Apple’s (AAPL) fiscal first quarter results and outlook should calm investor concerns around memory-related impact, according to analysts, while the quarter saw record-breaking iPhone sales.
Shares of the Cupertino, Calif.-based company dipped about 1% premarket on Friday.
J.P. Morgan kept its Overweight rating on Apple’s stock and raised the price target to $325 from $315.
“Apple delivered a print and an outlook that should calm investor nerves around memory-related impact to gross margins and a Services slowdown, even as the magnitude of iPhone revenue upsides is noteworthy in itself. Record Product gross margins in the Dec-Q and an implied Mar-Q record Product gross margin should help reassure investors around the materiality of the impact that investors have been concerned about in relation to rising memory costs, even though management acknowledged slightly higher impact in Mar-Q than the Dec-Q,” said analysts led by Samik Chatterjee.
The analysts noted that Apple’s management’s tone on the call indicated that the availability of leading-edge foundry capacity is a bigger concern for the company as it looks to match supply with demand, which has exceeded expectations, rather than memory being the single largest factor.
“Within the broader upsides in iPhone demand, mix is a tailwind relative to prior years, indicating a greater mix of consumers opting for higher-end of the portfolio including Pro and Pro Max, which should further reassure investors around lower demand elasticity to any potential price actions that the company might have to take with the launch of the iPhone 18 series to offset potential cost headwinds,” said Chatterjee and his team.
On Thursday, Samsung (SSNLF) said that it expects weak smartphone demand in the first quarter due to seasonal factors and memory supply and pricing pressures, while noting that the ongoing AI boom should support favorable conditions across the memory market.
Driven by the demand from data centers and AI-related infrastructure, memory and storage makers have seen their stocks surge in the past year. Earlier this month, it was reported that Samsung and SK hynix are looking to raise prices for server memory by up to 70% in the first quarter, as a surging demand in AI impacts global supply. Samsung and SK hynix are among the largest memory chipmaking companies.
The analysts noted that in relation to the concerns about a potential slowdown in App Store revenues as indicated in third-party data, they saw limited evidence of the same in fiscal fourth quarter results, where the company was able to deliver 14% year-over-year growth in aggregate Services and also delivered a first quarter record in App Store revenues, while delivering overall records in Advertising, Music, Payments and Cloud revenues.
Wedbush (IVES) maintained its Outperform rating and $350 price target on Apple’s stock, noting that the company delivered “robust iPhone sales with strong outlook,” and that AI would be on the “menu soon.”
“AAPL reported its FY1Q26 (December) results that featured strong beats on the top and bottom lines led by iPhone which grew 23% y/y, particularly in China which saw eye-popping 38% y/y growth and has been a surprise tailwind in the iPhone 17 upgrade cycle thus far,” said analysts led by Dan Ives.
The analysts noted that besides maintaining their rating they are keeping Apple on the Wedbush Best Ideas List and the IVES AI 30 List (IVES)
The analysts added that while the timeline to integrate into Siri is longer than they had expected, Alphabet’s (GOOG) (GOOGL) Gemini announcements were necessary moves for Apple to deliver its own personal assistant within its hardware ecosystem while expecting to deliver a new subscription-based revenue stream to its 2.5B user installed base worldwide.
“We believe no ‘AI premium’ which could be worth $75-$100 per share is factored into Apple’s stock at current prices,” said Ives and his team.
Evercore kept its Outperform rating and $330 price target on Apple’s stock.
“Dec-qtr came in above our upwardly revised estimates, as iPhone + Services strength appears to be more durable than expected. Structurally we think AAPL is positioned to sustain high single digits sales and low teens EPS/FCF growth that could get magnified with share gains as competition likely struggles to get memory allocations. Apple Intelligence (powered by Gemini) will also be another catalyst,” said analysts led by Amit Daryanani.
Morgan Stanley maintained its Overweight rating and $315 price target on the shares.
Analysts led by Erik Woodring said that the “iPhone is outperforming our above-Street ests, and Product mix appears to be an underappreciated offset to growing memory headwinds. Services outperformance should also quell App Store concerns. Not fully out of the woods yet, but we feel incrementally better about ROY setup.”