Bank of America is leaning bullish on Apple (AAPL) stock ahead of a critical earnings test on Jan. 29. The sharper take comes right after a major shift in Apple’s AI future, following a breakthrough deal for Siri with Google, a unit of Alphabet (GOOGL).
The bank sees multiple potent near-term and medium-term catalysts lining up for Apple, spearheaded by robust iPhone 17 demand, double-digit Services revenue expansion, and stronger gross margins led by a more lucrative Services mix.
The note drops at an opportune time, as on Jan. 12, Apple announced a massive multi-year partnership with Google, according to Tech Crunch, placing Gemini AI models in the thick of things with Apple Intelligence while dramatically upgrading Siri.
Over the past couple of years, Apple’s lack of AI progress has become a major overhang on the stock.
For perspective, the stock posted a nifty 10% gain last year, but lagged the broader market’s 20% gain. Over a longer time frame, Apple’s delivered over 100% gain (5 years), beating theS&P 500’s 84% gain.
Near-term gains, though, for Apple have been impressive at more than 22%.
“This is what the Street has been waiting for,” said Daniel Ives of Wedbush Securities, describing the deal as a major validation moment for Google and a stepping stone for Apple in pushing for bigger AI-powered wins this year and beyond.
BofA also reiterated a strong buy rating on Apple stock, while keeping a $325 price target unchanged (implying nearly 25% upside from current levels).
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Bank of America sees a bullish setup into earnings
Bank of America feels Apple’s recent underperformance has led to a considerable disconnect between sentiment and fundamentals leading up to earnings.
The bank expects to have a powerful December quarter, spearheaded by superb iPhone 17 demand, resilient pricing power, along double-digit Services growth, despite the risks related to memory costs.
Earnings visibility is a huge part of BofA’s bullish setup.
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It models December-quarter sales of $140 billion and an EPS of $2.69, both comfortably ahead of the market’s consensus.
Moreover, gross margins are expected to fall to 47.5%, with stronger sequential expansion in the March quarter, as services make up a larger share of sales.
Key numbers behind Bank of America’s Apple call:
- iPhone units: Raised to 85 million for the December quarter, with sales up 17% year over year
- Services: Modeled at a superb 13% year-over-year growth, despite the sluggishness in App Store trends in China
- Margins: Seen moving near the 48% mark in March, with long-term potential above 50%
Looking ahead, BofA underscores the importance of the upcoming foldable iPhone slated for launch later this year, as reported by CNET, along with an enhanced Siri powered by Gemini AI, driving higher upgrades and renewed institutional interest.
Perhaps Apple’s biggest risk is execution.
Moreover, ties with Google could potentially open up the door to greater regulatory scrutiny and oversight concerns, complicating rollouts and limiting flexibility.
Additionally, there are other pressure points to consider.
AI-driven shifts can potentially threaten Google’s Safari payments, along with EU App Store rules potentially weighing down high-margin commissions.
Additionally, growing DRAM and NAND costs further complicate the situation, while reinforcing Apple’s power through disciplined execution rather than hype.
Siri is Apple’s services gateway
Siri is arguably the biggest traffic director inside Apple’s walled-garden ecosystem, which quietly guides users to its sticky apps, subscriptions, and payments, ultimately driving Apple’s booming services business.
For this reason, the stakes are clearly pretty high.
- Siri usage is massive: Apple said the service processes a whopping 1.5 billion user requests each day, positioning it as the most popular consumer AI interface.
- Services are already huge: Apple generated an eye-popping$28.75 billion in Services sales in the September 2025 quarter and $109.16 billion for FY2025. For perspective, it posted roughly half of that number back in 2020 at $53.7 billion.
- Siri touches every monetized surface: Siri sits across the App Store, Apple Music, Apple Pay, iCloud, and Apple TV. So with Apple Intelligence tailor-made to take action across the entire ecosystem, Siri basically becomes the connective tissue for stronger engagement.
The real win behind Apple’s Google AI deal
On the face of it, Apple opting for Google’s Gemini as a foundation model may seem like a simple partnership headline.
However, if we dig in a little deeper, the move effectively reshapes the AI power structure inside the iPhone.
Why Apple’s Google AI deal is so significant: key points
- Foundation model = default brain: Gemini isn’t just another plug-in, which means it’s the core reasoning engine Siri’s relying on, though the interactions flow through Google’s models by default.
- Massive distribution win for Google: Apple controls more than 2 billion active devices globally, offering Gemini incredible exposure at a scale that’s impossible to match.
- Apple keeps control, not Google: Despite Gemini being the foundational engine, Apple still controls Siri’s robust interface, privacy rules, and app actions, along with on-device processing.
- The Siri problem gets solved faster: The Siri overhang had been weighing down Apple’s stock over the past couple of years, but this partnership effectively closes out that gap to a great extent.
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