Apple Inc. (AAPL  ) is expected to report steady services growth in its fiscal third quarter, with analysts pointing to improving monetization trends despite mixed App Store dynamics. On Monday, Bank of America reiterated its Buy rating on the stock, citing continued strength in services and long-term upside tied to artificial intelligence and new product categories.

Services Growth Offsets Modest Download Trends

App Store revenue rose 3.7% year over year to about $3.2 billion in the first 33 days of the quarter, supported by higher spending per user rather than volume growth. Downloads increased just 0.7% over the same period, while revenue per download climbed about 3% to $1.01.

The firm said gaming remains under pressure, while productivity apps continue to gain share, reflecting shifting consumer behavior within the platform.

AI Competition Intensifies

Analysts highlighted growing competition in AI-driven search and applications. Alphabet Inc. (GOOGL  ) (GOOG  ) Google's share of daily active users in its search app has declined to roughly 73% from 88% in early 2025, as AI-focused platforms gain traction.

ChatGPT remains the leading revenue generator among AI apps, producing more than $240 million in monthly App Store revenue in April, well ahead of peers.

Apple Earnings Outlook And Valuation

Bank of America expects Apple's services revenue to grow about 14% year over year in the fiscal third quarter.

The firm forecasts earnings per share of $8.61 for fiscal 2026, rising to $9.96 in 2027 and $10.84 in 2028, supported by services expansion and AI-driven hardware upgrades.

It maintained a price target of $330, based on a 32 times multiple of estimated 2027 earnings of $10.29 per share, implying potential upside of about 18%.

Outlook

Analysts said Apple's investment case remains supported by strong capital returns, margin expansion from in-house chip development and growing services contribution. They cautioned that risks include a weaker iPhone upgrade cycle, regulatory pressures and potential slowing in services growth.

Still, they expect Apple's ecosystem strength and AI integration to remain key drivers of long-term performance.

Apple Price Action

AAPL Stock Price Activity: Apple shares were down 1.20% at $276.77 at the time of publication on Monday, according to Benzinga Pro data.