VALUATION HIGHLIGHTS

1. Services constitute 47% of the Trefis price estimate for Apple's stock.
2. iPhone constitutes 36% of the Trefis price estimate for Apple's stock.

WHAT HAS CHANGED?

Latest Earnings: Q2 Fiscal 2026

Apple reported record March quarter revenue of $111.2 billion, a 17% year-over-year increase, while diluted EPS surged 22% to $2.01. Financial outperformance was driven by double-digit growth across all geographic segments and a new all-time high for the Services division, alongside strong demand for the iPhone 17 lineup that pushed the active installed base beyond 2.5 billion devices.

Note: Apple's FY'25 ended on September 27, 2025. Q2 FY'26 ended on March 28, 2026.

Aggressive Capital Return and Shareholder Yield

Following the strong quarterly results, Apple's board authorized an additional $100 billion for share repurchases and raised the quarterly dividend by 4% to $0.27 per share. This move underscores management's confidence in long-term cash flow generation despite moderate supply constraints in advanced-node system-on-chip capacity and rising memory costs.

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:

iPhone and Hardware

• Advanced-Node Supply Constraints: Management flagged ongoing capacity limitations for next-generation silicon. If supply fails to meet the sustained demand for the iPhone 17 family through the second half of the year, there is a risk of a 3-5% revenue shortfall in the hardware segment.


• Emerging Market Expansion: Apple achieved double-digit growth in Greater China and other emerging economies this quarter. Continued momentum in these regions could drive hardware margins higher than the current Trefis estimate of 37% due to favorable product mix toward Pro models.

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

BUSINESS SUMMARY

Apple operates a premium hardware-software ecosystem, utilizing its industry-leading iPhone and Mac brands to anchor users into a high-margin services platform that includes the App Store, iCloud, and financial services.

SOURCES OF VALUE

The massive and growing installed base of active devices provides a low-churn environment for high-margin digital revenue.

Scale of Active Installed Base

Apple's active installed base now exceeds 2.5 billion devices, providing an unparalleled platform for cross-selling services and new hardware. This scale ensures that even incremental improvements in services penetration lead to significant absolute growth in operating cash flow.

Hardware-Led Services Growth

Services revenue hit a record $30 billion this quarter, accounting for over 20% of total sales. The high gross margins associated with this segment act as a powerful catalyst for overall corporate margin expansion, reducing the company's reliance on hardware refresh cycles.

KEY TRENDS

Rising Memory and Component Costs

Apple is navigating a period of accelerating memory prices, which may pressure hardware gross margins toward the 47% floor in the coming quarters. The company's ability to offset these costs through high-end product mix and inventory management will be a key determinant of near-term profitability.

Next-Generation Product Launches

The recent introduction of the MacBook Neo and M4-powered iPad Air signals an aggressive refresh of the computing lineup. These products, combined with the upcoming WWDC 2026 AI catalysts, are positioned to sustain hardware momentum and further integrate generative AI capabilities into the user experience.