TLDR
- Citi maintained its Buy rating on Apple (AAPL) stock with a $315 price target while reducing 2026 EPS estimates by $0.06 and 2027 by $0.04.
- Industry forecasts show DRAM prices climbing 50% in Q2 2026 and doubling by H2 2026, creating pressure across the smartphone industry.
- Memory components represent approximately 9% of iPhone production costs and 15% for iPad and Mac devices.
- The firm projects a 140 basis-point impact on Apple’s gross margins in 2026, declining to 48 basis points in 2027.
- Recent product launches including the $599 iPhone 17e and $599 MacBook Neo demonstrate Apple’s ability to navigate cost challenges more effectively than competitors.
The smartphone industry is bracing for a significant increase in memory costs, and hardware manufacturers are scrambling to adjust. In a weekend research note, Citi analyst Atif Malik flagged an impending DRAM price surge — projected at 50% in the second quarter of 2026 and doubling by year’s end. While this presents challenges for most device makers, Apple’s situation carries unique nuances.
The investment bank adjusted its Apple earnings projections downward, shaving $0.06 from fiscal 2026 estimates and $0.04 from 2027 forecasts. These modifications account for anticipated margin compression from escalating component expenses. Despite these changes, Citi maintained its Buy recommendation and $315 price objective.
Shares of Apple stock declined approximately 0.7% to $255.81 during Monday morning trading. The stock has fallen roughly 5.3% year-to-date entering the current week.
Memory represents a substantial cost component for Apple. According to Citi’s analysis, it comprises approximately 9% of iPhone manufacturing expenses and 15% for iPad and Mac production. Given the magnitude of projected DRAM price increases, the financial impact accumulates quickly.
However, Malik contends Apple possesses superior capabilities to navigate this challenge compared to industry peers.
“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
According to Citi’s calculations, the memory cost escalation will create a 140 basis-point headwind for Apple’s gross margins during 2026. This pressure moderates to 48 basis points in 2027 as DRAM pricing is anticipated to normalize. Projections for 2028 remained unaltered.
Smaller competitors with inferior purchasing leverage will likely experience more severe impacts. Citi suggests this dynamic could enable Apple to capture additional market share as rivals struggle with cost management challenges.
The firm held its iPhone shipment projections unchanged — expecting 1.3% expansion in 2026 to approximately 246 million units, followed by 5.9% growth in 2027 reaching about 262 million units.
New Product Launches Signal Resilience
Apple unveiled two new products last week with unexpectedly aggressive pricing strategies. The iPhone 17e debuts at $599, significantly undercutting the $799 starting price of the standard iPhone 17. The MacBook Neo also launches at $599 — representing a 40% reduction versus the previous $999 MacBook Air entry point.
Evercore ISI analyst Amit Daryanani interpreted these launches as evidence that Apple is navigating inflationary pressures more successfully than market expectations suggest.
“We think investors are underappreciating how well AAPL is perhaps managing through the memory inflation issue,” Daryanani observed. Evercore maintains an Outperform rating with a $330 price target.
Malik also emphasized Apple’s flexibility in adjusting pricing strategies throughout its product portfolio and modifying its bill of materials to counterbalance cost pressures. The company has already implemented price increases on select MacBook configurations while maintaining iPhone pricing stability in certain markets.
The analyst referenced Apple’s services division and artificial intelligence initiatives as additional supportive factors. An anticipated Siri enhancement utilizing Google’s Gemini technology is scheduled for release later this year. Apple’s installed base encompasses approximately 2.5 billion active devices globally.
