VALUATION HIGHLIGHTS

1. Services constitute 47% of the Trefis price estimate for Apple's stock.
2. iPhone constitutes 35% of the Trefis price estimate for Apple's stock.

WHAT HAS CHANGED?

Apple's Q1 FY'26 earnings

Apple reported strong Q1 FY 2026 results for the quarter ended December 27, 2025. The company posted $143.8 billion in quarterly revenue, up about 16% year-over-year, and diluted earnings per share of $2.84, up roughly 19%, both well ahead of expectations. Growth was driven by record-high iPhone revenue of approximately $85.3 billion, up about 23%, and services revenue of around $30 billion, up 14%, reflecting broad demand across products and digital services.

Note: Apple's FY'25 ended on September 27, 2025. Q1 FY'26 ended on December 27, 2025.

Launch of iPhone 17 Series

Apple unveiled its new iPhone 17 lineup at its September 2025 event, introducing the iPhone 17, a redesigned iPhone 17 Pro, and the all-new ultra-thin iPhone Air. The series features major technological upgrades, including the A19 chip, enhanced camera systems, and advanced display technology. Apple also raised prices for the Pro model - likely its best-selling variant - a move that could boost profit margins.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Apple's value that present opportunities for upside or downside to the current Trefis price estimate for Apple:

iPhone revenues And margins post improvements

• iPhone Revenue and Gross Margin:
  We estimate that Apple's iPhone revenues will improve from $209 billion in FY'24 to around $245 billion by FY'31. However, if the company can improve its iPhone revenues to around $260 billion by the end of our review period, with gross margins rising to about 50% from our current forecast of 48%, there could be an upside of about 10% to our price estimate.

For additional details, select a driver above or a division from the interactive Trefis split for Apple at the top of the page.

BUSINESS SUMMARY

Apple makes money primarily by selling mobile phones, computers, and tablets to consumers worldwide. Apple's well-known consumer products include the iPhone, Mac, iPad, and Apple Watch. In addition to selling hardware, Apple makes money from services that include the App Store, Apple Music, and iCloud.

SOURCES OF VALUE

We believe the iPhone segment is more valuable than the Mac and iPad segments due to the following:

Large mobile phone market

The smartphone market is significantly larger than the tablet market, and margins in the smartphone business are also likely to be higher. About 1.22 billion smartphones were shipped globally in 2024, per Canalys.

KEY TRENDS

Mac Gains Traction

Apple's Mac computers have gained market share due to their superior product differentiation, proprietary Mac OS software and applications, speedy M-Series processors, and premium build quality. Apple has also been benefiting from the fact that it plays in the high end of the PC market, typically focusing on the lucrative $1,000+ price points rather than the commoditized low- and mid-range where a bulk of the volumes come from. Over FY'22, Mac revenues reached an all-time high of $40 billion, before declining to about $30 billion in FY'23 and FY'24 as the Covid-19-related boom eased.

Services Present A Growth Opportunity

Apple's Services business has grown 2x between 2019 and 2024, eclipsing the iPad and Mac to become the company's second-largest business segment with revenues of about $85 billion in FY'23. While the App Store remains the primary driver of growth, services such as Apple Music and Apple TV+ are also gaining traction. Apple's base of paid subscriptions on its platform has also been rising steadily, with over 1 billion active subscriptions as of late 2024.