Apple (AAPL) is set to report its Fiscal Q4 earnings on Thursday, October 31, after the closing bell, aiming to maintain its recent bullish momentum. However, I’m more cautious this time. While I remain a long-term Apple bull, analysts have raised their estimates for FQ4 over the past three months, adding pressure on the company to meet these heightened expectations. As a result, I’m uncertain if now is the best time to buy, despite my long-term optimism.
In addition to this, the stock’s stretched valuation after its recent rally could further increase the pressure for strong performance, leaving little room for any slip-ups in guidance. The narrative surrounding the AI supercycle, still in its early stages, also adds a layer of short-term volatility.
Although I have a more cautious outlook on Apple stock ahead of its FQ4 earnings, the previous quarter was quite strong, with the company exceeding expectations on both earnings and revenue. Apple reported an EPS of $1.40, beating the consensus estimate of $1.34, and posted revenues of $85.8 billion, surpassing the $84.4 billion forecast. This marked the sixth consecutive quarter that the firm exceeded earnings estimates, highlighting Apple’s consistent performance
Two key takeaways from the quarter were Apple’s performance in China and its approach to capital expenditures (CapEx). First, despite a 6.5% year-over-year decline in China sales, the results were better than expected, especially given that the iPhone dropped out of the top five in market share, slipping to 14% from 16% a year ago.
Second, while many Big Tech companies have been significantly increasing their AI-related spending, Apple has taken a more conservative approach. The company is likely to maintain its CapEx in the $10–$11 billion range annually. In fact, over the past twelve months, CapEx has decreased by 28% compared to the same period last year—far below the $50–$70 billion being spent by some of its peers.
Apple’s conservative approach has resonated well with the market. Unlike its peers, Apple’s AI strategy focuses on improving existing products to better monetize its vast user base rather than building data centers. This cautious spending led to strong cash flow, with $29 billion in operating cash flow in the June quarter—a record. With $153 billion in cash and $101 billion in debt, Apple is well-positioned to reward shareholders, returning over $32.7 billion last quarter through share buybacks and a $0.25 dividend.