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Apple's Supply Woes Likely to Continue Into Fiscal 2027, UBS Says

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Apple's Supply Woes Likely to Continue Into Fiscal 2027, UBS Says

Apple's (AAPL) supply chain-related concerns could persist into fiscal 2027, UBS Securities said, after Chief Financial Officer Kevan Parekh flagged a worsening supply backdrop.

Late Thursday, the company reported strong results for a supply-constrained fiscal third quarter amid momentum in iPhone sales. It, however, missed estimates for iPad and services revenue.

The results were in-line with UBS' expectations, but analysts including David Vogt noted that Apple faces "increasingly more difficult gross margin headwinds and supply chain challenges," according to a note sent Friday.

Fourth-quarter revenue is expected to grow 9% to 11% year over year, Parekh said on an earnings call late Thursday. That indicates a sequential slowdown from 16% growth in the June quarter, and missed Wall Street's then-consensus estimate.

"We expect the impact from supply constraints to increase significantly sequentially" in the fiscal fourth quarter, affecting iPhone, Mac, and iPad, Parekh told analysts.

UBS reiterated its neutral rating on the stock with a price target of $296. Apple's shares closed 7.4% lower at $308.91 on Friday.

Apple and other technology giants are grappling with a global shortage of memory chips, which has sent component prices higher. Apple recently increased prices for MacBooks and iPads.

UBS expects component costs to pressure gross margins in the September and December quarters.

Average selling prices for dynamic random access memory and NAND are likely to increase 30% quarter-over-quarter, which, combined with a ramp in iPhone volume, could lower the December-quarter gross margin to 45.9% from 50.1% in the three months ended June, Vogt said.

The fiscal third quarter's margin benefitted from tariff refunds, the brokerage said.

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