Citi's latest report has lowered Apple's target stock price from $330 to $315, indicating that soaring memory prices will directly squeeze Apple's profit margins, with its 2026 gross margin expected to face significant downward pressure.

According to the report, the bank's model shows that the average selling prices (ASPs) for DRAM and NAND flash memory in 2026 are projected to rise by 88% and 74% year-over-year, respectively. If Apple faces a 50% increase in its DRAM procurement costs, its 2026 gross margin is estimated to come under approximately 100 basis points of downward pressure.

The report notes that while rising memory chip prices will directly compress profits, Apple's premium market positioning and supply chain bargaining power mean the impact will be less severe than for most Android manufacturers. In the long term, AI upgrades for Siri and the anticipated launch of the first foldable iPhone in the second half of 2026 are expected to become new growth drivers for the company.

iPhone demand remains resilient, with its premium positioning providing a buffer. Citi's research, developed in collaboration with its internal research and innovation lab, indicates that demand for the iPhone 17 remains strong through late 2025, with a normal seasonal slowdown expected in the March quarter. The bank's model forecasts iPhone shipments of 82 million units for the December quarter and 56 million for the March quarter, representing year-over-year growth of 45% and a decline of 32%, respectively, outperforming market expectations of 41% growth and a 34% decline.

Amid the current environment of sharply rising memory prices, Apple's high-end market position and supply chain influence are expected to afford it stronger cost-pass-through capabilities. Citi's analysis suggests that despite rising component costs, Apple's iPhone shipments could still achieve 1.2% growth in 2026, significantly outperforming the projected 5% overall decline in the global smartphone market. Historical data shows that during the previous memory price hike cycle of 2017-2018, Apple's gross margin faced pressures of approximately 110 basis points and 70 basis points in September 2017 and March 2018, respectively.

Third-party data also corroborates Apple's market performance. Preliminary statistics from IDC show that Apple shipped 81 million phones in Q4 2025, a 5% year-over-year increase, raising its market share to 19.7%, with full-year shipment growth of 6.3%. A Counterpoint report noted that iPhone shipments grew 10% in 2025, capturing a 20% market share and further solidifying its dominance in the premium segment.

Rising memory prices present a significant cost pressure. Soaring memory chip prices have become a key supply chain risk for investors. Citi's research model predicts that the ASPs for DRAM and NAND flash will surge by 88% and 74% year-over-year in 2026, respectively, far exceeding the increases seen in any previous memory upcycle.

Based on an analysis of the bill of materials, Citi estimates that memory accounts for approximately 9%, 15%, and 15% of the cost for the iPhone, PC, and iPad, respectively. If Apple faces a 50% increase in DRAM procurement prices in 2026, it is estimated to exert about 100 basis points of downward pressure on its overall gross margin. Supply chain checks indicate that Apple has largely completed price negotiations for 2026 NAND flash memory, but uncertainty remains regarding DRAM pricing.

Growth in services and confirmation of Gemini partnership. The latest data from Sensor Tower shows that App Store revenue grew 7% year-over-year in the December quarter, below the company's guidance for approximately 14% growth in total services revenue. Notably, a trend divergence has emerged in recent quarters between the growth rate of App Store revenue reported by Sensor Tower and the growth of Apple's overall services revenue.

Beyond the App Store (accounting for over 30% of total services revenue), advertising (approximately 30%) and cloud services (around 10%) are also significant engines for the services segment growth. With an active installed base of about 2.5 billion devices, and over 50% of users not yet having a transaction account, Apple has a structural foundation for capturing incremental opportunities in the high-margin services arena.

On January 12, Apple and Google issued a joint statement confirming that Apple has selected Google's Gemini as a long-term partner to power its next-generation foundation model. According to the plan, a more advanced, AI-powered personalized Siri is expected to launch in the spring of 2026. A prior Bloomberg report suggested Apple may pay Google around $1 billion annually for this partnership. This collaboration will enable Apple to deploy a more capable intelligent assistant more quickly, while buying crucial development time for its own in-house models.

The foldable iPhone 18 to kick off a new product cycle. Industry sources indicate that Apple is expected to launch its first foldable iPhone in the second half of 2026, most likely during the autumn event alongside the iPhone 18 Pro/Pro Max models. Reportedly dubbed the "iPhone Fold," the device will adopt a book-style folding design (as opposed to a clamshell), featuring an unfolded screen size of approximately 7.8 inches (5.5 inches when folded), with a thickness of about 9-9.5mm when folded (4.5-4.8mm when unfolded).

Analysts predict the model will utilize a liquidmetal hinge and a stress-dispersing metal plate structure to achieve a nearly crease-free display. For its imaging system, the device is expected to feature dual rear cameras and a single front camera, and may integrate a Touch ID sensor on the side, potentially replacing Face ID.

Given an expected premium price point around $2,000 and its launch timing, Citi forecasts initial shipments of the foldable iPhone at around 8 million units in 2026, accounting for 3% of total iPhone shipments for the year; this figure is expected to rise to 20 million units by 2027. IDC previously predicted the foldable phone market will maintain a compound annual growth rate (CAGR) of about 17% through 2029. Citi believes that with its brand and technological advantages, Apple is well-positioned to rapidly capture over 30% market share in this segment, significantly outperforming the industry average.