TLDR
- Citi maintained its Buy stance on Apple with a $315 target while reducing FY2026 and FY2027 earnings projections by $0.06 and $0.04 per share.
- Industry forecasts show DRAM costs climbing 50% during Q2 2026 and doubling by year’s end, creating challenges for all phone manufacturers.
- Memory components represent approximately 9% of iPhone production expenses and 15% of costs for iPad and Mac products.
- The investment bank projects a 140 basis-point gross margin compression for Apple during 2026, moderating to 48 basis points the following year.
- The company unveiled the $599 iPhone 17e and $599 MacBook Neo recently, demonstrating superior cost management versus competitors.
A memory cost tsunami is approaching, and tech manufacturers are bracing for impact. Citi’s Atif Malik issued research over the weekend projecting dramatic DRAM price increases — a 50% jump in the second quarter of 2026 followed by doubling during the latter half. While concerning for the industry broadly, Apple’s situation carries unique nuances.
The financial institution adjusted its Apple earnings outlook downward, cutting fiscal 2026 projections by six cents per share and 2027 by four cents. These modifications account for anticipated profitability pressure from escalating component expenses. Nevertheless, Citi retained its Buy recommendation alongside the $315 valuation target.
Shares of Apple were declining approximately 0.7% to $255.81 during Monday’s morning session. The technology giant has already shed roughly 5.3% since the year began.
Memory represents a substantial cost factor for Apple. The component comprises about 9% of iPhone manufacturing expenses and 15% for iPad and Mac production, according to Citi’s analysis. Given the projected price trajectory, these increases compound quickly.
Yet Malik contends Apple stands in a stronger position than most competitors to absorb this shock.
“We believe Apple’s procurement team and purchasing strategies have improved over the years,” he stated. “And Apple likely has the best negotiation power among all smartphone vendors.”
Gross Margin Under Pressure
The investment bank calculates the memory cost surge will generate a 140 basis-point headwind to Apple’s gross profitability during 2026. This compression moderates to 48 basis points in 2027 as DRAM pricing is anticipated to normalize. Projections for 2028 remained unaltered.
Smaller competitors lacking similar procurement influence will likely experience more severe impacts. Citi suggests this differential could actually enable Apple to capture additional market share as rivals grapple with their cost challenges.
The firm maintained its iPhone volume projections — anticipating 1.3% expansion in 2026 reaching approximately 246 million units, followed by 5.9% growth in 2027 to roughly 262 million units.
New Product Launches Signal Resilience
Apple executed an unexpected strategic shift recently, introducing two products at substantially reduced entry prices. The iPhone 17e debuts at $599, significantly beneath the $799 starting price of the standard iPhone 17. The MacBook Neo likewise begins at $599 — representing a 40% reduction versus the previous MacBook Air’s $999 price point.
Evercore ISI’s Amit Daryanani interpreted these launches as proof that Apple is navigating inflationary pressures more effectively than market expectations reflect.
“We think investors are underappreciating how well AAPL is perhaps managing through the memory inflation issue,” Daryanani noted. Evercore assigns an Outperform rating with a $330 target.
Malik further emphasized Apple’s capability to modify pricing throughout its product portfolio and adjust its component specifications to counterbalance cost headwinds. The company has already implemented price increases on select MacBook configurations while maintaining iPhone pricing stability in specific models.
The analyst referenced Apple’s services division and artificial intelligence development pipeline as additional supportive factors. An anticipated Siri enhancement utilizing Google’s Gemini platform is scheduled for later this year. Apple’s device ecosystem encompasses approximately 2.5 billion active units worldwide.
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