Goldman Sachs Group, Inc. preview of Apple Inc. (AAPL.US) Q4 earnings: iPhone Duo/18 series to underpin growth in the new fiscal year, target price raised to $390

Apple Inc. (AAPL.US) will report its fiscal 2026 fourth-quarter financial results on the morning of November 3, Beijing time. Goldman Sachs Group, Inc. released its latest preview research report, forecasting Apple Inc. Q4 revenue of US$113.598 billion, up 11% year over year, about US$155 million above the FactSet consensus, and at the upper end of the company's 9%11% guidance; EPS is expected at US$2.01, above the US$1.99 consensus revenue essentially in line and profit slightly ahead of expectations, which is Goldman Sachs Group, Inc.'s characterization of the quarter. Goldman Sachs Group, Inc. maintains its "Buy" rating on Apple Inc. and raises its 12-month target price to US$390 from US$360. Business performance Goldman Sachs Group, Inc. forecasts First, iPhone revenue is expected at US$56.561 billion, up 15% year over year, in line with consensus and consistent with management's "mid-teens" guidance, driven by "lower volume, higher price" unit shipments down 4% year over year (consistent with IDC estimates) and average selling price up 20% year over year. Second, services revenue is expected to grow 10% year over year, in line with consensus and company guidance; Apple Inc. previously guided Q4 services growth of 9.5%, equivalent to about 2.5 percentage points of sequential FX headwind deducted from the +12% base in the June quarter. Third, gross margin is expected at 47.8%, above the 47.5% consensus and near the midpoint of the company's 47%48% guidance (46%47% excluding tariff refunds); operating expenses of US$19.375 billion, within the US$19.1 billionUS$19.4 billion guidance range. Note that Goldman Sachs Group, Inc. is more conservative on the next quarter: F1Q27 EPS of US$2.88, revenue of US$151.2 billion, and gross margin of 46.8%, all three below consensus; it expects the company to guide revenue growth of low-to-mid single digits year over year, while Goldman Sachs Group, Inc.'s own estimate is +5%. iPhone: Price increases fill the gap, but only half a quarter is captured this quarter iPhone shipments fell 4% year over year for three reasons: the split iPhone 18 launch cycle, with the absence of the base model resulting in smaller channel fill this quarter than a year ago when the full iPhone 17 lineup launched; industry-wide memory and component supply constraints; and overall handset price increases suppressing end demand. These were partly offset by continued demand for iPhone 17 and a strong debut of the iPhone 18 Pro series (especially in China and India). Comparing with the industry highlights Apple Inc.'s relative resilience: Counterpoint estimates 3Q26 global smartphone shipments fell 20% year over year, and IDC estimates -22%; while IDC estimates Apple Inc.'s shipments fell only 4% to 57.3 million units, with share rising to 22.4% from 18.2% a year earlier. Average selling price rose about 20% year over year, from three sources: demand concentrated in iPhone 18 Pro and Pro Max (with the base model absent), US$100 price increases on the 18 Pro and Pro Max, and US$100 price increases across all models sold in the US (iPhone 16, 17e, 17 and iPhone Air). But Goldman Sachs Group, Inc. also points to a timing gap Apple Inc. captures only part of the quarter's price increase benefit in F4Q26 while already bearing higher memory costs, creating near-term gross margin pressure. The full quarter of price increase benefit will only be realized in the December quarter. Lead times: Pro slightly soft, Pro Max holds up, Duo first-week wait about 100 days Goldman Sachs Group, Inc. used its proprietary Apple Inc. lead-time tracker to produce a set of somewhat cool numbers: in the first 42 days after order opening, the iPhone 18 Pro series averaged 24 days globally, below the 25 days for the iPhone 17 Pro series in the same period; and it fell back faster the 18 Pro dropped from 22 days to 13 days about 20 days after launch, and the Pro Max from 30 days to 24 days after about 27 days, versus about 39 days for the iPhone 17 Pro Max in the same period. Differences across colors were minor. By region, lead times in the US, UK, India and Japan were generally slightly below the prior-generation Pro series, with Hong Kong SAR a clear exception: average lead time rose to 25 days from 18 days for the prior generation. Goldman Sachs Group, Inc. attributes this to the price gap the iPhone 18 Pro 256GB is about 10% cheaper in Hong Kong, and the Pro Max 2TB gap widens to about 12.5%, potentially bringing some demand from mainland China. Conversely, mainland China lead times shortened, and Goldman Sachs Group, Inc. speculates some demand is waiting