Apple Inc (NASDAQ:AAPL, XETRA:APC) shares fell nearly 10% following its latest earnings report as analysts highlighted supply constraints, rising memory costs and a more challenging margin outlook heading into fiscal 2027.
UBS wrote that Apple delivered an “in-line quarter” with solid iPhone demand but weaker-than-expected Services growth.
The firm noted that investor expectations could face pressure after Apple’s shares gained around 15% in July, while broader technology stocks declined.
“Although Apple’s cash flow is less impacted by AI-related capex than Mag 7 peers, its lack of a robust AI strategy remains a challenge in our view,” UBS wrote.
The firm maintained a ‘Neutral’ rating and a $296 price target, citing limited upside to estimates and an elevated valuation.
Apple reported fiscal third quarter iPhone revenue of $54.3 billion, up 22% year over year and ahead of UBS’ $53.3 billion estimate, supported by strong demand for the iPhone 17 lineup and improved component availability. However, Services revenue of $30.7 billion, up 12% year over year, came in below UBS’ $31.4 billion forecast.
UBS highlighted that gross margin excluding tariff refunds was 48.1%, broadly in line with expectations, but warned that higher memory costs and increasing component expenses could weigh on profitability in coming quarters. The firm wrote that supply constraints are expected to “increase significantly sequentially,” affecting iPhone, Mac and iPad production.
The firm added that Apple’s September quarter outlook points to slowing iPhone growth, with revenue growth expected to decelerate despite strong recent demand. UBS expects gross margins to face further pressure as higher memory costs filter through and tariff-related benefits fade.
UBS made minor changes to its earnings forecasts, raising its fiscal 2026 earnings-per-share estimate to $8.85 from $8.72 due to an 11-cent tariff refund benefit, while leaving fiscal 2027 and 2028 estimates unchanged. The firm lowered its target valuation multiple to 29 times from 30 times earnings, citing stronger iPhone demand but increasing gross margin headwinds and supply chain challenges.
Wedbush focused on Apple’s comments around memory costs, noting that expenses increased in the March quarter, rose significantly again in June and are expected to increase further in September.
The firm wrote that Apple’s inventory buffer had only partially offset higher costs in the June quarter, with that benefit now largely spent. Wedbush said the continued cost inflation supports its view that pricing power should persist for memory suppliers Micron Technology and Sandisk deeper into 2027.
Wedbush also highlighted Apple’s efforts to evaluate additional supply options, including Chinese memory suppliers, as evidence of broader capacity constraints across the industry. The firm wrote that Apple’s willingness to seek additional supply supports its view that the market faces both a volume problem, with even the largest hardware companies struggling to secure enough capacity, and a pricing problem.
