Buy, Sell or Hold the Apple Stock? Key Tips Ahead of Q1 Earnings

Apple AAPL is set to report first-quarter fiscal 2026 results on Jan. 29.Apple expects first-quarter fiscal 2026 net sales to grow between 10% and 12% on a year-over-year basis. The company expects iPhone sales to grow in double digits year over year. The Mac segment is expected to face a tough year-over-year comparison, and Services are expected to grow at the 2025 rate. Gross margin is expected to be 47-48% in the first quarter of fiscal 2026, including a tariff impact of $1.4 billion. Operating expenses are expected to be between $18.1 billion and $18.5 billion.The Zacks Consensus Estimate for fiscal first-quarter net sales is pegged at $137.47 billion, indicating year-over-year growth of 10.6%. The consensus mark for earnings is pegged at $2.65 per share, up by a penny over the past 30 days. The estimate indicates a 10.4% increase from the year-ago quarter’s reported figure.Consensus Estimate Trend Image Source: Zacks Investment Research AAPL’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 5.42%, on average.   Apple Inc. Price and EPS Surprise Apple Inc. price-eps-surprise | Apple Inc. Quote  Let us see how things have shaped up prior to this announcement.Apple’s iPhone Sales Likely to Rise Y/Y in Q1Apple’s fortunes are heavily reliant on the iPhone, which is by far its biggest revenue contributor. The device accounted for 47.8% of net sales in the fourth quarter of fiscal 2025, wherein sales increased 6.1% year over year to $49.03 billion. iPhone sales have been benefiting from strong iPhone 17 sales as well as iPhone 16 shipments in Japan, India and Southeast Asia, per Counterpoint data. Apple led the smartphone market with 20% share in calendar 2025, and shipments increased 10% year over year. The Zacks Consensus Estimate for fiscal first-quarter iPhone net sales is pegged at $77.63 billion, suggesting 12.2% year-over-year growth.AAPL’s Services to Drive Q1 ResultsServices, which comprises Apple’s advertising business, AppleCare, Cloud Services, Digital content (Arcade, Music, Fitness+, TV, News+) and Payment services (Apple Card & Apple Pay), is riding on an expanding base of installed devices. Apple’s Services segment benefits from an expanding games portfolio and the growing popularity of Apple TV+. Apple’s strategy of adding new games on a continuous basis is driving its user base. Apple TV+ is benefiting from an expanding content portfolio, with total hours viewed increased 36% year over year in 2025.The Services have been benefiting from frequent updates, thereby driving the user base. In 2025, the App Store saw more than 850 million average weekly users globally, with developers earning over $550 billion on Apple’s platform since 2008. Apple Pay is now available in 89 markets, while Apple Fitness+ expanded to 28 additional countries and regions. Apple Arcade expanded its catalog of highly rated games with more than 50 new titles.The consensus mark for the fiscal first quarter Services revenue is pegged at $30.04 billion, suggesting 14.1% growth on a year-over-year basis.Apple’s Mac Sales to Rise ModestlyAAPL has been benefiting from strong demand for Mac devices powered by the latest M5 as well as the previous M4 family of chips. However, Apple lost market share in the fourth quarter of calendar 2025 and trails Lenovo LNVGY, Dell Technologies DELL and HP HPQ, per the latest IDC data. Apple’s market share fell 90 basis points (bps) while Lenovo gained 110 bps, HP gained 40 bps, and Dell Technologies increased 110 bps on a year-over-year basis.In terms of shipments, Apple’s 0.2% trails Lenovo’s growth of 14.4%, per IDC data. Dell Technologies’ shipment increased 18.2%, while HP saw shipment growth of 12.1%. According to Gartner’s list, Lenovo was placed at the #1 spot with shipment growth of 14.3%, trailed by Apple’s 5.7%, HP’s 12.1% and Dell Technologies’ 18.2% growth.The consensus mark for Mac revenues is pegged at $9 billion, suggesting 0.9% growth on a year-over-year basis.AAPL Shares Underperform SectorApple shares have risen 7.2% in a year, underperforming the Zacks Computer & Technology sector’s return of 24.7%. While Apple shares have outperformed HP over the time frame, the shares have lagged Dell Technologies. HP shares dropped 1.3%, while Dell Technologies returned 14.5%.Apple Stock’s Performance Image Source: Zacks Investment Research The AAPL stock is not so cheap, as suggested by the Value Score of D. In terms of the forward 12-month price/earnings, AAPL is trading at 30.12X, higher than the Zacks Computer & Technology sector’s 27.03X.AAPL Stock is Overvalued Image Source: Zacks Investment ResearchAI Focus to Aid AAPL’s ProspectsApple is fast catching up in the AI space thanks to its multi-year collaborative deal with Alphabet under which the next generation of the former’s foundation models will be based on Google's Gemini models and cloud technology. Apple Intelligence features, including a more personalized Siri, will now be powered by Google models. Apple Intelligence will continue to run on Apple devices and Private Cloud Compute.Apple Intelligence is expected to play a significant role in driving the company’s Services business, which accounted for roughly 26% of net sales. Apple has witnessed strong shipments of its devices in markets where Apple Intelligence has been available. The company believes growing adoption of Apple Intelligence among developers will drive strong demand for their apps. The addition of Google models, including Gemini, is expected further boost the adoption of Apple models among app developers.ConclusionApple is suffering from stiff competition in the smartphone and PC market, along with regulatory headwinds. A stretched valuation makes the stock risky for investors. However, strong iPhone 17 sales along with continuing momentum in Services are key catalysts.Currently, AAPL carries a Zacks Rank #3 (Hold), which implies that investors should wait for a favorable point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Just Released: Zacks Top 10 Stocks for 2026Hurry – you can still get in early on our 10 top tickers for 2026. 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(LNVGY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks