Apple’s affluent customer base and vast ecosystem of developer partners. These moat sources elicit returns on invested capital and could let Apple leverage continued economic profits over the next 20 years.

Read more about Apple’s economic moat.

Financial Strength

We expect Apple to focus on using its immense cash flow to return capital to shareholders while increasing its net leverage over the medium term. Apple has a terrific balance sheet, with a net cash position of $34 billion as of September 2025. Management has set a goal to become cash-neutral eventually, with no set timetable. We model it to hit this target near the end of the decade. Since announcing the goal in 2018, Apple has cut its net cash position by nearly 75%, from $120 billion.

Apple supplements its strong balance sheet with impressive cash flow. Over the past five years, the firm has averaged more than $100 billion in free cash flow generation annually, and we forecast significant free cash flow growth over the forecast period. Since 2020, this cash flow has generated an average free cash flow margin of more than 25%, and Apple has converted more than 100% of its net income into free cash flow. We anticipate the firm to hit these figures over our five-year forecast, as well.

Read more about Apple’s financial strength.

Risk and Uncertainty

We assign Apple a Medium Uncertainty Rating. We see the firm’s greatest risk as its reliance on consumer spending, which is highly competitive and cyclical. Apple is at constant risk of disruption as the iPhone could be unseated by a new device or “superapp.” We also see geopolitical risk arising from Apple’s supply chain, which is heavily dependent on China’s Foxconn for iPhone assembly and Taiwan Semiconductor for chip production.

Apple also faces regulatory scrutiny. The European Union has enacted regulations requiring Apple to offer third-party app stores, adopt open messaging standards, and prevent it from gatekeeping access to its repair materials for third parties. Similarly, there are ongoing antitrust cases in the US that could affect Apple’s walled garden ecosystem. Finally, we see low environmental, social, and governance risk for Apple due to its commitment to full carbon neutrality by 2030. We believe it will achieve its goal.

Read more about Apple’s risk and uncertainty.

AAPL Bulls Say

• Apple offers an expansive ecosystem of tightly integrated hardware, software, and services that locks in customers and drives strong profitability.
• We like Apple’s move to in-house chip development, which we think has accelerated its product development and increased its differentiation.
• Apple has a stellar balance sheet and returns substantial cash flow to shareholders.

AAPL Bears Say

• Apple is prone to consumer spending and preferences, which creates cyclicality and exposes the firm to disruption.
• Apple’s supply chain is highly concentrated in China and Taiwan, which opens up the firm to geopolitical risk. Attempts to diversify into other regions may pressure profitability or efficiency.
• Regulators have a keen eye on Apple, and recent regulations have chipped away at parts of Apple’s sticky ecosystem.

This article was compiled by Irza Waraich.