Bank of America has adopted a more optimistic outlook on Apple Inc. (AAPL) stock, anticipating strong performance ahead of the company’s earnings report scheduled for January 29, 2025. This shift follows a significant partnership between Apple and Google, a subsidiary of Alphabet Inc. (GOOGL), aimed at enhancing Apple’s artificial intelligence capabilities, particularly for Siri.
The bank cites several key factors contributing to its bullish stance, including robust demand for the iPhone 17, expected double-digit growth in Services revenue, and improved gross margins driven by a more profitable Services mix. On January 12, 2025, Apple announced a multi-year collaboration with Google to integrate Gemini AI models into its systems, significantly upgrading Siri’s functionality. This partnership comes at a crucial time, as Apple has faced criticism over its perceived slow progress in AI development, which has affected investor sentiment.
In the past year, Apple’s stock gained approximately 10%, lagging behind the broader market’s 20% increase. Over a five-year span, Apple has achieved a remarkable gain of over 100%, outperforming the S&P 500, which rose 84% during the same period. Recent short-term gains for Apple have also been notable, exceeding 22%.
“This is what the Street has been waiting for,” said Daniel Ives, Managing Director at Wedbush Securities. He described the partnership as a significant validation for Google and a pivotal moment for Apple to secure larger AI-driven achievements in the near future.
Bank of America has reaffirmed a strong buy rating for Apple stock, maintaining a price target of $325, suggesting nearly 25% upside potential from current levels. The firm believes that Apple’s recent stock underperformance has created a disconnect between market sentiment and the company’s underlying fundamentals leading up to the earnings report.
Positive Earnings Predictions and Growth Catalysts
Bank of America anticipates a strong December quarter for Apple, projecting sales of $140 billion and earnings per share (EPS) of $2.69, both of which exceed market consensus estimates. The bank expects gross margins to be around 47.5%, with further improvements anticipated in the March quarter due to an increased share of Services revenue.
Key projections from Bank of America include an increase in iPhone unit sales to 85 million for the December quarter, representing a 17% year-over-year growth. Additionally, Services revenue is projected to grow by 13% year-over-year, despite some challenges in App Store performance in China. The bank believes that margins may approach 48% in March, with long-term potential exceeding 50%.
Looking forward, Bank of America emphasizes the significance of the upcoming launch of a foldable iPhone later in the year, which could attract renewed interest from institutional investors. The enhanced Siri, powered by Gemini AI, is expected to drive higher upgrade rates among users.
Despite the positive outlook, there are risks associated with execution and potential regulatory scrutiny arising from the partnership with Google. These challenges may complicate the rollout of new features and limit Apple’s operational flexibility. Additionally, external pressures, such as rising DRAM and NAND costs, could impact the company’s profitability.
Siri: A Key Driver in Apple’s Ecosystem
Siri remains a central component of Apple’s ecosystem, guiding users to various services and applications while driving substantial revenue in the process. The voice assistant processes an impressive 1.5 billion user requests daily, making it the most widely used consumer AI interface. In the fiscal year ending in September 2025, Apple reported $28.75 billion in Services revenue, a significant increase from $53.7 billion in 2020.
The partnership with Google to leverage Gemini as the foundational AI model represents a strategic shift for Apple. This integration not only enhances Siri’s capabilities but also positions Apple to better compete in the evolving landscape of AI technology. The collaboration allows Apple to maintain control over its user interface and privacy protocols, while benefiting from Google’s extensive AI resources.
Overall, Bank of America’s analysis highlights the potential for Apple to regain momentum in the stock market as it capitalizes on its latest AI advancements and prepares for the upcoming earnings report.