Citibank adjusts Apple's 2026 second-half outlook due to memory price increases

Investing.com - Citi analysts say that Apple is expected to face profit margin pressure this year due to rising memory costs, prompting the bank to lower its earnings forecasts for the second half of 2026 (H2 26).

Although Apple has an advantage over most smartphone manufacturers in coping with higher component costs, soaring memory prices could put pressure on profitability. Analyst Atif Malik wrote in a report: “While we believe Apple can better handle rising memory component prices than its peers, we see gross margin facing incremental pressure.”

Using InvestingPro to find the hottest analyst stock recommendations

Citi currently expects a 140 basis point headwind to gross margin in 2026, with an additional 48 basis points in 2027 as DRAM prices surge significantly. The bank assumes DRAM prices will rise 50% in Q2 2026 and 100% in the second half, with most of the increase easing in 2027.

To reflect these pressures, Citi slightly lowered its earnings forecasts for fiscal years 2026 and 2027, reducing estimates by $0.06 and $0.04 per share, respectively, while maintaining its outlook for 2028. Despite the revisions, the bank reaffirmed a buy rating and maintained a target price of $315.

Citi also kept its iPhone shipment outlook unchanged, forecasting growth of 1.3% in 2026 and 5.9% in 2027, corresponding to approximately 246 million and 262 million units, respectively. Malik believes that, due to competitors facing greater difficulties in managing component cost increases, Apple may gain market share in the current environment.

He stated: “Large manufacturers like Apple are better able to cope with this situation and may seize opportunities to gain market share.”

Due to limited memory supply and rising prices, the overall smartphone market is expected to remain weak. Industry forecasts cited by Citi indicate that global smartphone shipments will decline in 2026, with a moderate recovery in the following years.

Malik said that Apple still has multiple ways to offset cost pressures, including potential price adjustments and bill of materials (BOM) modifications. The tech giant has already increased prices for some MacBook models while keeping certain iPhone configurations stable to stay competitive in a weak demand environment.

Beyond hardware, the analyst also emphasized that services and AI initiatives are additional growth drivers. Apple’s collaboration with Google Gemini technology is expected to support a major Siri upgrade later this year, while service growth continues to benefit from the company’s approximately 2.5 billion active devices.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.