Apple Q1 Earnings Might Not Miss A Beat, Even As iPhone Sales Stumble: Analyst

Apple Inc AAPL may be facing a softer iPhone cycle, but at least one analyst isn't worried.

Despite trimming iPhone sales estimates for the year, Bank of America Securities’ Wamsi Mohan remains bullish. He reiterated a Buy rating with a $253 price target—just slightly lower than before.

iPhone Demand Wobbles, But Margins Hold Strong

The iPhone 16 rollout faces a staggered launch of Apple Intelligence features. Mohan cut his forecast for total iPhone units in fiscal 2025 and 2026. His new estimates call for 229 million iPhones in 2025. That’s down from 239 million. For 2026: 246 million (down from 257 million).

However, thanks to Apple's strong gross margins and robust Services growth, the earnings impact remains minimal.

Apple's first quarter earnings report is set for Jan. 30, and expectations are still high. Mohan forecasts $126 billion in revenue, slightly ahead of Wall Street's consensus at $124 billion. But for the second quarter, he expects weaker guidance, modeling just 49 million iPhone sales. That’s down from his prior 56 million estimate.

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China Worries Overblown? Price Cuts Could Be A Game Changer

Apple's struggles in China have been a major investor concern, but Mohan sees recent price cuts as a key factor that could change the narrative. With some iPhones now priced under 6,000 RMB, they qualify for a 15% Chinese government subsidy, which could drive demand.

Meanwhile, regulatory pressures—both in China and the U.S.—could ease under the new Donald Trump administration. Mohan believes Apple will navigate EU and DOJ scrutiny much as it has in the past, keeping its focus on AI innovation and its upcoming iPhone 17 launch.

iPhone SE: The Wildcard For Apple's In-House Chips

Apple's long-rumored iPhone SE refresh is expected to land in the second quarter of 2025, and it could be more than just a budget-friendly offering. The new SE is set to debut Apple's first in-house 5G modem, a move that could eventually reduce reliance on Qualcomm Inc QCOM and boost margins further. Mohan expects 5 million units sold per quarter, making it an important test run for Apple's insourcing ambitions.

Apple’s Earnings Power Remains Intact

Despite iPhone sales volatility, Apple's services growth (+14% expected in FY25) and margin strength keep Mohan optimistic.

Investors may focus on short-term iPhone headwinds, but with AI, WWDC, and a refreshed iPhone lineup ahead, Apple's long-term thesis remains rock solid.

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