Goldman Sachs raises Apple’s target price ahead of Q4 earnings: Limited impact from slowing App Store growth, strong demand for iPhone 17 remains

According to the Zhitong Finance APP, Goldman Sachs recently released a stock research report on Apple Inc. (AAPL.US), maintaining a "Buy" rating and setting a 12-month target price of $279.00, indicating an upside potential of 6.4%. Apple is set to release its fiscal year 2025 fourth quarter (F4Q25) earnings report on October 30, Eastern Time. Ahead of the earnings report, Goldman Sachs is optimistic, expecting Apple's revenue and earnings per share (EPS) to exceed market consensus.

From the F4Q25 performance forecast, Goldman Sachs expects Q4 revenue to reach $103.5 billion, a year-on-year increase of 9%, at the upper limit of Apple's "mid-single-digit to high-single-digit" growth guidance, and higher than the market consensus of $101.8 billion. EPS is expected to be $1.81, also above the market consensus of $1.77. The gross margin is expected to be 46.5%, including $1.1 billion in tariff costs, in line with the company's previous guidance range.

Looking at the business segments, product revenue is the core driver. As the mainstay, Goldman Sachs expects iPhone revenue to reach $50.8 billion, a year-on-year increase of 10%, exceeding the market consensus of $49.8 billion, thanks to the strong performance of the iPhone 17 series, with sales increasing by 3% year-on-year, consistent with IDC estimates, and a shift towards higher-priced models driving a 7% year-on-year increase in average selling price (ASP), supported by the demand for upgrading old devices purchased during the pandemic.

The Mac business is expected to generate $8.681 billion in revenue, a year-on-year increase of 12%, supported by the demand for upgrading old devices (51 million Macs shipped in 2020-2021 entering the replacement cycle) and the back-to-school season, although ASP is expected to decline by 1% due to price reductions on the M4 MacBook Air and an increase in education discounts.

The iPad business is expected to generate $6.93 billion in revenue, flat year-on-year, supported by demand for upgrading old devices, but education procurement discounts offset the positive impact of high-end models on ASP.

The services business shows strong resilience, with expected revenue of $28.2 billion, a year-on-year increase of 13%, in line with market consensus. Although App Store spending growth has slowed to 10%, down from 13% in F3Q25, the continued growth of subscription services such as iCloud+, app store-related revenue (TAC), AppleCare+, and Apple Pay has compensated for this gap. Among them, TAC advertising business is expected to achieve a compound annual growth rate of 9% from 2024 to 2029, consistent with Google's TAC growth trend; Apple TV+ will increase its monthly fee from $9.99 to $12.99 in August 2025, further boosting service revenue growth.

Looking ahead, Apple has ample growth momentum for fiscal year 2026. In terms of iPhone, in addition to the continued demand for the iPhone 17 series, competition among U.S. carriers and the innovative design of the iPhone 18 foldable model (expected to launch in September 2026, featuring a 2nm A20 chip and a crease-free design) will support demand.

The product pipeline is rich, with plans to launch the M4 Ultra chip Mac Pro in the second half of 2025 in the Mac field, and OLED MacBook Pro in 2026-2027; in the iPad field, the M5 iPad Pro will be released in October 2025, and the 12th generation basic iPad will be launched in March-April 2026; In addition, Smart Glasses will be launched in 2026-2027, and Vision Pro 2 will be released in 2028, continuously improving the ecological layout.

Goldman Sachs also addressed several key controversies in the report: on one hand, Goldman Sachs stated that the demand for the iPhone 17 is stronger than its predecessor, supported by delivery cycles, production plans, and channel data. Since Apple has eliminated the 128GB storage version across its entire iPhone lineup, achieving a hidden price increase, the sales of the basic model of the iPhone 17 exceeding expectations will not have a significant negative impact on product profit margins.

Furthermore, the bank stated that the impact of third-party payments on the App Store is limited, as users prefer a seamless experience, and Apple is hedging risks through the expansion of its service categories. There is no need to worry about the long-term correlation of smartphones, as the vast global installed base and Apple's continuous innovation ensure its position. Based on current social behavior patterns, the form of smartphones should exhibit strong resilience. Even nearly 20 years after the launch of the iPhone, its active installed base continues to reach historical highs.

On the risk side, the bank stated that Apple needs to address multiple challenges: demand is affected by the macroeconomic environment, and the replacement cycle may be extended; the supply chain relies on assembly in China, and geopolitical issues may cause disruptions; competition in the streaming and device sectors is intensifying; regulatory requirements for third-party payments may weaken App Store commission revenue; and there is uncertainty regarding the effectiveness of mergers and acquisitions and the ROI of stock buybacks in capital allocation. Overall, Goldman Sachs believes that Apple, with its product innovation and ecological advantages, still possesses long-term growth potential