iPhone 17 Demand vs. Memory Costs
Strong iPhone 17 demand is anticipated to significantly contribute to Apple's revenue and could help offset margin pressure from higher memory costs.
Strong iPhone 17 Momentum: Analysts expect Apple's Q1 FY26 results to reflect strong iPhone 17 momentum, with expectations for double-digit growth in iPhone sales. JPMorgan and Bank of America analysts both cite better-than-expected iPhone demand as a key driver for an earnings beat. Some estimates suggest 85 million iPhones were sold in the first fiscal quarter, with iPhone revenue projected to rise 17% year-over-year.
Memory Cost Headwinds: The core concern lies in the significant surge in NAND and DRAM memory prices. Memory previously constituted 8% to 10% of Apple's iPhone bill of materials (BOM) cost, averaging about $50 per phone. While Apple managed to avoid the cost impact in the December quarter due to strong supply chain relationships and pre-signed agreements, the risk is shifting to the second half of 2026. UBS warns that gross margins for the June and September quarters could face 50 to 100 basis points of downward pressure as new iPhone production peaks.
Manageable Impact: Despite these concerns, Bank of America analyst Wamsi Mohan believes that rising memory costs could be a "manageable" headwind for Apple in 2026. JPMorgan analyst Samik Chatterjee suggests Apple can largely absorb higher memory prices with limited impact due to its strong supply chain.
Beating Expectations and Reversing Underperformance
If Apple beats expectations, it could contribute to reversing recent underperformance, as analysts are optimistic about the company's reliable execution and future catalysts.
Analyst Optimism: JPMorgan has reiterated an Overweight rating and raised its price target for Apple, citing confidence in the company's outlook and viewing recent underperformance as an attractive entry point. Analysts expect Apple to report strong Q1 results, potentially marking its 12th consecutive quarter of beating EPS and revenue estimates.
Key Drivers for a Beat: Better-than-expected iPhone demand, strong iPhone 17 sales, and a reduction in operating expenses are cited as potential drivers for an earnings beat. The company's Q1 FY26 revenue is expected to grow between 10% and 12% year-over-year, which would be a record for the company.
Future Catalysts: While Q1 FY26 earnings are important, analysts also highlight upcoming catalysts that could further boost the stock, such as the iPhone 18 series, a foldable iPhone, and enhanced AI integration, including a Siri refresh. Wedbush analyst Dan Ives calls 2026 a "pivotal year" for Apple, with an "AI premium" of $75 to $100 per share not yet factored into the stock price.
Current Stock Performance: Apple's stock has experienced some underperformance, trading down 1.3% to $254.96 on Wednesday, January 29, 2026, and is down 5.9% year-to-date in 2026. However, the stock traded over 3% higher today (January 29, 2026), fueled by investor optimism ahead of the earnings report and strong iPhone market share gains in India. The current close is $256.44, representing a change of -0.71%.
While strong iPhone 17 demand is expected to drive robust Q1 FY26 results and could help mitigate memory cost pressures, the long-term reversal of underperformance will also depend on Apple's ability to execute on its AI strategy and deliver future product innovations like the iPhone 18 and a foldable iPhone.
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