While supply chain pressures mount, Wall Street’s focus remains fixed on Apple’s long-term strategic shift. The central question for investors is whether the company’s aggressive push into artificial intelligence can offset the tangible margin pressures from soaring hardware expenses.
Record Performance Provides Foundation
Apple’s recent quarterly results offer a robust financial backdrop. In late January, the company reported record revenue of $143.8 billion for its first quarter, representing a 16% year-over-year increase. Earnings per share saw an even stronger jump, climbing 19%. During the earnings call, CEO Tim Cook described customer demand as “simply staggering.”
The company’s expansive ecosystem, now comprising over 2.5 billion active devices globally, presents a massive installed base for its upcoming software initiatives. This foundation is critical, as new, computationally intensive AI features are expected to drive a significant hardware upgrade cycle among users.
Analyst Confidence Amid Cost Headwinds
Market experts are looking beyond near-term challenges. Bernstein analyst Mark Newman recently issued a bullish signal, raising his price target for the iPhone maker from $325 to $340. He acknowledged that component costs for the next iPhone generation could rise by approximately 15% due to a global shortage of memory chips. However, Newman argues that investors focusing solely on these expenses are missing the broader narrative.
Should investors sell immediately? Or is it worth buying Apple?
The pivotal factor for the stock by 2026, in his view, will be the rollout of “Apple Intelligence” and Siri 2.0. The strategic partnership with Google to integrate its Gemini AI technology is seen as a central catalyst for future growth.
The Memory Chip Squeeze
The procurement landscape remains tense. According to Bernstein research, DRAM memory prices have skyrocketed by a massive 237% since the second quarter of 2025, while NAND flash memory has become 70% more expensive.
Newman calculates that this trend could pressure gross margins by roughly 1.5 percentage points by the end of 2027. The impact on earnings per share, however, is projected to be muted, leaving the long-term growth story intact.
Key Data Points:
* Price Target: Bernstein raises to $340
* Recent Close: $273.68 (Previous Session)
* Q1 Revenue: $143.8 billion (+16%)
* Dividend: $0.26 (Payable tomorrow, February 12)
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