Buy Or Sell Apple Stock Ahead Of Q3 Earnings?

Apple (NASDAQ:AAPL) is set to announce its fiscal Q3 2025 earnings on Thursday, July 31. Traditionally, this timeframe tends to be a seasonally weaker quarter for the company, due to the timing right before its major product launches in the fall. Earnings are estimated to be approximately $1.42 per share, according to consensus projections, representing a slight rise compared to the same quarter last year, while revenues are expected to increase by 3.3% year-over-year, reaching $88.6 billion. The modest revenue growth is anticipated to be primarily fueled by Apple’s high-margin services sector, which covers the App Store, iCloud, Apple Music, and Apple TV+ among others. Nevertheless, hardware sales may continue to remain lackluster, with total iPhone sales expected to slow down in anticipation of the highly awaited iPhone 17 launch in September. However, Apple may experience some offsetting gains from rolling out its new budget-friendly iPhone 16e and upgraded M4-powered MacBooks.

We will also monitor the effects of tariffs on Apple, in light of the intense trade conflict between the United States and key trading allies, particularly China. In the previous quarter, CEO Tim Cook cautioned that Apple could face up to $900 million in additional expenses during the June quarter due to tariffs. Although there have been indications of diminishing tensions between the U.S. and China, President Trump mentioned in May that Apple might be subject to a 25% import tariff on iPhones sold in the U.S. unless the products are manufactured within the country.

The company has a current market capitalization of $3.1 trillion. Revenue over the past twelve months totaled $400 billion, with the company maintaining operational profitability that included $127 billion in operating profits and a net income of $97 billion. Although much depends on how the results align with consensus and expectations, gaining an understanding of historical patterns could potentially improve the odds in favor of event-driven traders.

There are two approaches to take: comprehend the historical probabilities and position yourself ahead of the earnings announcement, or evaluate the relationship between immediate and medium-term returns following earnings and position yourself accordingly after the earnings are disclosed. That said, if you are looking for upside with lower volatility than individual stocks, the Trefis High Quality portfolio offers an alternative – having surpassed the S&P 500 and achieved returns of over 91% since its inception.

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Apple’s Historical Odds Of Positive Post-Earnings Return

Here are some insights regarding one-day (1D) post-earnings returns:

• There are 20 earnings data points recorded over the past five years, with 8 positive and 12 negative one-day (1D) returns documented. In conclusion, positive 1D returns were observed about 40% of the time.
• Significantly, this percentage rises to 50% when looking at data for the last 3 years instead of 5.
• The median of the 8 positive returns is 5.3%, while the median of the 12 negative returns is -1.6%

Additional information regarding the observed 5-Day (5D) and 21-Day (21D) returns post earnings is summarized along with the statistics in the table below.

Correlation Between 1D, 5D, and 21D Historical Returns

A relatively less risky strategy (though ineffective if the correlation is low) involves understanding the relationship between short-term and medium-term returns following earnings, identifying a pair with the highest correlation, and executing the corresponding trade. For instance, if 1D and 5D show the strongest correlation, a trader can position themselves “long” for the next 5 days if the 1D post-earnings return is positive. Here is some correlation data based on the 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and the ensuing 5D returns.

Learn more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (a combination of all three, the S&P 500, S&P mid-cap, and Russell 2000), generating substantial returns for investors. In addition, if you desire upside with a smoother experience than an individual stock like Apple, consider the High Quality portfolio, which has excelled beyond the S&P and achieved returns exceeding 91% since its inception.