Apple Earnings Outlook: iPhone Growth, AI Strategy, and Rising Costs

Apple is scheduled to report its fiscal first-quarter Apple earnings on Thursday after market close, with investors closely watching iPhone sales momentum, artificial intelligence initiatives, and rising component costs. The quarter, which ended in December, covers Apple’s critical holiday season and the first full reporting period for iPhone 17 sales.

Despite expectations of solid financial performance, Apple shares have declined nearly 11% from their December 2 peak, reflecting broader concerns around margins, operating expenses, and longer-term growth sustainability.

Market Expectations Heading into Earnings

According to LSEG consensus estimates, Apple previously guided for overall revenue growth of 10% to 12% in the fiscal first quarter, alongside similar double-digit growth for iPhone sales. Based on this outlook, Apple is expected to report revenue in the range of approximately $136.7 billion to $139.2 billion.

This guidance has fueled analysts' optimism that Apple could deliver a quarterly earnings beat. However, market sentiment remains cautious as investors weigh near-term strength against potential cost pressures in upcoming quarters.

Apple Earnings Outlook: Margin Pressure and Rising Memory Costs

A key theme expected to dominate the earnings call is operating costs, particularly the sharp rise in memory and storage prices. Apple devices, including the iPhone, Mac, and iPad, are heavily dependent on memory components, which have become more expensive due to an AI-driven supply shortage.

While Apple’s finance chief Kevan Parekh stated in October that memory prices were presenting only a minor tailwind at the time, several analysts believe the market may be underestimating future margin impact.

Morgan Stanley analyst Erik Woodring noted that current consensus forecasts may not fully reflect the potential pressure from rising component costs in fiscal 2026. Although he does not Expect memory prices to materially affect margins in the current quarter, he cautioned that the impact could become more pronounced as the year progresses.

iPhone 17 Cycle and Cost Trade-Offs

Analysts continue to express confidence in the strength of the iPhone 17 upgrade cycle, suggesting that demand has exceeded earlier expectations. However, this optimism is balanced by concerns that higher operating expenses and margin headwinds have not yet been fully priced into earnings models.

This disconnect between strong product demand and rising costs could Influence how investors interpret Apple’s forward guidance during the earnings call.

Apple’s AI Strategy Under the Spotlight

Apple’s artificial intelligence roadmap is another major focus area. Earlier this month, the company confirmed it has selected Google’s Gemini to power parts of its Apple Intelligence platform, replacing some internally developed AI models.

CEO Tim Cook is also expected to address the upcoming launch of a more personalized version of Siri, designed to leverage recent advances in AI. While this signals Apple’s intent to remain competitive in the AI space, analysts remain cautious about near-term monetization.

Jefferies analysts have warned that commercializing AI features remains challenging, particularly as rising memory costs could make edge AI applications harder to justify financially over the next two years.

Investor Takeaways

Apple’s upcoming earnings report is shaping up to be a balancing act between strong iPhone demand, growing AI ambitions, and mounting cost pressures. While near-term revenue performance may remain resilient, longer-term margin sustainability and AI monetization will be critical factors influencing investor confidence.

As Apple navigates a major product cycle alongside structural shifts in technology costs, the company’s guidance and commentary could set the tone for the stock in the months ahead.