iPhone share continued to increase in May, but FQ3 momentum was slightly slower than expected

Overview

This report is Bernstein's May Apple Tracker data update, using data from Counterpoint and Sensor Tower, among others, to assess iPhone sales volume, revenue, ASP, inventory, regional demand, and the impact on Apple's supply chain. The core conclusion is that the iPhone 17 cycle remains strong, with Apple continuing to gain share in most regions, but unit growth slowed in May, ASP shifted to a modest decline after six consecutive months of year-over-year growth, and sales and revenue progress in the first two months of FQ3 were both slightly below historical seasonal trends.

Core views

The report maintains a positive overall view of Apple, considering AAPL a gateway asset benefiting from the intelligence-driven wave, and maintains an Outperform rating and a USD 350 price target. In the near term, global iPhone sell-through volume increased 2% year over year and 1% month over month in May, but China saw its first year-over-year revenue decline for the iPhone 17 series since launch due to weaker 618 promotional intensity. Over the medium term, Apple remains better able to absorb rising memory costs than Android handset manufacturers. Within the supply chain, TSMC benefits from advanced nodes, N2 migration, WMCM packaging, and AI demand; sentiment is strong for Luxshare and Largan, while Sony and Qualcomm face greater pressure.

Analysis framework

The report uses a monthly tracking framework combining iPhone sell-through, sell-in, ASP, inventory weeks, regional demand, and semiconductor content analysis across the supply chain. It first compares global and regional sales performance in May, then compares cumulative April and May sales volume and revenue with FQ3 market expectations and historical seasonality, and subsequently assesses investment implications through foundry nodes, A-series processors, DRAM capacity configurations, and supply-chain company exposure.

Methodology notes

• Sales data trackingCounterpoint and Sensor Tower monthly tracking

  iPhone sell-through and services data

  The report uses third-party monthly data to break down iPhone end-market volume, revenue, and ASP, and uses these metrics to assess the strength of Apple demand and changes in regional share.

• Quarterly pace comparisonFirst two months of FQ3 progress rate

  Cumulative April and May sales volume and revenue as a percentage of quarterly expectations

  The report compares sell-in volume and revenue for the first two months with FQ3 market expectations, Bernstein's forecasts, and historical FQ3 averages to assess whether the quarter is outperforming or lagging seasonality.

• Supply-chain mappingFoundry and memory content analysis

  Process nodes, A-series processors, and DRAM capacity changes

  The report assesses demand and value trends for TSMC, memory manufacturers, and Apple's supply chain through changes in N3P, N2, the A19 series, and DRAM capacity structure.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• AAPL

  Core covered company

  Strengths

  The iPhone 17 cycle remains strong, revenue grew year over year in most markets in May, Apple continued to gain market share in both the US and China, and its high margins make it better able to absorb rising memory costs.

  Weaknesses

  May ASP declined modestly year over year, sales and revenue progress in the first two months of FQ3 were below the historical FQ3 average, and China market revenue declined year over year in May.

  Comparison

  Compared with Android handset manufacturers, the report believes Apple has greater resilience in demand and cost absorption.

  Risks

  Insufficient 618 promotional intensity, an increasing mix of lower-ASP e-series models, higher memory prices, and failure to close the seasonal FQ3 gap in June.

• TSMC

  Beneficiary of Apple's advanced-process supply chain

  Strengths

  The migration of iPhone processors to N2 and the shift in packaging from InFO to WMCM, together with AI demand, can fill leading-edge node capacity released by handsets; management raised its 2026 revenue growth guidance.

  Weaknesses

  N3P has been relatively weaker than the N3E cycle in the past two months, affected by weaker iPhone 17e sales versus the 16e and lower 618 discounts.

  Comparison

  Even if Apple or handset customers release advanced-process capacity, the report believes AI applications can refill that capacity.

  Risks

  Further weakening in smartphone demand due to rising memory prices and changes in the advanced-process demand mix.

• DRAM supply chain

  Beneficiary of higher iPhone content

  Strengths

  Average iPhone DRAM capacity reached 9.6GB in May, up 27% year over year; the mix of 12GB models increased to 43%, while on-device AI capabilities are driving higher content.