for the iPhone Duo (foldable), as mainland consumers are more familiar with foldable phones. But early demand indicators are not bad: first, 18 Pro Max lead times are better than the Pro series overall, roughly comparable to 17 Pro Max and higher than 16 Pro Max; second, Counterpoint data show the 18 Pro series grew 12% year over year in China in the first week, accounting for 33% of China smartphone sales in the quarter, with India first-day sales growth initially estimated at +15% to +28%; third, according to Apple Inc. supply chain sources, Apple Inc. raised 18 Pro Max orders by 10%15% and Duo orders by 30%, while cutting 18 Pro orders by 10%15%, leaving total Pro series orders unchanged total volume unchanged, but the mix skewing toward higher-priced models. On the first day of iPhone Duo pre-orders, the global average wait was about 100 days, broadly consistent across regions. Goldman Sachs Group, Inc. also explicitly notes: lead times are not a complete mapping of demand and are significantly affected by channel inventory and supply capability, and supply remains constrained currently. Apple Inc. management expects F4Q26 supply constraints to intensify significantly sequentially, affecting iPhone, Mac and iPad, mainly due to capacity at advanced nodes used for Apple Inc.'s in-house SoCs; separate third-party supply chain reports suggest DRAM supply may delay assembly of A20 Pro-based models, and iPhone Duo mass production yields remain below mature levels. On affordability, US carrier promotions remain supportive: according to CIRP, carrier channels accounted for about 75% of US iPhone sales in the year to July 2026; AT&T and T-Mobile offer trade-in credits of up to US$1,199, enough for eligible users to cover the full starting price of the 18 Pro and compress the effective incremental cost of the 18 Pro Max to about US$99. In addition, Apple Inc.'s Apple Upgrade program launched with Klarna in July allows device payments to be spread over 12 or 24 months. Mac and iPad: Double-digit shipment declines offset by June price increases Mac is where Goldman Sachs Group, Inc. diverges most from consensus: Goldman Sachs Group, Inc. estimates F4Q26 Mac revenue at US$8.683 billion, flat year over year, versus FactSet consensus of +12%. Goldman Sachs Group, Inc. assumes unit shipments down 12% year over year (IDC estimates -11%), offset by average selling price +13% year over year. Shipment weakness stems from three factors: a weaker PC market after demand and inventory were significantly pulled forward in 1H26, industry price increases suppressing end demand, and supply constraints. The price support is concrete: Apple Inc. raised Mac prices by an average of about 18% across the lineup in June 2026 MacBook Neo from US$599 to US$699 (+17%), 13-inch MacBook Air from US$1,099 to US$1,299 (+18%), M5 MacBook Pro from US$1,699 to US$1,999 (+18%), and M3 Ultra Mac Studio from US$3,999 to US$5,299 (+33%). Entering F2027, Goldman Sachs Group, Inc. expects Mac revenue growth to accelerate to +15% (F2026 estimated +6%), driven by an easy base, a full year of price increases, new products such as M6 MacBook Pro/M6 MacBook Air/second-generation MacBook Neo, and share gains especially in the low-to-mid-end (sub-US$800) PC segment. iPad is the opposite: Goldman Sachs Group, Inc. estimates F4Q26 revenue at US$7.398 billion, up 6% year over year, above the +1% consensus: unit shipments down 9% year over year, average selling price up 17% year over year, the latter from June price increases averaging over 20% across the iPad lineup (23% on a total weighted average basis) entry iPad from US$349 to US$449 (+29%), 11-inch iPad Air from US$599 to US$749 (+25%). F2027 iPad revenue growth is expected at +8%. On the product pipeline, Goldman Sachs Group, Inc. updated its tracking table after the October 13 "Welcome Home" event: HomeView (7-inch smart home hub, US$299, pre-orders opened October 13, available November 13), a new-generation Apple TV 4K, HomePod mini 2, and Home Collection smart home accessories developed with LG Electronics and Schneider Electric (security cameras, video doorbells, smart locks, thermostats), launching in December 2026 and early 2027. The remainder of 2026 is expected to bring the 8th-generation iPad mini, M6 MacBook Pro and an updated iMac. Services: +10% year over year, but the engine has shifted Goldman Sachs Group, Inc. estimates F4Q26 services revenue at about US$31.521 billion, up 10% year over year. By composition, the engine has clearly shifted: App Store about US$7.48 billion, up only 2% (about 24% of services revenue), TAC (Alphabet Inc. Class C search traffic acquisition cost share) about US$7.2 billion, up 11% (about 23%), while iCloud+ +12%, AppleCare+ +19%, and subscription services +22%. The App Store is the most closely watched item this quarter. Goldman Sachs Group, Inc. estimates its growth slowed further to +2% from +3% in F3Q26. Sensor Tower data show C3Q26 App Store consumer spending grew 2% year over year (below 3% in C2Q26), with July only +1%, August flat, and September recovering to +5%; by region, the US (about 33%) fell 7% year over year (-6% in C2Q26), China (about 20%) slowed to +8% (previously +10%), and Japan (about 10%) improved slightly to -2%. Beyond softer underlying spending, Goldman Sachs Group, Inc. sees three additional pressures: more off-platform payment options in the US, commission structure changes in China/Japan/Brazil (previously estimated to collectively constitute about 5 percentage points of headwind), and macro volatility. By category, games (about 40%) and entertainment (about 15%) growth slowed, while photo and video (about 9%) improved. Longer term, Goldman Sachs Group, Inc. expects Apple Inc. services revenue to sustain about 9% CAGR from 20262030, reaching US$173 billion by F30; of which advertising and other grows at +14% CAGR to US$69 billion, the largest incremental source, iCloud+ to US$19 billion, AppleCare+ to US$18 billion, first-party services to US$30 billion, while the App Store grows at only +4% CAGR to US$34 billion. Three supporting rationales: the resilience of Alphabet Inc. Class C TAC payments (Sensor Tower shows Chrome usage time and MAUs on iOS broadly stable), rising iCloud+ penetration as data volumes and Apple Intelligence features increase, and AppleCare+ growth with device upgrades. Apple Inc.'s August Apple TV price increase will also contribute incrementally as churn normalizes. Apple TV itself: Goldman Sachs Group, Inc. estimates F4Q26 revenue at about US$2.3 billion, up 33% year over year, with net paid subscriber additions of 1 million; C3Q26 is estimated to have launched about 86 episodes of original series, corresponding to about US$756 million of content amortization, and C4Q26 is expected at about US$610 million. F2027 pivots: Spring launches, Duo upgrade cycle, easy base Goldman Sachs Group, Inc. gives F2027 iPhone revenue growth of +7%, supported by five factors: the spring 2027 launches of the base iPhone 18, iPhone 18e and iPhone Air 2; the upgrade cycle catalyzed by the new iPhone Duo form factor; the easy base after F2H26 supply constraints; the full-year benefit of price increases; and affordability support from premium positioning, carrier promotions and Apple Upgrade. Goldman Sachs Group, Inc. believes that with memory price increases continuing to squeeze low-to-mid-end handsets, Apple Inc.'s premium positioning is instead a relative advantage IDC expects overall smartphone market growth to remain constrained through 2027. Valuation is the core of this upgrade. The target price rises to US$390 from US$360, corresponding to a valuation multiple increase to 40x from 37x Goldman Sachs Group, Inc.'s "NTM+1Y" EPS. Goldman Sachs Group, Inc. attributes the multiple expansion directly to increased confidence in the iPhone upgrade cycle following the Duo launch not to earnings estimate revisions (F2026/27/28 EPS essentially unchanged at US$8.89/9.16/9.76, corresponding to P/E of 39.1/38.0/35.6x). On the investment thesis, Goldman Sachs Group, Inc.'s logic is: the market's focus on slowing hardware revenue growth obscures the resilience and visibility of Apple Inc.'s ecosystem and services revenue; installed base growth, structural services growth and new product innovation should offset cyclical headwinds such as lengthening upgrade cycles and weaker PC and tablet demand; most of gross profit growth over the next five years will come from services, marking an inflection point for the "Apple-as-a-Service" narrative. There are five key risks: weaker consumer demand (iPhone accounts for about 50% of F2025 revenue and is highly dependent on upgrades), supply chain disruption (primary final assembly remains in China, and some key components depend on a small number of suppliers), intensifying competition (Apple Inc. is not the market leader in every business line, e.g., it spends less on video streaming content than some rivals), regulatory risk (intense regulatory scrutiny in all major markets, with potential requirements to open its proprietary products or services), and capital allocation execution (returns on M&A and buybacks are uncertain and may face tighter regulation). In addition, Goldman Sachs Group, Inc. notes Apple Inc. returned more than US$110 billion to shareholders in F2025, expected to expand with free cash flow growth; the company guides F4Q26 FX to be about 2.5 percentage points of sequential headwind (implying -1.5%), below the implied level of Goldman Sachs Group, Inc.'s spot FX model.