Apple (AAPL) posted another blowout quarter, but CEO Tim Cook used that moment to quietly reset expectations.
After celebrating another powerful quarter, Cook issued a warning for iPhone 18 fans, as supply tightens, component costs rise, and Apple’s supply chain is losing some of its never-ending cushion.
On the surface of it, things look as pristine as ever for the Cupertino giant. However, beneath all the flashy headlines, Cook points to a company that’s essentially in “supply chase mode,” tackling advanced chip constraints and memory prices that are relentlessly rising.
Memory market giants including Micron have been scrambling to build multi-billion-dollar new fabs to address the ongoing shortage, a situation that’s unlikely to correct for the next few years.
Consequently, memory players such as SanDisk are enjoying record demand, with its stock up a jaw-dropping 1,230% in the past six months.
For iPhone 18 fans in particular, this setup is mighty interesting.
When supply is tight and costs rise during a strong cycle, Apple’s management is compelled to reassess how the next iPhone is built and priced. Though Cook isn’t spelling it out yet, the signal is clearly there.
Apple’s Q1 results landed with a thud, spearheaded by record revenue and EPS, a surprise gross-margin boost, and stronger-than-expected iPhone demand powering the beat.
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Sales/EPS: Revenue $143.8 billion (+16% year over year); diluted EPS $2.84 (+19% year over year); net income $42.1 billion.
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Margins/Cash flow: Gross margin 48.2% (above guidance); operating cash flow $53.9 billion (record).
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Segment sales: iPhone $85.3 billion (+23%); Services $30.0 billion (+14%); Mac $8.4 billion (-7%); iPad $8.6 billion (+6%); Wearables/Home/Accessories $11.5 billion (-2%).
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Outlook: March-quarter revenue +13% to +16% year over year; gross margin 48% to 49%; operational expenditure $18.4 billion-$18.7 billion.
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Cash & liquidity: Ended quarter with $145.0 billion in cash and marketable securities; $91.0 billion total debt; $54.0 billion net cash.
Source: Apple Inc., Investor Relations
Cook was unusually direct about the pressures facing Apple on the margin side.
In responding to questions over supply and components, he painted a picture of demand effectively outrunning Apple’s planning at this point.
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“We exited December with very lean channel inventory,” Cook said. “Based on that, we are in a supply chase mode to meet the very high levels of customer demand.”
He argued that Apple is constrained at this point, and it’s hard to lay out a timeline when supply and demand will balance, given key bottlenecks in advanced chip nodes and limited supply-chain flexibility.
On memory specifically, Cook was careful.
He went on to acknowledge that memory market pricing is expected to rise at a significant pace.
However, when pressed about Apple’s potential response and whether it would use pricing as a lever, Cook said he wouldn’t speculate on that point yet.
Cook’s restraint shows that the decisions are still up in the air, and the current dynamics point to an equation that isn’t settled for the upcoming iPhone.
Nonetheless, in the interim, I think Cook’s view aligns with what TF International Securities analyst Ming-Chi Kuo has said about Apple absorbing higher costs for now.
Kuo, in a post on X, laid it out clearly.
Wall Street’s view on Apple remains upbeat after its latest quarterly showing, with the average analyst price target sitting at $290.40 (roughly 11.92% above current levels).
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Bank of America: Reiterated a buy rating and kept a $325 price target, 25.3% upside (current price is $259.48).
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Goldman Sachs: $330, implying a 27.2% upside.
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JPMorgan Chase: $325, suggesting a 25.3% upside.
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Morgan Stanley: $315, pointing to a 21.4% upside.
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UBS: $280, implying a 7.9% upside.
It’s pretty clear that the iPhone’s pricing doesn’t work like typical consumer electronics pricing.
Though demand hasn’t been perfectly inelastic, it has been remarkably sticky, compelling legendary investors like Warren Buffett to say in an interview that it’s “probably the best business I know in the world.”
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Let’s wind our clocks back to 2017-2018, when Apple launched a $999 iPhone X. Many in the tech punditry pointed to a demand cliff, but that never arrived.
For context, in fiscal Q1 2018, Apple sold 77.3 million iPhones, with iPhone sales jumping a superb 13% to $61.6 billion, underscoring the iPhone’s inelastic demand.
Apple is fully aware of how pricing matters at the margin.
For example, in 2019, it dropped the iPhone 11’s starting price to $699, effectively widening the upgrade funnel without retreating to premium models. By repeating the same strategy in 2020, when Apple bumped the iPhone 12’s price to $799 while also introducing a new $699 iPhone 12 mini, it protected entry-level demand.
Consumer surveys also reinforce that tension.
A WalletHub study showed that 59% of respondents feel inflationary pressures could delay a new phone purchase, while 89% feel iPhones are overpriced. However, 26% felt that, despite being overpriced, a new iPhone is worth going into debt.
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YTD: Apple -4.55% versus S&P 500+1.37%
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1-year: Apple +9.21% versus S&P 500 +14.29%
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3-year: Apple +81.45% versus S&P 500 +72.71%
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5-year: Apple +96.64% versus S&P 500 +86.82%
Source: Seeking Alpha
Related: Bank of America delivers sobering stock market take
This story was originally published by TheStreet on Feb 1, 2026, where it first appeared in the Technology section. Add TheStreet as a Preferred Source by clicking here.
