Apple just delivered one of its stronger quarterly performances in recent memory, and Wall Street’s reaction has been split. Some analysts are watching the margin pressure and slowing Services growth and asking whether the best of this run is already behind the company.
Bank of America is not in that camp.
In a Nov. 3 note shared with TheStreet, analyst Wamsi Mohan reiterated a Buy rating on Apple (AAPL) and held his price target at $370. Based on the stock’s closing price of $338.32 at the time of the note, that target implies upside of roughly 9.4%.
The call comes after Apple’s fiscal fourth quarter came in ahead of expectations on both the top and bottom lines.
But Mohan’s thesis is not really about one quarter. It is about what he sees building underneath the headline numbers and whether the market is pricing Apple’s AI opportunity correctly.
Apple’s iPhone business continues to deliver
The quarter gave BofA plenty to work with on the iPhone side. Apple reported fiscal fourth-quarter revenue of $114.5 billion, up 12% year over year and above the high end of its own guidance.
Earnings per share came in at $2.10, a 14% increase from the prior year, though that figure included a $0.05 benefit from tariff refunds.
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The iPhone was the standout. Revenue from the product climbed 17% to $57.6 billion, a September-quarter record. Demand held up in the U.S. and Greater China, even as supply constraints limited what Apple could actually put in customers’ hands.
The latest lineup, including the iPhone 18 Pro, Pro Max, and the foldable iPhone Duo, helped sustain that demand, and the company raised iPhone prices in September, though management acknowledged it was too early to gauge how consumers would absorb the increases.
BofA expects iPhone revenue growth to stay strong through the December quarter, backed by higher average selling prices and continued demand. Apple has guided fiscal first-quarter revenue to between $154 billion and $158 billion, above analyst consensus.
Supply on the iPhone Duo remains tight, with no timeline from Apple on when that catches up.
Higher memory costs could pressure Apple’s margins
Revenue growth is one thing. What it costs Apple to generate that growth is a separate conversation, and that is where the picture gets more complicated heading into the next few quarters.
Apple’s gross margin came in at 47.9% in the September quarter, helped along by those tariff refunds. Strip that benefit out, and the underlying picture is less comfortable.
Higher memory costs created a 100-basis-point sequential headwind for both overall and product gross margins, and Apple has guided gross margins for the December quarter to between 45% and 46%.
BofA expects the pressure to persist across several quarters as memory prices continue to rise. Apple is working to offset the impact through savings on non-memory components, inventory bought at lower cost, and higher product pricing, and the bank believes those measures will cushion some of the decline.
But cushioning is not the same as neutralizing, and near-term margin compression looks likely regardless.
For investors, that creates a distinction worth keeping in mind. Strong revenue growth does not automatically translate into equally strong earnings growth when the cost of producing the hardware keeps climbing.
The gap between those two metrics is something BofA is watching closely in its fiscal 2027 and 2028 estimates.
Services growth is slowing, but BofA sees a recovery ahead
Services revenue hit an all-time record in the September quarter, reaching $31.6 billion on 10% year-over-year growth. The record headline masks a deceleration that investors are starting to pay attention to.
Growth had come in at 12% the prior quarter, and BofA now expects it to ease further to between 8% and 9% in the December quarter.
Several things are pulling in the same direction at once. Third-party licensing revenue has softened. App Store growth has gone relatively flat. Mobile gaming continues to drag. Changes to Apple’s App Store business model in certain markets and a U.S. court ruling affecting link-out transactions are adding more friction. Higher cloud costs tied to Siri’s AI features are also expected to weigh on Services margins in the near term.
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BofA is not reading this as a structural problem. The bank expects Services growth to pick back up over the longer term as Apple finds ways to monetize AI-powered Siri features and pulls more of its installed base into new subscription and service offerings.
Apple has more than 2.5 billion active devices. The monetization opportunity attached to that base is something the market has not fully priced in, in Mohan’s view.
Apple’s AI opportunity remains central to the bullish case
The near-term pressures on margins and Services are real, but BofA’s conviction on Apple is built around a longer view. The bank expects Apple to benefit from a multiyear iPhone upgrade cycle as consumers move toward hardware capable of running generative AI features locally.
That is a different kind of replacement cycle than Apple has historically seen, and if it plays out the way BofA expects, it could sustain iPhone revenue growth well beyond the current product lineup.
Apple’s internally developed silicon, its tightly integrated product ecosystem, and the potential for new AI-driven services sit at the center of that argument. Meanwhile, capital returns continue to give shareholders something to hold onto while the AI story develops.
During the September quarter, Apple returned $28 billion to investors, including $24 billion in share repurchases and $3.9 billion in dividends.
BofA nudged its fiscal 2027 earnings-per-share estimate up slightly to $9.15 from $9.12, while trimming its fiscal 2028 estimate to $10.20 from $10.40.
Its $370 price target is based on approximately 35 times its calendar 2028 earnings estimate of $10.32, a valuation the bank believes is justified by Apple’s AI positioning, the potential upgrade cycle, and the company’s overall financial strength.
The core question for investors right now is whether Apple’s revenue growth remains strong enough to offset the margin compression and Services deceleration in the quarters ahead.
BofA’s answer, for now, is yes.
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