Morgan Stanley resets Apple stock forecast ahead of earnings | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

Wall Street is resetting expectations for Apple ahead of the company’s first-quarter earnings report, due Thursday, Jan 29, 2026, at 5 pm ET. Weighing resilient iPhone demand against cost pressures, increasing competition, and slightly slow growth in the services industry, analysts are optimistically cautious.

Consensus estimates Apple to post about $138.4 billion in revenue and both GAAP and non-GAAP earnings per share (EPS) of around $2.67 for the December quarter. The numbers highlight at least an 11% year-over-year growth in EPS and revenue, but analysts are now tightening their margin forecasts despite favourable iPhone sales and AI roadmap.

As the tech giant prepares to announce its Q1 2026 earnings, investors are focused on whether iPhone strength can offset margin pressures and rising operating expenses.

Apple’s earnings have continued to expand in recent years, even as growth has become slightly uneven, with the rise of competitors such as Samsung, Huawei in China, and, increasingly, Google, which is bending the rules of the game by pushing into AI-driven hardware and software.

Apple’s stock is down 6% year to date.

Photo by Bloomberg on Getty Images

Apple’s revenue over the last five fiscal years:

FY 2021: $365.8 billion
FY 2022: $394.3 billion
FY 2023: $383.3 billion
FY 2024: $391.0 billion
FY 2025: $416.2 billion

Morgan Stanley turns tactically cautious

In a note, Morgan Stanley analyst Erik Woodring reiterated an Overweight rating and an unchanged price target of $315, but cautioned investors that Apple stock could “trade sideways to modestly lower after earnings.”

The firm expects Apple to beat expectations, driven by stronger, more persistent iPhone demand. Woodring expects December-quarter revenue of about $80 billion, around 4% above consensus, and March-quarter revenue of $55.4 billion, about 8% above consensus, citing supply-chain checks and shipment data.

He said iPhone 17’s “strength remains underappreciated by the Street.”

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Morgan Stanley sees cost assumptions as overly optimistic. The firm forecasts March-quarter operating expenses about 7% above consensus and a gross margin forecast 30 basis points below consensus, driven by rising memory costs.

As a result, Woodring sees limited scope for positive EPS revisions for Apple, even with a revenue beat.

Morgan Stanley also flagged potential downside risk to June quarter earnings, estimating EPS of $1.62 versus the consensus of $1.71, citing intensifying memory-related cost pressures. The firm also notes that Apple has historically underperformed the S&P 500 more in Q1 than in any other period.

Looking ahead to 2026

All things considered, Morgan Stanley believes Apple is positioned to outperform in 2026 as a wave of new products and AI-driven catalysts is set to shape the company’s growth trajectory. The firm particularly highlighted the relaunch of Siri in February and Apple Intelligence in June at Apple’s Worldwide Developers’ Conference (WWDC).

Some notable introductions expected include its most “innovative iPhone in 10+ years (Foldable)“, plus the first smartphone powered by 2-nanometer chips, part of the iPhone 18 family.

The firm sees greater benefits from share gains and higher average selling prices, with Morgan Stanley underscoring an EPS of $9.77 for FY2027, roughly 7% above Wall Street consensus.

On Monday, the stock traded 2.9% higher intraday and is up 14% year over year, but year-to-date, it is down 6%. The upcoming product launches and the WWDC will play an important role in setting the tone for Apple’s performance and customer expectations in the upcoming year.

Analysts also argued that Apple’s current valuation is attractive. While shares are now trading about 25 times Morgan Stanley’s FY2027 EPS estimate or 1.2 times the S&P 500, they are still at the lower end of Apple’s historical valuation range.

Therefore, while cautious of the near-term growth, Morgan Stanley sees “positive asymmetry” in Apple’s valuation in the long term.

Other analysts strike a mixed tone

Analysts at Jefferies, ahead of Apple’s earnings report, lowered the price target to $276.47 from $283.36, while keeping a Hold rating.

Jefferies also tightened its revenue forecasts, based on Sensor Tower data showing that Apple App Store revenue grew only 7% in the December quarter, marking the slowest pace in seven quarters. However, it also sees strong iPhone sales, driving a modest 3% beat in both revenue and EPS, as noted at TheFly.

Contrastingly, JPMorgan increased its price target for Apple to $315 from $305, keeping an Overweight rating, ahead of the Q1 report.

Analysts noted that margin concerns tied to the “unprecedented rise” in memory costs have overshadowed improving iPhone demand, pointing to its underperformance in the S&P 500 index. But JPMorgan sees a positive setup for shares ahead of the report, as noted at TheFly.