BofA Warns: Staggered iPhone Launch Causes Wall Street "Modeling Error," Apple Inc. (AAPL.US) Q4 Results May Be Overestimated

Bank of America Corp noted in its latest research report that as Apple Inc. (AAPL.US) adjusts its product launch cadence and staggers iPhone release timing, Wall Street's earnings expectations for Apple Inc. may contain a "modeling error." Bank of America Corp maintains a "Buy" rating on Apple Inc. with a price target of $370. Bank of America Corp analyst Wamsi Mohan wrote in a note to clients: "Apple Inc. will report fiscal 2026 fourth-quarter (September quarter) results after the U.S. market close on Monday, November 2, and investor focus will be on component cost inflation, gross margin sustainability, and services revenue growth." He noted that because iPhone has adopted a staggered launch strategy (Pro, Pro Max, and Duo launched in September, with the base model and Air launching in March of the following year), combined with price increases to offset rising component costs, BofA has lowered its overall earnings forecasts. In Mohan's view, due to this year's staggered launches, the market's revenue expectations for the December 2026 quarter and gross margin expectations for the March 2027 quarter are too high, while revenue expectations for the June 2027 quarter are too low (though gross margin expectations for the same quarter are too high). Specifically, BofA cut its fiscal 2027 iPhone shipment forecast by 9 million units to 247 million units (Wall Street expects 260 million units). BofA expects fiscal 2026 fourth-quarter revenue of $113 billion and earnings per share of $1.97 (Wall Street expects $114 billion and $1.99, respectively); it expects fiscal 2027 first-quarter revenue and earnings per share to be significantly below Wall Street expectations, but given potential tariff refunds and memory inventory conditions, BofA's forecasts may be conservative, especially on gross margin. Mohan believes margin pressure is temporary and forecasts that gross margin will recover from late fiscal 2027 through fiscal 2028.