Our Apple Price Target With AI-Powered Update Around the Corner

On Thursday night, Apple (AAPL) delivered a solid top- and bottom-line beat for its December quarter, spurred on by a more than 23% increase in iPhone revenue and the one-two punch of double digit jump and further margin gains at its Services business.

We knew, based on comments from Taiwan Semiconductor (TSM) and, more recently, Qorvo (QRVO) that iPhone volumes would be robust, but the mix of models favored higher-end ones, resulting in Product segment margins near 41%, the highest in multiple quarters. The Services segment benefited from continued device attach gains across Apple’s more than 2.5 billion active devices, but also price increases taken in mid-2025.

We see that as showcasing the combined might of the initial iPhone refresh and the more than 75% gross margin Subscription business. Aggregating Apple’s other product categories — Mac, iPad, Wearables, Home & Accessories, we find a modest decline compared to the year-ago quarter.

Turning to Apple’s outlook for the current quarter, it guided overall revenue to be up 13% to 16% year over year, which implies about $107.5 billion to $110.6 billion as it contends with “constrained iPhone supply in the quarter.” The positive is that guidance tops the $105 billion the market was forecasting. That 23% to 25% top-line decline compared to the $143.8 billion posted in the December quarter also reflects seasonal weakness and lower shipment volumes across the balance of its Product business.

But as we saw in the March 2025 quarter, this is when we really see the power of the higher margin Services segment, which is expected to grow double-digits year over year. That should help Apple maintain or potentially see a modest uptick in overall gross margins compared to the 48.2% achieved in the December quarter. On a year-over-year basis, that suggests some nice margin expansion prospects.

Potential Catalyst Just Around the Corner

We know Apple only guides one quarter at a time, but as we’ve discussed, the next known, meaningful catalyst for AAPL shares will be when Apple unveils its revamped, AI-enabled Siri. The first look is expected to come with the upcoming iOS 26.4 beta release targeted for the second half of February and wider availability in March or early April.

But as we are learning, this is just the beginning. Reports indicate Apple plans to unveil a fully reimagined Siri at this year’s WWDC, one that will be conversational, aware of relevant context, and capable of sustained back-and-forth dialogue. While this next evolution in Siri will be seen at WWDC in June, the first opportunity to test it in the wild will come with the beta version of iOS 27, iPadOS 27 and macOS 27 this summer.

We acknowledge this has been a long time coming from when Apple first expected to deliver an AI-powered Siri in 2H 2024. However, we continue to think that if Apple is able to delight consumers with this initial AI-enabled Siri and even more so with the reimagined one, that would ignite the massive upgrade cycle we and others have been waiting for.

Maintaining Our AAPL Price Target... for Now

For now, we’ll maintain our current AAPL price target of $305, and as we test the iOS 26.4 Siri beta, we’ll revisit it as needed.

And even though AAPL is a 3.9% position for us, we’ll continue to evaluate levels that make sense for folks looking to increase their holdings in the shares.

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At the time of publication, TheStreet Pro Portfolio was long AAPL.