NEW YORK, August 11, 2026, 07:28 EDT
- Jefferies downgraded Apple Inc. NASDAQ:AAPL to Underperform and reduced its price target to $263.66.
- The target is 14.5% lower than Monday’s closing price of $308.26.
- Apple reported a product gross margin of 40.1% in its fiscal third quarter, up from 34.5% previously.
- Analyst opinions are divided, setting targets between $250 and $366.
Apple Inc. NASDAQ:AAPL dropped 1.5% on Monday following a downgrade to Underperform by Jefferies. Analyst Edison Lee also reduced his price target to $263.66 from $285.56.
The revised target is 14.5% lower than Apple’s most recent $308.26 closing price. It questions investors’ expectations that high-end devices will continue to defend margins amid higher memory expenses.
Jefferies reported its supply chain checks showed Apple had cancelled plans for an all-glass iPhone, describing the move as a “major setback to efforts to bring in higher-priced iPhones amid soaring memory costs.” Apple declined to comment. Investopedia
The warning comes following a strong quarter. Revenue climbed 16.4% to $109.42 billion, and diluted earnings per share increased by 29% to $2.02. Chief Executive Tim Cook described it as Apple’s “strongest June quarter ever.” Apple earnings release
| Fiscal Q3 net sales | 2026 | 2025 | Change | 2026 revenue share |
|---|---|---|---|---|
| iPhone | $54.25 billion | $44.58 billion | +21.7% | 49.6% |
| Mac | $10.35 billion | $8.05 billion | +28.7% | 9.5% |
| iPad | $6.19 billion | $6.58 billion | -5.9% | 5.7% |
| Wearables, Home and Accessories | $7.88 billion | $7.40 billion | +6.5% | 7.2% |
| Services | $30.74 billion | $27.42 billion | +12.1% | 28.1% |
| Total | $109.42 billion | $94.04 billion | +16.4% | 100% |
Apple provided the sales numbers listed above in its filing. The computed share indicates iPhone accounted for nearly half of total revenue. Services made up 28.1%, while hardware pricing continues to be the more significant near-term driver.
This is why the downgrade is significant. Apple increased its product gross margin by 5.6 percentage points in the last quarter. If component inflation continues and the premium mix softens, achieving additional margin improvements could be more challenging.
| Margin and mix measure | Fiscal Q3 2026 | Fiscal Q3 2025 | Change |
|---|---|---|---|
| Product revenue | $78.68 billion | $66.61 billion | Up 18.1% |
| Services revenue | $30.74 billion | $27.42 billion | Up 12.1% |
| Product gross margin | 40.1% | 34.5% | Rise of 5.6 points |
| Services gross margin | 75.6% | 75.6% | No change |
| Company gross margin | 50.1% | 46.5% | Increase of 3.6 points |
The company reported that tariff refunds contributed roughly two percentage points to its overall gross margin. Without this short-term gain, the margin buffer would have been narrower. As a result, product mix and pricing are set to become more significant factors in the upcoming cycle.
Wall Street remains divided. Recent bearish projections suggest significant downside, but optimistic analysts continue to forecast double-digit growth. Such a wide gap is rare for a company as large as Apple.
| Firm | Analyst | Recommendation | Target | Upside/downside to $308.26 |
|---|---|---|---|---|
| Jefferies Financial Group Inc. NYSE:JEF | Edison Lee | Underperform | $263.66 | -14.5% |
| KeyCorp NYSE:KEY, via KeyBanc | Brandon Nispel | Underweight | $250 | -18.9% |
| UBS Group AG NYSE:UBS | Not stated | Neutral | $296 | -4.0% |
| HSBC Holdings plc NYSE:HSBC | Nicolas Cote-Colisson | Buy | $366 | +18.7% |
| Morgan Stanley NYSE:MS | Erik Woodring | Overweight | $360 | +16.8% |
| Visible Alpha mean | Six tracked analysts | Four rate Buy, two negative | $330 | +7.1% |
The comparison reflects Monday’s closing price. Jefferies, KeyBanc and UBS are below that benchmark. HSBC and Morgan Stanley forecast that the next product cycle and advances in artificial intelligence will drive growth.
Expectations shifted last week, as Apple tumbled when its revenue forecast failed to impress investors, even though it surpassed quarterly estimates. Losses continued on Monday, pushing the adjustment in valuations into another week.
This week features a single confirmed corporate event: Apple is set to pay its $0.27 quarterly dividend on August 13. Meanwhile, investors will gauge high-valuation technology stocks in light of the upcoming U.S. inflation data due Wednesday.
Risks are present on both sides. Jefferies bases its product outlook on supply chain checks rather than on any statement from Apple. Apple has the potential to maintain pricing with an additional premium product, but softer demand or rising memory expenses could put pressure on product margins.
The key issue at hand is the gap to the target price. Reaching the $330 average analyst estimate depends on maintaining steady product margins. Jefferies’ $263.66 scenario factors in a less reliable premium hardware bridge.
Related articles: NASDAQ:AAPL
