Bank of America points out in its latest research note that as Apple adjusts its product launch cadence and staggers iPhone release timing, Wall Street's earnings expectations for Apple may contain a "modeling error." Bank of America maintains its "Buy" rating on Apple with a price target of $370.
Bank of America analyst Wamsi Mohan wrote in a note to clients: "Apple will report fiscal 2026 fourth-quarter (September quarter) results after the U.S. market close on Monday, November 2, and investors will focus on component cost inflation, gross margin sustainability, and services revenue growth."
He noted that due to Apple's staggered iPhone launch strategy (with the Pro, Pro Max, and Duo released in September and the base model and Air released the following March), combined with price increases to offset rising component costs, Bank of America has broadly lowered its earnings estimates.
In Mohan's view, because of this year's staggered release, the market's revenue expectations for the December 2026 quarter and gross margin expectations for the March 2027 quarter are too high, while revenue expectations for the June 2027 quarter are too low (though gross margin expectations for that same quarter are too high).
Specifically, Bank of America has cut its fiscal 2027 iPhone shipment forecast by 9 million units to 247 million units (Wall Street expects 260 million units).
Bank of America projects fiscal 2026 fourth-quarter revenue of $113 billion and earnings per share of $1.97 (Wall Street expects $114 billion and $1.99, respectively); it expects fiscal 2027 first-quarter revenue and earnings per share to be significantly below Wall Street expectations, but given potential tariff refunds and memory inventory conditions, Bank of America's forecasts may prove conservative, especially on gross margin.
Mohan believes the margin pressure is temporary and predicts gross margin will recover from the end of fiscal 2027 through fiscal 2028.
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