1. Can strong iPhone 17 demand offset margin pressure from higher memory costs?
Positive factors supporting this view
JPMorgan expects stronger-than-expected iPhone 17 demand to be a key driver of Q1 2026 revenue and earnings, and has raised its price target to $315 with an Overweight rating ahead of the earnings release. It also anticipates lower operating expenses than guidance, which should help margins.
Other analysts are similarly noting robust iPhone 17 sales as the primary engine of revenue growth for the quarter.
Challenges from memory cost inflation
A broad set of market intelligence indicates that memory chip prices have risen sharply globally, driven by strong AI demand and supply tightness, and this is compressing margins for consumer device makers.
Even analysts who are positive on the near-term earnings beat acknowledge gross margin pressure from rising DRAM and NAND costs.
Some research suggests that prolonged high memory pricing could materially erode gross margins, even for Apple’s high-end hardware.
Balancing these forces
JPMorgan’s view is that Apple’s scale, long-term supplier contracts and supply chain leverage should mitigate much of the memory cost impact in the near term, allowing iPhone revenue strength to outweigh cost inflation in Q1.
Other analysts see margin pressure persisting but expect that higher iPhone volumes and stable pricing will still sustain leverage in overall profitability, at least through this quarter.
Assessment
On balance, it is plausible that strong iPhone 17 demand will offset a significant portion of margin pressure in this quarter, but not eliminate it entirely. Apple’s ability to manage costs critically depends on contract pricing for memory and its product mix (higher-end models carry better margins). An earnings beat driven by iPhone sales and cost control is consistent with many analyst forecasts; yet memory cost headwinds will remain a risk factor for margins longer term.
2. If Apple beats expectations, is that enough to reverse recent underperformance?
Underperformance context
Apple’s stock has lagged the broader market and major tech peers in recent months, partly due to investor concerns about memory cost inflation and Services slowdown.
Over the year Apple stock has risen, but it has been weaker year-to-date, reflecting these near-term worries.
Potential catalysts for a reversal
A clear earnings beat in revenue and earnings per share driven by iPhone strength could restore investor confidence and reduce the focus on cost concerns. Many analysts are positioning for this outcome.
Valuation metrics such as price-to-earnings multiple are below historical peaks for Apple in major upgrade cycles, which some analysts see as supportive of upside if the data is strong.
Additional product catalysts later in the year (e.g. foldable iPhone, next-generation devices and AI features) could strengthen the narrative beyond the current quarter.
Risks to a sustained reversal
If the earnings beat is narrow (e.g. good revenue but weak guidance), or margins disappoint because memory costs persist more than expected, the stock may struggle to sustain an upward trend.
Services growth softness or greater competition could temper investor enthusiasm even with a near-term beat.
Assessment
A solid earnings beat could spark a meaningful short-term recovery in Apple’s share price and help reverse recent underperformance. However, for a more durable reversal investors will likely look for evidence that margin pressures are stabilising and that future product cycles and Services growth provide sustained growth prospects.
Conclusion
Strong iPhone 17 demand appears sufficient to support an earnings beat this quarter and may counteract some margin pressure. Whether this translates into a sustained stock performance reversal will depend on the quality of guidance Apple provides and how investors interpret cost trends going forward.
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