  Weaknesses

  A high base beginning in September 2025 may cause year-over-year growth to slow.

  Comparison

  Growth in iPhone DRAM content is higher than expected overall smartphone content growth.

  Risks

  Rising memory prices could suppress smartphone demand or affect subsequent capacity upgrades.

• QCOM

  Name exposed to Apple substitution and Android demand pressure

  Strengths

  The data center narrative still provides potential support.

  Weaknesses

  Apple-related sales contributions may decline significantly as Apple develops in-house solutions and diversifies its supply, while Android demand may also come under pressure from rising memory prices.

  Comparison

  Compared with Apple and AI-related semiconductor assets, the report is more cautious on QCOM's handset business.

  Risks

  Higher Apple share, internalization by Apple, weak Android shipments, and rising memory costs jointly pressuring handset revenue.

Key data

• May global iPhone sell-through volumeup 2% year over year, up 1% month over monthThis indicates that the iPhone 17 cycle remains supportive, although unit growth has slowed.
• May global iPhone ASPdown approximately 1.2% year over yearASP weakened after six consecutive months of year-over-year growth; the report attributes this to the increasing mix of the iPhone 17e and 16e.
• China May iPhone revenuedown 15.5% year over yearThis was mainly due to weaker 2026 618 promotional intensity than in 2025, although Apple's share of the Chinese smartphone market still increased from 16% in April to 18% in May.
• US May iPhone sales volume and revenuesales volume up 4.6% year over year, revenue up 6.5% year over yearApple's share of the US smartphone market increased from 50% in April to 53% in May.
• iPhone sell-in in the first two months of FQ335.9 million unitsThis represents 67% of the market's 53.3 million-unit FQ3 shipment expectation and 64% of Bernstein's 56.1 million-unit expectation, below the historical FQ3 average of 72%.
• iPhone revenue in the first two months of FQ3USD 31.4 billionThis represents 58% of market and Bernstein FQ3 revenue expectations, below the historical FQ3 average of 69%.
• May channel inventory41.7 million units, 10.2 weeks of inventoryInventory units increased 1% month over month, while inventory weeks were broadly unchanged from 10.3 weeks in April.
• Average iPhone DRAM capacity in May9.6GB, up 27% year over year12GB models accounted for 43% of total shipments, while models with more than 8GB of DRAM accounted for 95%.
• AAPL rating and price targetOutperform, USD 350.00The current price in the table is USD 312.66.

Impact & implications

From an investment perspective, the report remains positive on Apple itself but emphasizes that near-term FQ3 data are not entirely without pressure. Apple is better positioned to withstand high memory prices and weak Android demand, and the iPhone 17 cycle continues to support share performance. However, reduced promotional elasticity in China, a weaker ASP mix, and slower revenue progress in the first two months mean that the market needs to verify whether June can close the seasonal gap. At the supply-chain level, TSMC has strong defensiveness due to AI demand and rising advanced-process pricing. Growth in DRAM content benefits memory demand, while Qualcomm may face simultaneous pressure from Apple's in-house development and weak Android demand.

Risks

• Chinese iPhone demand and promotional elasticity are weaker than expected, particularly as lower-than-last-year 618 promotional support caused a year-over-year decline.
• If the seasonal gap cannot be closed in the final month of FQ3, quarterly sales volume and revenue may fall below market expectations.
• A rising mix of lower-ASP iPhone e-series models may continue to pressure overall ASP.
• Rising memory prices may affect smartphone demand and the pace of future DRAM content upgrades at Apple.
• Within Apple's supply chain, Sony may face risks from insufficient CIS upgrades and Samsung taking share in 2027.
• Qualcomm faces multiple pressures from Apple's in-house development, Apple's rising share, and weak Android demand.

What to watch

• Whether June iPhone sell-in and sell-through can close the FQ3 seasonal gap.
• Demand recovery in China after 618 and changes in subsidy eligibility.
• The ongoing impact of iPhone 17e and 16e sales mix on ASP.
• Whether inventory weeks remain around 10.2 weeks or begin to rise again.
• N3P shipment trends relative to the N3E cycle, as well as progress on N2 and WMCM migration in 2H26.
• The impact of the mix of 12GB DRAM models, average DRAM capacity, and memory prices on handset demand.