Apple is expected to post its strongest iPhone sales growth in four years when it reports earnings on Thursday, supported by solid demand for its high-end Pro models and ahead of the rollout of new artificial intelligence features built using Google’s technology.
Investor attention, however, will also focus on how the company plans to manage a global memory chip shortage, which could push production costs higher and pressure profit margins in the coming quarters.
Apple’s decision to integrate Alphabet’s Gemini models into a revamped Siri and other Apple Intelligence features marks the most significant change yet in its AI strategy. Wall Street has largely welcomed the move, arguing that it allows Apple to leverage its installed base of more than two billion devices without committing to the massive capital spending required to build advanced AI models internally.
Analysts at Goldman Sachs said the partnership should reinforce the iPhone’s position as the preferred consumer device for accessing new AI tools. Even before the AI overhaul, demand for the latest iPhone 17 lineup jumped in the final three months of 2025, traditionally Apple’s strongest sales period.
In China and other emerging markets, Apple attracted buyers with upgrades such as a redesigned camera system and larger storage options on its latest Pro models. According to Counterpoint, Apple led the global smartphone market last year with a 20% share, up from 18% in 2024.
Overall, analysts surveyed by LSEG expect iPhone revenue to have risen 13.8% in Apple’s fiscal first quarter ended in December, the fastest pace of growth in more than four years. Total revenue is forecast to climb 11.4% to a record $138.43 billion, helped by a 14.1% increase in the company’s services division. Sales in Greater China are also projected to have surged about 15%, based on Visible Alpha data.
Supply chain strength remains a key advantage
Despite the strong outlook, Apple shares rose just 8.5% last year, lagging behind the AI-driven rallies seen at rivals such as Microsoft and Alphabet. Some investors believe Apple can still generate attractive returns from AI without matching the heavy infrastructure investments of its peers.
“Apple can probably deliver positive returns on relatively modest AI spending thanks to its distribution,” said Gerrit Smit of Stonehage Fleming’s Global Best Ideas Equity fund.
At the same time, Apple’s services business, which includes the App Store, faces mounting regulatory pressure in Europe over its payment practices. The company has already been fined hundreds of millions of euros for abusing its dominant market position.
Looking ahead to the fiscal second quarter, tight memory chip supplies could raise iPhone manufacturing costs, according to Rosenblatt Securities. Still, the firm noted that Apple has a strong track record of managing supply chain disruptions by using its scale to secure supplier concessions and lock in components.
The ongoing chip crunch is expected to weigh on demand across consumer electronics, including smartphones, PCs and gaming consoles, with the biggest impact likely on lower- and mid-range devices.
