Apple set to report earnings: iPhone growth, AI, memory costs will be in focus in first quarter

Apple is gearing up to unveil its fiscal first-quarter earnings this Thursday, and analysts are buzzing with expectations based on LSEG consensus estimates. The quarter, which wraps up in December, has seen the tech giant anticipate a significant surge in iPhone sales during the holiday season. Apple has forecasted an overall revenue growth of 10% to 12% for the quarter, with iPhone sales expected to reflect a similar double-digit increase. This projection suggests that revenue could range between $136.73 billion and $139.22 billion, marking the first full quarter of iPhone 17 sales. Despite these optimistic forecasts, investor sentiment appears to be cautious, with Apple's stock experiencing a nearly 11% decline since its peak on December 2. Analysts will likely press Apple’s leadership regarding operating expenses, especially concerning the soaring costs of components such as memory and storage, which have been significantly impacted by an AI-driven supply shortage. Given that all of Apple's devices, including the iPhone, Mac, and iPad, rely heavily on storage and memory, the company faces critical questions about managing these rising costs during a pivotal growth period. In a recent statement, CFO Kevan Parekh mentioned that while there has been a slight easing of memory prices, he deemed it “nothing really to note.” Morgan Stanley analyst Erik Woodring expressed concern that Wall Street might not have fully accounted for the potential margin impacts resulting from increasing memory costs in their fiscal year 2026 estimates. He maintains a buy rating on Apple’s stock with a $315 price target, but he cautioned that while he does not foresee immediate effects from the memory price surge this quarter, future developments could alter that outlook. Additionally, Apple CEO Tim Cook is expected to discuss the company’s AI strategy during the earnings call. Recently, Apple announced a partnership with Google's Gemini to enhance its Apple Intelligence software by replacing some of its internally developed AI models. Cook may also highlight the anticipated release of a more personalized Siri, leveraging advancements in AI technology. However, analysts at Jefferies have pointed out that the commercialization of AI remains a complex challenge, particularly in light of rising memory costs. Analyst Edison Lee noted that the use case for AI applications among consumers is not yet clear, and the increasing expenses associated with memory could make it difficult to justify investing in edge AI applications over the next two years. He currently holds a steady rating on Apple’s stock. As the earnings report approaches, all eyes will be on Apple to see how the company navigates these challenges and whether its strategies will lead to anticipated growth in a competitive market.