Apple earnings leave Wall Street analysts divided as company faces a series of headwinds
Wall Street was divided on how to interpret Apple’s earnings, as investors took the stock lower after a strong rally into the report. Apple delivered a revenue beat in its fiscal third-quarter earnings report . The technology company generated $109.42 billion in revenue during the three-month period, ahead of estimates for $108.65 billion, according to analysts polled by LSEG. Revenues for its iPhone, Mac and wearables products came in above expectations, while revenue for its iPads and services division missed estimates slightly. However, shares were falling almost 8% after the company delivered weaker-than-expected guidance for the current quarter. Revenue growth will total between 9% and 11%, below expectations for 12% according to LSEG. CFO Kevan Parekh said supply constraints for parts is holding growth back, and could particularly impact iPhone revenues. David Vogt, an analyst at UBS, expected investors to take profits in Apple’s stock after shares benefited from the sell-off in AI-trade related names over the past month. AAPL 3M mountain Apple 3-month. “We expect investor pushback after Apple’s shares gained ~15% in July amid the AI infrastructure unwind,” Vogt wrote. As the AI trade comes back in vogue over the last few days, Vogt still views the lack of major investments into the technology by Apple as a liability. “Its lack of a robust AI strategy remains a challenge.” Still, Melius Research analyst Ben Reitzes said the company’s free cash flow — thanks to its lack of AI capital expenditures — is unique in the megacap technology world now that it’s still a reason to own the stock. JPMorgan said high memory costs and supply constraints are overshadowing good news from the report, like the demand for its consumer products. But that’s because Apple may not be prepared to weather this storm like it has past ones, according to Barclays. “We believe AAPL has used most of its lower-priced inventory and is not as prioritized in the supply chain as previous cycles,” wrote Barclays analyst Tim Long in a Thursday note. “We believe the component shortages are at leading edge nodes that are now being prioritized for AI over AAPL products.” Barclays: Underweight, $245 The bank’s price target, down from $253, represents a 26% loss from Thursday’s close. “AAPL 3FQ26 results were mixed as revenue came in at $109.42bn, beating our estimates of $108.05Bn. However, Services revenue and Greater China came in below expectations. Services revenue missed our expectations at $30.74Bn vs our estimates of $31.18Bn and Greater China missed expectations after having strong results the prior two quarters, coming in at $18.82Bn vs Street consensus of $19.58Bn. Softness in mobile gaming in the App Store (link-out transactions pressured top line) was called out as part of the Services deceleration.” UBS: Neutral, $296 “Tougher iPhone comparisons, modest Services growth, and gross margin pressure over the next several quarters into FY27 could reverse defensive positioning, with limited room for multiple expansion: Apple’s NTM P/E premium to the S & P 500 has risen to ~71% from ~50% at June-end, while our FY27/28 revenue and EPS estimates are largely unchanged.” Baird: Outperform, $330 “FQ4 revenue growth guidance of 9-11% missed our prior 12% estimate, though would have beat our estimate if not for Fx and severe supply constraints. While supply constraints are likely to remain a headwind near-tomedium term, more importantly in our judgment, demand indicators remain robust, with new iPhone form factors and Siri AI potential added catalysts. FCF remains a stand-out too.” JPMorgan: Overweight, $340 The bank’s price target, down from $345, implies a 2% gain from Thursday’s close. “The headwinds in relation to supply and costs are combining with incremental pressure from FX headwinds into the Sep-Q to lead to an F4Q (Sep-Q) revenue and underlying gross margin (excluding tariff refunds) outlook, both of which are below our and Street expectations. However, in thinking about the long-term ramifications of the above headwinds, we expect: 1) supply constraints to primarily push out revenue realization from the strong demand cycle into the future quarters rather than being lost revenue; and 2) FX headwinds are likely to turn more benign starting the Dec-Q if current rates hold.” Wells Fargo: Overweight, $350 The bank’s price target, up from $310, indicates a 5% rise from Thursday’s close. “Expect shares to remain range bound as investors assess / question Apple’s GM% outlook into FY27 – iPhone 18 pricing strategy a key focus, in our opinion. We continue to see Apple as a longterm AI winner; however, patience will be required as we / investors question a visible path to bottoming GM% + renewed confidence in sustaining double-digit (ex-FX) Services growth. CY27 & CY28 EPS ests fall ~9% below pre-qtr Street ests.” Morgan Stanley: Overweight, $360 The bank’s price target, down from $364, implies a 9% gain from Thursday’s close. “Supply constraints are limiting Sept Q growth, memory inflation pre-iPhone price hikes is causing more pronounced margin pressure, and Services is decelerating. With shares near all-time highs, we’d expect some softness until new catalysts are nearer.” Goldman Sachs: Buy, $360 The bank’s price target is down from $370. “Although results and the forward quarter guidance clearly disappointed, we think sentiment should improve over the next 1-2 quarters as (1) price increases (Mac, iPad, and eventually iPhone) and price/mix from premium products drive upside to revenue and mitigate margin headwinds (though acknowledging continued cost inflation); (2) volume declines prove better-than-expected as affordability measures (e.g., Apple Upgrade program), new product innovation (e.g., Siri AI, new Mac, iPad, home products), and education & enterprise share gains help mitigate price-volume elasticity; and (3) Services growth stabilizes from increased demand for iCloud+ (tokens) and AppleCare+ (product momentum).” Evercore ISI: Outperform, $365 “While we understand investors will struggle with the GM trajectory into H2, we think AAPL’s guide has an extra dose of conservatism and there are host of levers that could unlock further upside from here.” Citi: Buy, $365 “Despite the softer near-term outlook, we remain constructive on Apple’s long-term trajectory, supported by its ability to gain share. Looking ahead, the upcoming September iPhone launch and rollout of enhanced Siri AI capabilities represent important catalysts with potential for iCloud+ adoption to enhance Services segment growth.” Melius Research: Buy, $370 The firm’s price target, down from $385, indicates an 11% gain from Thursday’s close. “Just think how much share Apple would be gaining in Macs and iPhones if it didn’t have to raise prices and could get its hands on more 2 & 3nm silicon. A foldable is coming and a few new iPhones while the low-end Neo is a hit and Macs are the go-to hardware for agentic AI. iPhones have made a comeback in China and there’s a desire to refresh iPhones globally even amidst some pull-ins. While we see memory being structurally tight for a long time (higher pricing here to stay), Apple clearly needs more from TSMC and should be beating down Intel’s door.” Bank of America: Buy, $380 “Services revs faced a tough y/y compare from the theatrical release of F1 (sports movie) last year, and App Store revs faced headwinds in mobile gaming and from changes to the business model in certain countries. Cloud services, video, payment services and advertising saw strength. Revs for F4Q were guided in-line with F3Q, ex the 2.5% higher FX impact q/q. While Services came in somewhat weaker than we expected, the Apple installed base still remains underpenetrated, and we see room to expand Services revenues especially as Apple starts to monetize AI Siri related applications.”
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