TLDR
- Citi maintained its Buy rating on Apple with a $315 price target while reducing 2026 EPS estimates by $0.06 and 2027 by $0.04.
- DRAM costs are projected to climb 50% in Q2 2026 and double by H2 2026, creating industrywide pressure on smartphone manufacturers.
- Memory components represent approximately 9% of iPhone production costs and 15% for iPad and Mac devices.
- Apple faces an estimated 140 basis-point gross margin pressure in 2026, declining to 48 basis points in 2027, according to Citi.
- Last week’s launch of the $599 iPhone 17e and $599 MacBook Neo demonstrates Apple’s superior ability to navigate cost pressures compared to competitors.
DRAM prices are heading upward sharply, creating significant challenges for smartphone manufacturers. Citi analyst Atif Malik released research Sunday forecasting DRAM costs will jump 50% in Q2 2026 and double during the second half of the year. While this creates headwinds for hardware companies broadly, Apple’s situation carries additional nuance.
Citi adjusted its fiscal 2026 EPS projection for Apple downward by $0.06 and reduced 2027 estimates by $0.04. These changes account for anticipated margin compression from escalating component expenses. The firm maintained its Buy rating and $315 price target on the stock.
Apple stock traded down approximately 0.7% at $255.81 Monday morning. Shares have declined roughly 5.3% year-to-date entering this week.
Memory represents a substantial cost category for Apple. The component accounts for roughly 9% of iPhone production expenses and 15% for iPad and Mac products, according to Citi’s analysis. Given the projected DRAM price movements, these percentages translate into meaningful financial impact.
Malik contends Apple holds advantages over most competitors in managing this challenge.
“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
Citi projects the memory cost surge will create a 140 basis-point headwind on Apple’s gross margins during 2026. This pressure moderates to 48 basis points in 2027 as DRAM pricing is anticipated to normalize. The firm’s 2028 projections remained unaltered.
Smaller competitors with weaker purchasing leverage face more severe margin compression. Citi believes this dynamic could enable Apple to capture additional market share as rivals wrestle with cost structure challenges.
Citi maintained its iPhone shipment projections — 1.3% growth 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 introduced two products last week at substantially reduced price points. The iPhone 17e carries a $599 starting price, significantly below the $799 entry level of the standard iPhone 17. The MacBook Neo also debuts at $599 — representing a 40% reduction compared to the previous $999 MacBook Air.
Evercore ISI analyst Amit Daryanani interpreted these launches as evidence Apple is navigating inflationary pressures more effectively than market valuations reflect.
“We think investors are underappreciating how well AAPL is perhaps managing through the memory inflation issue,” Daryanani stated. Evercore assigns the stock an Outperform rating with a $330 price target.
Malik emphasized Apple’s flexibility in adjusting pricing throughout its product portfolio and modifying its bill of materials to counterbalance cost pressures. Apple has implemented price increases on select MacBook models while maintaining iPhone pricing stability in certain configurations.
The analyst cited Apple’s services division and artificial intelligence strategy as additional supporting 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.
