BofA flags weaker near-term Apple quarters

Bank of America is signaling a much weaker December quarter for Apple than current market expectations, highlighting pressure on both revenue and margins. The bank argues that consensus estimates may not fully account for a shift in the company’s iPhone launch schedule and rising component costs, which together could weigh on near-term results even as Apple prepares to report what is expected to be a modest earnings beat for its September quarter.

A key concern is that market models may be overly optimistic about December-quarter revenue and March-quarter gross margins, while potentially underestimating June-quarter revenue. This reflects how the altered device rollout can pull more premium revenue into one period and push lower-priced volume into another, complicating year-over-year comparisons and masking the underlying trajectory of the business.

Apple’s latest iPhone cycle has been split across two fiscal quarters: the Pro, Pro Max and Duo models launched in September, while the base model and Air are scheduled for March. Bank of America notes that this staggered schedule reshapes the usual distribution of high-end and lower-priced device sales through the fiscal year.

Because premium devices tend to carry higher prices and stronger margins, front-loading these models into the September quarter can make the December period look weaker than typical seasonal patterns might suggest. At the same time, the shift of the base model and Air into the March quarter may place additional pressure on margins then, even if unit volumes remain solid.

Bank of America emphasizes that investors need to focus on several linked metrics across this cycle: December-quarter revenue, March-quarter gross margins, iPhone unit trends, component costs and the possibility that June-quarter revenue gains from the delayed base-model launch. The bank frames the issue as one of timing and mix rather than a fundamental change in Apple’s longer-term prospects.

Beyond launch timing, Bank of America highlights component cost inflation, especially in memory, as a major source of margin pressure. The bank estimates that higher memory costs alone could reduce iPhone gross margins by 900 basis points before the effects of pricing, product mix and cost-saving actions.

After taking these offsets into account, the residual impact on iPhone gross margins is projected at around 500 basis points, translating to an estimated 250-basis-point drag on Apple’s overall company gross margin. For the March quarter, Bank of America forecasts total gross margin of 43.6% to 44.6%, below a 47.7% consensus estimate, underscoring its more conservative stance on Apple’s near-term profitability.

Apple has already raised prices in response to higher component costs, and investors are expected to watch closely whether those increases are sufficient to protect margins in coming quarters. Bank of America believes the current margin pressure should prove temporary, with a recovery expected toward the end of financial 2027 and into financial 2028.

Reflecting a more cautious view on demand, Bank of America has reduced its financial 2027 iPhone shipment forecast by 9 million units to 247 million, compared with a Street estimate of 260 million units. This revision aligns with its view that the combination of launch timing, mix effects and cost inflation could dampen near-term performance relative to prevailing expectations.

Despite highlighting these risks, Bank of America does not characterize its view as outright bearish on Apple. Instead, it argues that the main issue is how the market is interpreting the company’s quarterly results amid an atypical product cycle. In this framework, apparent weakness in the December and March quarters may need to be weighed against potential benefits for June-quarter revenue and a longer-term margin recovery as cost pressures ease.