Goldman Sachs raises Apple's target price to $330, strong outlook but expects memory cost pressure

Goldman Sachs released a report stating that Apple Inc. (AAPL.US) reported earnings per share of $2.84 for the first fiscal quarter of fiscal year 2026 ending in December last year, surpassing both the firm's and market consensus estimates of $2.66 and $2.67, primarily driven by iPhone revenue, which reached $85.3 billion, a year-on-year increase of 23% (the firm's original estimate was a year-on-year increase of 13%); service revenue was $30 billion, a year-on-year increase of 14%, in line with expectations. Apple's revenue guidance for the second quarter of fiscal year 2026 ending in March this year is expected to grow by 13% to 16% year-on-year (with service revenue expected to grow by 14% year-on-year), exceeding the market consensus of a 10% year-on-year increase. The firm noted that although the second quarter guidance is better than expected, revenue could have been higher if not constrained by the supply of 3-nanometer advanced process SoCs (system-on-chips).

Additionally, Apple guided that its operating expenses for the second quarter would be between $18.4 billion and $18.7 billion, marking the first quarterly increase in operating expenses for Apple in the second quarter, reflecting the company's investments in artificial intelligence and new products. Thirdly, Apple achieved record-high gross margins in both products and services, but the firm also anticipates potential future pressures from additional memory cost inflation.

Goldman Sachs reiterated its "Buy" rating on Apple Inc., raising its 12-month target price from $320 to $330