Apple Stock Price Forecast - AAPL at $264: iPhone 17, China Surge and Tariff Ruling Rewrite the AAPL Story

Apple stock (NASDAQ:AAPL) price snapshot and context

Short-term trading range and valuation frame

Apple stock (NASDAQ:AAPL) finished February 20 at $264.58, up 1.54% on the session, with after-hours trading nudging to $264.40. Intraday trade stayed inside a $258.16–$264.75 band, while the 52-week range stretches from $169.21 to $288.61. Market capitalization is roughly $3.89 trillion, the trailing P/E stands at 33.48, and the cash yield via dividend is a modest 0.39%, backed by heavy liquidity at about 54.28 million shares in average daily volume. At this price, the core question is whether a low-30s earnings multiple is justified by the current growth and margin trajectory or whether the market is paying too far in advance for the new iPhone and AI cycle.

Revenue acceleration: $143.76 billion quarter puts growth back in focus

In FY2026 Q1, Apple booked $143.76 billion in combined products and services revenue, a 15.65% year-on-year increase. That is a rare re-acceleration for a business already approaching $4 trillion in equity value. The quarter also came with a $5.23 billion positive surprise versus analyst expectations, marking one of the biggest top-line beats in recent years. This isn’t a marginal overshoot; it signals that end-demand and pricing are stronger than the market modeled heading into the print. The scale of the beat, in an environment of mixed macro signals and concerns about consumer fatigue, repositions Apple as a growth compounder rather than a purely defensive mega-cap.

iPhone 17 cycle: $85.27 billion in sales and a richer product mix

The iPhone 17 launch is the centre of gravity in this earnings phase. iPhone revenue reached $85.269 billion, up 23.33% compared with the prior year, a sharp acceleration from the roughly 6.06% growth posted in the previous quarter. The mix skewed heavily toward iPhone 17 Pro and 17 Pro Max, lifting average selling prices and helping push product gross margin past the 40% threshold. In North America alone, iPhone revenue climbed to about $58.5 billion, with growth re-accelerating to 11.2% from the low- to mid-single-digit range seen through most of 2025. For a mature category, double-digit unit plus ASP growth demonstrates that Apple’s current flagship line is taking share, not just rolling existing users forward.

China and Asia: 37.9% surge where sentiment is fragile

China remains the most sensitive region in the Apple stock (NASDAQ:AAPL) debate, and the latest numbers cut straight through the bearish narrative. Quarterly revenue in China reached approximately $25.53 billion, a 37.9% year-on-year increase, making it by far the fastest-growing major geography. The rest of Asia-Pacific delivered roughly 18% growth, strong but clearly lagging the Chinese rebound. This is happening while China’s consumer confidence index sits well below 2021 levels, meaning Apple is posting nearly 40% growth in a cautious spending environment. iPhone has reportedly been the only major smartphone line to grow sales in China in January, despite intense local competition. That level of outperformance transforms China from a perceived structural risk into a current growth driver.

Margin profile: 48.2% gross margin and product margin north of 40%

The most important shift sits on the margin line. Gross profit expanded around 18.8%, outpacing revenue growth near 15.7%, lifting gross margin to roughly 48.2%, up about 100 basis points year-on-year and 128 basis points sequentially. Product gross margin climbed to about 40.7% in Q1 FY2026, breaking above 40% for the first time in the post-pandemic stretch. That improvement is driven by premium iPhone mix, disciplined cost management and leverage on the fixed parts of the supply chain. Operating margin also improved by roughly 91 basis points, but not as sharply as gross margin, because Apple is deliberately funneling a portion of the upside into innovation. Research and development spending rose about 32% year-on-year, while SG&A increased only about 4%, signalling a controlled cost base with heavy focus on future products rather than overhead bloat. Diluted EPS landed at $2.84, up roughly 18%, and exceeded expectations by $0.17, confirming that margin expansion is flowing cleanly through to the bottom line.

Guidance: 13–16% revenue growth with 48–49% gross margin on deck

For the current quarter, management projects revenue growth in the 13–16% range. That is a slight deceleration from the previous 15-plus percent, but still a powerful rate for a company of this size. It points to a multi-quarter run for the iPhone 17 cycle and continued resilience in services. The gross margin guide sits at 48–49%, versus roughly 47% in the same quarter a year ago, implying further structural strength in pricing, mix and supply efficiency. Operating expenses are expected around $18.55 billion at the midpoint, up roughly 21%, again outpacing top-line growth. The composition matters: the majority of that increase comes from R&D rather than SG&A, which is consistent with an organisation using current cash flow to reinforce its hardware, software and AI roadmap rather than simply inflating support costs.

