Bargain-hunting Apple moment? Goldman Sachs: Super upgrade cycle + Siri revamp, iPhone remains the top hardware gateway in the AI era.

Despite Apple’s stock price dropping 5% in early 2026 due to concerns about commodity cost inflation and the App Store, Goldman Sachs believes this presents a good buying opportunity.

According to Chase Wind Trading Desk information, Goldman Sachs maintained its “Buy” rating on Apple in its January 20 report and set a target price of $320. Analysts emphasized that, considering the ongoing iPhone replacement cycle, the anticipated launch of foldable phones, and the implementation of AI functions, the key now is to ignore short-term noise and focus on Apple’s strong pricing power and the resilience of its services business.

iPhone Revenue Surges 13%, Foldable and AI to Continue the Super Cycle

Goldman Sachs is optimistic about the upcoming F1Q26 earnings report, expecting Apple to deliver results above market expectations.

The report forecasts Apple’s quarterly revenue to reach $137.4 billion, up 11% year-over-year. Most notably, the iPhone business is expected to perform strongly, with revenue projected to reach $78 billion, a 13% year-over-year increase.

This growth is driven by two main factors: a 5% year-over-year increase in shipments (with shipments in China an astonishing 26% higher), and an 8% year-over-year rise in average selling price (ASP).

Goldman Sachs points out that demand for the iPhone 17 series is outperforming previous generations, and the future product pipeline will further support this growth momentum. Apple is expected to launch its highly anticipated foldable iPhone (iPhone Fold) in fall 2026, and release the iPhone 18 base model and iPhone Air 2 in spring 2027. This shift to a twice-a-year product cycle, together with upgrades to iOS and Siri 2.0, will effectively sustain the upgrade wave.

Additionally, Apple’s collaboration with Google Gemini on Siri also demonstrates to the market that iPhone remains the primary device for consumers to access AI tools, easing competitive concerns.

Soaring Storage Costs: Worst Case Could Hit Gross Margin Hard, But Apple Can Cope

The biggest point of contention in the market currently is the inflation in storage costs eroding Apple’s profit margins.

Global shortages of DRAM and NAND have pushed prices sharply higher, with industry reports showing that the cost of a 12GB LPDDR5X RAM chip has soared from $30 to $70.

Goldman Sachs’ stress testing model shows that in a “worst-case scenario” with no mitigating measures, if storage costs rise by 120%-140%, Apple’s product gross margin could fall by 8 to 10 percentage points, and overall gross margin by 6 to 7 percentage points.

However, Goldman Sachs stresses this is only a theoretical risk.

In reality, Apple’s huge purchasing scale and long-term supply agreements give it strong defenses. Even as some long-term agreements expire, Apple can still offset cost pressures through supply chain management, product redesigns, and price increases. Unlike lower-margin competitors, Apple’s positioning as a high-end brand gives it greater ability to absorb these costs without suffering the severe impact seen by low-cost rivals.

Services Business Up 14%, App Store Slowdown Does Not Affect the Big Picture

Although App Store revenue growth in F1Q26 is expected to slow to 7%, this is not enough to shake the overall growth logic of the services business.

Goldman Sachs forecasts Apple’s services revenue to grow 14% year-over-year to $30 billion. This growth is mainly driven by strong momentum in other categories, including Traffic Acquisition Cost (TAC), iCloud+, AppleCare+, and subscription service growth.

Investors’ concerns about the App Store mainly center on diversion by third-party payments and macroeconomic effects, but Goldman Sachs believes iCloud+ will continue to expand as demand for data storage increases (driven by AI functions and higher quality media), and the rise in Apple TV+ subscription prices will also support revenue. In addition, improved Google search traffic supports the long-term growth of TAC revenue, proving browser search remains stickier than AI chatbots.

Valuation Premium is Reasonable

From a valuation perspective, Apple’s expected price/earnings (P/E) ratio is about 30 times, which Goldman Sachs believes is justified by strong, stable earnings growth.

For the F1Q26 quarter, Goldman Sachs predicts earnings per share (EPS) of $2.66, in line with market consensus. Gross margin is expected to be 47.7%, at the midpoint of the company’s guidance range (47%-48%), and this already factors in around $1.4 billion in tariff-related costs.

Looking forward to F2Q26 (March quarter), Goldman Sachs expects revenue to reach $104.4 billion, and gross margin to rise to 49.1%, above the market expectation of 47.7%.

With continued strong demand for the iPhone 17 series and the scale effects of services, Apple is expected to maintain robust financial returns while delivering high shareholder returns (buybacks and dividends exceeding $110 billion in fiscal year 2024).

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