Apple Earnings Preview: Government Subsidies Boost iPhone Sales, Surge in Memory Prices Targets 'Supply Chain Master'

Author | Eric

The global consumer electronics leader $Apple (AAPL.US)$ is set to release its FY26 Q1 earnings report after the market closes on Thursday Eastern Time. Behind the push for record-high revenues, an under-the-radar battle over costs is underway: On one side is the sales surge fueled by government subsidies; on the other, rising memory prices threaten to erode profits.

Consensus estimates for key financial data:

- Consensus revenue forecast1384billion USD, representing a year-on-year increase of11.3%, previous guidance was year-over-year growth10%-12%。

– Consensus gross margin expectation47.5%, up 0.6 percentage points year-over-year, with previous guidance being47%-48%。

– Consensus net profit expectation394billion USD, representing a year-on-year increase of8.4%。

Three core areas of focus in the earnings report:

1. Government subsidies as a strong tailwind, can Greater China stage a comeback?

$Apple (AAPL.US)$ Greater China was once a key market accounting for over 20% of revenue but has underperformed for nine consecutive quarters, with its share dropping to 15%. However, this quarter,Government subsidies have become the strongest catalyst.

Data from the China Academy of Information and Communications Technology shows that, benefiting from national subsidy policies such as trade-ins, overseas brands' shipments in mainland China surged year-over-year in October and November 2025,13%And128%with iPhone being the main driver of this growth, outperforming domestic competitors significantly.

Thanks to this, the market expects revenue from Greater China this quarter to reach USD 21.8 billion (an 18% year-over-year increase), which is expected to outpace the company's average growth rate and mark a triumphant return.

2. Services business surpasses USD 30 billion for the first time, but will its growth continue to slow?

The services segment (Services), with its75.3%exceptionally high gross margin (far exceeding hardware at 36.2%), has become $Apple (AAPL.US)$ the profit pillar. Wall Street forecasts that service revenue this quarter will hitUSD 30.04 billion, marking a historic breakthrough above the USD 30 billion threshold.

However, concerns linger as the year-over-year growth rate is projected to be only 14%, remaining below 20% for the 15th consecutive quarter. As the base grows larger, the market worries that this growth engine may have already hit its ceiling.

3. Surge in storage prices puts 'Supply Chain Master' to the test

This is the market's most anxious concern. Since the second half of last year, AI demand has squeezed production capacity, causing continuous spikes in storage and memory prices, even forcing some Chinese smartphone manufacturers to cut their 2026 shipment targets by nearly 20%. $Apple (AAPL.US)$ As the 'Supply Chain Master,' it once used long-term orders to lock in low prices, which even led to a major blowout in supplier Kioxia’s performance. However, market rumors suggestthese low-price long-term orders will expire at the beginning of 2026。

Facing a new round of contract price hikes, Apple is caught between a rock and a hard place: if it absorbs the costs itself, its myth of high gross margins may be unsustainable; if passed on to consumers, could it cool down the recently revived demand? Management’s response to cost control will be the biggest highlight of the earnings call.

Summary

The launch of new iPhone models, coupled with national subsidy policies, secures Apple’s short-term performance appearance. But what the capital markets are more concerned about is the substance: can this 'Supply Chain Master' squeeze out more profits from the supply chain towel amid the wave of rising memory chip prices as it did in the past?

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