Apple Inc (AAPL) — Equity Research

Apple Inc (AAPL) — Equity Research | Diagram-Rich Edition

AlphaInk Research · Tech Hardware

Apple Inc. (AAPL) — Quarterly Update

Services mix shift + AI cycle support 18% upside; Buy reiterated

Rating: BUY

12M Target: $245

Last Close: $208.40

Upside: +17.6%

Date: 27 Apr 2026

Analyst: Hai Z.

AAPL price vs AlphaInk 12-month target

As of 25 Apr 26 · Source: AlphaInk Research, FactSet

Price & Target

Investment Thesis

We reiterate our Buy rating on Apple following Q2 FY26 results. Three factors underpin our positive view:

Services mix shift — Services revenue is now 28% of total, up from 22% three years ago, at structurally higher gross margins (71% vs 36% on Products). The mix shift alone drives ~150 bps of consolidated GM expansion per year.
Apple Intelligence cycle — iOS 19 rollout is driving an above-trend iPhone replacement cycle. Installed base now ~1.6B devices. Channel checks suggest replacement intervals shortening from 4.2 to 3.8 years.
Capital return — ~$110B/yr program ($90B buybacks + $20B dividends) compounds EPS at ~3.5% structurally, independent of operating performance.

Earnings Power

Margin expansion is the dominant story. Gross margin reached 47.2% in Q2 FY26, up from 44.1% three years ago, driven by Services mix and supply-chain leverage. Operating margin expanded to 32.1% (vs 29.4% prior).

How is Apple Inc doing on its margins?

FY22–FY26E · Source: Company filings, AlphaInk estimates

Margins

We model FY26 EPS of $7.45, 3% above consensus of $7.22, with FY27 at $8.30 (vs Street $7.95). Our estimates have led consensus by 2-4% over the trailing 8 quarters, supporting the above-Street stance.

AlphaInk EPS forecast vs consensus

NTM rolling estimate · Source: AlphaInk Research, IBES Consensus

Earnings Estimates

Revenue Mix

Geographic concentration is a watch-item but stabilizing. China softness has bottomed and remains the swing factor; Americas continues to anchor growth.

Geographic sources of revenue

Americas43%
+6% YoY

Europe25%
+5% YoY

Greater China18%
-2% YoY

Japan6%

RoAP8%

FY26 YTD · Source: Company filings

Geographic

Sector sources of revenue

FY26 YTD · Source: Company filings

Segment

Services accelerating relative to Products: Services 28% (+14% YoY), iPhone 49% (+5%), Wearables/Home 9% (-3%), Mac 8% (+8%), iPad 6% (+2%). The mix shift is structural, not cyclical.

Ownership & Positioning

The Berkshire exit — from >900M shares three years ago to ~30M today — is fully reflected in price and removes a structural overhang. Recent two quarters show net institutional buying after 18 months of distribution. Retail participation at 11.2%, in line with Mag-7 average.

Top 13F institutional shareholders of Apple Inc

Quarterly · Source: FactSet Ownership

Ownership

Peer Comparison

Within the Mag 7, AAPL trades at attractive relative valuation (28x NTM P/E vs MSFT 32x, NVDA 35x; below GOOGL/META by less). AAPL has underperformed the Mag-7 average by ~8pp YTD, creating relative-value entry.

Stock	NTM P/E	YTD Return	Mkt Cap ($T)
NVDA	35x	+24%	3.8
MSFT	32x	+12%	3.2
AAPL	28x	−2%	3.1
META	24x	+18%	1.4
GOOGL	22x	+8%	2.1

How have the Magnificent 7 performed YTD?

YTD 2026 · Source: FactSet

Peer Performance

Risks

Key risks to our thesis:

Greater China revenue — further deterioration if local competition or geopolitics intensifies.
Regulatory — App Store take-rate pressure (EU DMA enforcement, US DoJ remedies).
AI execution — if Apple Intelligence underwhelms, replacement-cycle thesis weakens.
Factor exposure — AAPL screens long Quality / Low-Vol, short Momentum/Value — vulnerable to factor reversals.

Axioma style factor standardized sensitivities for Apple Inc

As of 25 Apr 26 · Source: Axioma US Medium-Term Risk Model

Factor Exposure

Recommendation

Maintain Buy. 12-month price target $245 (28x FY27E EPS of $8.30 + ~5% capital return yield). Risk/reward asymmetric given relative-value entry within Mag 7 and stabilizing China.