Apple 1Q26 Earnings Review: Margin Concerns Are Overblown
Happy Wednesday.
To recap where we stand with reviewing Apple's 1Q26 earnings.
Last Friday: Big picture overview and the numbers
Tuesday: All about iPhone
Today: Margins
Let's jump in.
Apple 1Q26 Earnings Review: Margin Concerns Are Overblown
Heading into Apple’s 1Q26 earnings release, margin concerns were among the list of items thought to be contributing to Wall Street’s negative view regarding Apple. Memory pricing inflation had been in the news for weeks. There was also growing chatter and speculation surrounding the Apple / TSMC relationship as it pertained to future pricing and supply. We could have even thrown in lingering tariff cost concerns into the margins discussion, although the tariff topic does seem to have genuinely been put on the back burner for now with Apple’s exposure being contained.
Based on Apple management’s commentary on the 1Q26 earnings call, gross margin fears are overblown based on how events on the ground are trending. While Apple will likely see some pressure from select higher component pricing, a handful of tailwinds are positioned to help offset those headwinds.
Memory accounts for a relatively small percentage
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My 3Q21 Apple Financial Estimates
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My 3Q21 Apple Financial Estimates
In today’s update, we go over my granular financial estimates for Apple's 3Q21. The discussion includes the major assumptions behind my estimates as well as my early thoughts on Apple’s 4Q21. The update also includes access to my updated Apple earnings model, which is a benefit associated with Above Avalon membership at no additional cost.
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Apple Earnings, Deconstructing Apple’s Growth, A Margins Rocket, Apple's Stingy Dividend Increase
Today's Above Avalon daily update includes the following stories:
Apple Earnings
Deconstructing Apple’s Growth
A Margins Rocket
Apple's Stingy Dividend Increase
Today's update will be dedicated to discussing Apple’s 2Q21 earnings. We begin by going over Apple’s financial results and how the numbers compared to my estimates. We then look at the drivers behind Apple’s strong revenue growth. There is value in deconstructing Apple’s 2Q21 revenue growth to get a cleaner look at how Apple’s ecosystem is performing. The discussion then turns to Apple’s stellar margins. The update concludes with what I think is going on with Apple’s stingy dividend increases.
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Above Avalon members receive the full Above Avalon experience throughout the week.
The cornerstone of Above Avalon membership is access to Neil’s exclusive daily updates about Apple. Daily updates are 2,000 words and sent via email Monday through Thursday. Updates revolve around the following topics:
Apple business and strategy analysis.
Neil’s perspective and observations on current news and Apple competitors.
Neil’s Apple financial estimates.
Full coverage of Apple earnings, product events, and keynotes.
If it is of interest to Apple, it is something I pay attention to.
Member Privileges and Benefits
Receive Exclusive Daily Updates. The cornerstone of Above Avalon membership is access to Neil’s exclusive daily updates about Apple. Each email is 2,000 words and includes Neil’s analysis and perspective on the most important stories and news impacting Apple. Unlike other paid emails that may sporadically talk about Apple, every Above Avalon daily update is focused on Apple. New updates are sent Monday through Thursday. Approximately 200 daily updates published throughout the year. Sample daily updates can be viewed here, here, and here. Members have the option of receiving a consolidated weekly version of the daily updates. In addition, an RSS feed is available for members. The daily updates can also be consumed in audio via the Above Avalon Daily podcast (available to members as an add-on feature).
Access Reports and Neil’s Earnings Model. Members have access to Above Avalon reports, which are in-depth examinations of Apple's business and financial strategy. Each report is 4,000 to 5,000 words and covers one Apple topic. Members also have access to Neil’s working Apple earnings model (an Excel file that also works in Numbers). The model is fully functional and adjustable with the ability to alter earnings drivers. Reports and Neil’s earnings model are available to members at no additional cost.
Email Priority. Receive priority when it comes to having email questions and inquiries answered. Neil personally answers all inquiries, including any customer service matters related to your membership.
Archive Access. Read more than 1,100 daily updates and five reports that have been previously sent to members. The Above Avalon member archive is unmatched in the marketplace in terms of the sheer amount of Apple analysis found in one location. The daily updates archive can be viewed here while the reports archive is available here.
Member Forum Access. Join other Above Avalon members in an active forum containing in-depth discussion and debate. While most private member forums have limited participation, the Above Avalon member forum has become known as one of the more vibrant private communities dedicated to Apple. Members live in 55 countries and hold a diverse range of backgrounds and occupations. There is a specific forum channel for members to share AAPL stock and options trading strategies. Neil moderates and participates in the forum. The forum is run through Slack and can be accessed here.
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