Morgan Stanley analyst predicts that the entire iPhone 18 lineup will increase by $100, with memory cost surging as the main reason

Apple in its latest quarterly earnings report for the first time listed “product pricing” as a tool to respond to pressure from rising component costs, breaking a decade-long precedent. Morgan Stanley analyst Erik Woodring predicts that the iPhone 18 series launching in September this year, with the same specifications, will see price increases of at least $100 to fend off continuously soaring costs of NAND flash memory and DRAM chips, and to ensure that gross margin of Apple’s hardware business will not be affected during the CEO transition.

The earnings report acknowledged margin pressure—will Apple hint at raising prices for iPhone 18?

In its latest 10-Q quarterly filing, Apple admitted that tight industry supply and rising costs of key components such as NAND and DRAM are hurting the company’s net sales and gross margin. However, what has drawn particular attention is that Apple immediately listed the company’s potential “product pricing and pricing actions” as a specific means to address the aforementioned pressures.

(Apple earnings report: iPhone and Mac demand is strong; Cook says supply chain concerns)

Morgan Stanley analyst Erik Woodring said in a research note that Apple’s past pricing-related wording has almost uniformly focused on competitive dynamics, framing price hikes as a last resort in a high-inflation environment. The shift in wording this time suggests Apple is moving from passive defense to active moves.

He also explained that although the quarterly report did not explicitly define whether “products” include services such as iCloud, nor guarantee that new devices will necessarily be priced higher at launch, it is still an important signal.

Memory costs rising structurally—absorbing them could severely damage 2027 earnings

The root of this price-hike pressure lies in the rise in memory costs. Morgan Stanley’s cost model shows that if Apple chooses to maintain prices and absorb the costs itself, once inventory previously purchased at lower prices runs out, higher storage costs will be fully reflected in the income statement in fiscal 2027, posing a risk to the company’s overall earnings.

On the supply chain front, constraints on advanced processors also affect Apple’s ability to meet iPhone market demand. Related chips are primarily produced by TSMC, and the rapid surge in demand for AI processors is continuing to squeeze capacity allocation for advanced manufacturing process.

Apple CEO Tim Cook also admitted at the earnings call that rising memory costs will gradually put pressure on the business starting in June, and that gross margin resilience in the second half will be a key metric for the market to watch.

With a leadership handover coming, protecting absolute gross margin is the top priority

Another key factor behind the potential price hikes is Apple’s upcoming leadership change. John Ternus, head of the hardware division, is expected to take over as CEO in September this year, while Tim Cook will move to become executive chairman. Morgan Stanley believes that at this sensitive transition, the likelihood that new leadership will face a significant earnings decline in their first year is very low; therefore, any potential pricing actions are not aimed at defending gross margin rates at all costs, but at protecting the minimum gross profit amount for product lines.

(Guo Ming-Chiang on Apple’s new CEO John Ternus: the challenge is no longer the iPhone; Asia supply chain may benefit)

Based on Morgan Stanley’s scenario that the entire iPhone 18 lineup could rise by over $100, it estimates that even if iPhone shipments in fiscal 2027 are flat year over year or grow by only 1%, the combined effect of higher pricing for the same specifications, along with a shift in the ultra-premium product mix driven by the rumored foldable phone, could still push iPhone average selling price up by more than 10% year over year. This would drive full-year iPhone revenue up by as much as 14% year over year and support full-year earnings per share of $10.23.

Morgan Stanley currently maintains an “Overweight” rating on Apple, with a target price of $330.

Falling behind on AI buildup is a hidden risk—after Apple’s market value returns to $4 trillion, challenges still remain

Despite Apple’s shares surging nearly 6% intraday after issuing strong earnings on May 1, closing at a five-month high of $280.14 and pushing market value back above the $4 trillion mark, multiple long-term challenges remain unresolved. In the artificial intelligence arena, Apple is clearly lagging behind Microsoft and Google in both feature deployment and infrastructure investment, and the market is focusing on this year’s June Global Developers Conference (WWDC).

Analysts broadly believe that the pricing strategy for iPhone 18 will be one of the key indicators of whether Apple can sustain its profit momentum amid the triple pressures of leadership transition, rising costs, and the AI race.

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