Tariff reset: Supreme Court ruling, Trump’s 15% blanket and a $3.3 billion bill

The US Supreme Court decision to invalidate the prior global tariff framework removed one layer of uncertainty but immediately created another. Last year Apple absorbed more than $3.3 billion in tariff charges as part of a supply chain spanning China, India and Vietnam, where duties often exceeded 20%, and reached 37–38% for some China-linked flows. The new regime, built around a 15% blanket tariff announced under Section 122, is lower than the 18% rate Apple faced importing from India and substantially below the high-30s brackets tied to China. Theoretically, Apple could pursue refunds of part of the $3.3 billion total, but the process is likely to be slow and politically noisy, with talk of litigation stretching for years. The key point for Apple stock (NASDAQ:AAPL) is that the company managed to expand gross margin by over 100 basis points and grow gross profit almost 19% while shouldering that tariff cost. With the new flat 15% rate, the policy backdrop becomes a mild tailwind rather than a structural headwind, even if refunds never materialise.

AI and R&D: CarPlay, wearables and the next devices wave

The aggressive 32% rise in R&D spending is tied directly to Apple’s push to stay relevant in AI-driven hardware and services. One near-term move is a refreshed CarPlay platform enabling direct integration of third-party chatbots into the in-vehicle experience, keeping Apple at the centre of infotainment as cars become rolling compute nodes. Beyond the car, work is ongoing on AI-enabled glasses, an AI pendant and more intelligent AirPods, aiming at continuous, context-aware interfaces that live on the body and in the ear. On the health side, a scaled-back dedicated AI health coach project has been partially folded into a more incremental expansion of AI features inside the existing Health app. That is more a change of packaging than a retreat from the health data and wellness theme. The common denominator is clear: a larger share of Apple’s future revenue base will be tied to AI-enhanced hardware and services built on the installed base, and rising R&D is the mechanism to get there while the current iPhone cycle funds the spend.

Component and memory constraints: where the operational risk really sits

The more immediate operational swing factor is the memory market, not tariffs. AI data-centre growth has tightened supply and pushed up prices for DRAM and NAND, inputs that sit inside every premium iPhone, Mac and iPad. Evercore has flagged the risk that memory shortages and rising prices could challenge hardware margins later in the year. For Apple, this could shave a few hundred basis points off gross margin if conditions deteriorate sharply, especially with high-capacity configurations gaining share. At the same time, the latest quarter shows 48.2% gross margin and 40.7% product margin, providing a buffer. Demand for iPhone 17 and related devices remains robust enough that Apple can offset part of any input inflation through mix, pricing and manufacturing efficiencies. The risk is non-trivial but remains a manageable variable rather than a structural threat.

Valuation: 31–33x earnings for mid-teens EPS growth

At around $264.58, Apple stock (NASDAQ:AAPL) trades near 31–33x forward FY2026 EPS, with consensus expecting roughly 14% earnings growth, about double the pace of the past two years. On a headline basis, that multiple looks demanding, but the combination of 13–16% guided revenue growth, 18% EPS growth just delivered, and gross margin guided to 48–49% justifies a premium over slower mega-caps. If the company sustains mid-teens top-line growth and keeps margins near the guided band, the market can reasonably shift the multiple towards the 34–35x zone, implying roughly 12–14% upside from multiple expansion alone. Add any potential upward revisions to earnings if guidance proves conservative, and the risk/reward tilts in favour of staying long, provided investors accept that this is a quality-at-a-price exposure rather than a discounted entry.

Final stance on Apple stock (NASDAQ:AAPL): Buy with explicit margin and growth conditions

Across earnings, geography, policy and valuation, the picture is consistent. Apple just printed $143.76 billion in quarterly revenue at 15.65% growth, $85.269 billion in iPhone sales at 23.33% growth, and $25.53 billion from China at 37.9% growth, while driving gross margin to about 48.2% and product margin past 40%. EPS grew 18% to $2.84, guidance points to 13–16% revenue growth and 48–49% gross margin, and the company is leaning into a 32% step-up in R&D to secure the AI and device roadmap. The tariff reset reduces a prior headwind, even with a new 15% blanket regime, and the main operational risk now sits with memory pricing, which the current margin structure can absorb. At 31–33x forward earnings, the stock is not cheap, but the combination of mid-teens growth and near-record margins supports a Buy stance, with upside coming from both earnings delivery and modest multiple expansion as long as Apple keeps revenue growth above low-teens and holds gross margin close to the upper-40s band.

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