Apple's June quarter was its strongest in years, but refunds flattered margins and costs are rising. At 39 times earnings, I see 2% upside to $344.50, so I rate it Hold.
Key points
- $109.4 billion June-quarter revenue, up 16% from last year, with iPhone sales up 22% to $54.3 billion and Mac sales up 29% despite chip supply limits.
- 50.1% gross margin included about 2 points from one-time tariff refunds, which added $0.11 to the $2.02 in diluted earnings per share for the quarter.
- $1,999 foldable Duo reaches stores October 23 after the iPhone 18 launch, while September-quarter guidance calls for 9% to 11% total revenue growth.
The call
The market asks for near perfect delivery at this price. At $336.58 Apple trades near 39 times trailing earnings of $8.72 per share. To hold a 35 multiple, which means price divided by earnings, earnings must reach about $9.62 next year.
Revenue accelerated while margin was flattered by refundsCompany filings via XBRL to Jun 2026; last two quarters are author's estimates from Jul 30 guide. As of Oct 7 2026.
Growth is strong but cost pressure is rising fast. I expect $511.9 billion in fiscal 2027 revenue and $9.84 in earnings per share. Memory prices, tighter chip supply and 23% higher research-led costs limit further margin gains.
Valuation
| Step | Figure |
|---|
| Fiscal 2026 revenue and EPS, my estimate | $477.1 billion, $8.85 |
| Fiscal 2027 revenue, up 7.3% | $511.9 billion |
| Fiscal 2027 EPS on 27.3% net margin | $9.84 |
| Multiple for services mix and buybacks | 35 times |
| 12-month target | $344.50 |
Target hinges on whether a 35x multiple holdsAuthor estimates: FY27 EPS $9.84 on $512B revenue. Price $336.58 Oct 7 2026.
A 35 multiple fits a firm with $62.2 billion in net cash, meaning cash above debt, and steady repurchases. Upside of 2.3% against about 12% downside at 30 times gives a balanced risk and reward for a Hold.
Risks
- Chip and memory shortages cut iPhone, Mac and iPad shipments further; watch store lead times and monthly sales from assemblers Hon Hai and TSMC.
- Services growth fades on lower EU app fees, currency drag and soft mobile gaming; watch App Store, advertising and cloud results each quarter.
- Siri AI server costs grow while paid upgrades and Duo demand disappoint; watch subscription counts, Duo sell-through and research spending.
What would change my mind
I would turn more positive if iPhone units grow at double-digit rates for two quarters with core margins above 48% excluding refunds.