Apple Inc.: F1Q26 Earnings Preview — More Near Term Cost Uncertainties Before a Catalyst Laden 2H
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Morgan Stanley maintains an Overweight rating on Apple with a target price of $315 ahead of its F1Q26 earnings, though the firm adopts a cautious short-term stance. While robust iPhone 17 demand could drive revenue upside, rising memory costs and underestimated operating expenses are likely to limit any significant upside to earnings per share estimates. For the December quarter, Morgan Stanley projects iPhone revenue of $80 billion on 83 million units, exceeding market expectations by 4%. For the March quarter, iPhone revenue is modeled at $55.4 billion on 60 million units, beating consensus by 8%. Supply chain checks suggest December-quarter assembly volumes approached 90 million units, implying conservative shipment forecasts.
Despite this strong demand backdrop, profitability faces headwinds. Market consensus for March-quarter operating expenses sits roughly 7% below the Morgan Stanley estimate, reflecting ongoing artificial intelligence investments. Furthermore, surging memory costs, with NAND prices up 55% to 60% sequentially, are expected to push gross margins 30 basis points below consensus. Consequently, Morgan Stanley forecasts June-quarter earnings per share at $1.62, compared to the $1.71 market consensus. Nevertheless, the valuation remains attractive at 25 times FY27 earnings, representing a 1.2 times relative multiple to the S&P 500, near a five-year low. The firm anticipates several catalysts in the second half, including the Siri relaunch, a foldable iPhone, and the 2-nanometer iPhone 18.