iPhone continues to gain share in a weak smartphone market, but the AAPL FQ3'26 preview is mixed

Overview

This report is Bernstein's June Apple Tracker, using Counterpoint, Sensor Tower, and supply chain analysis to track iPhone sales, channel inventory, services revenue, and semiconductor supply chain impacts. The core conclusion is that although the global smartphone market remains weak amid worsening memory shortages, Apple's iPhone unit sales, revenue, and market share are performing significantly better than the industry, but in FQ3'26, because of the product mix impact from iPhone 17e, unit sales are strong while ASP is weak, resulting in mixed short-term earnings preview signals.

Core views

The report maintains a positive view on AAPL, with an Outperform rating and a $350 price target. Apple's global smartphone share rose to 20% in CQ2'26, and it was the only major OEM in the quarter that did not raise smartphone prices. The iPhone 17 series drove significant year-over-year growth in both sell-in and sell-through, and stronger e-series demand boosted unit sales but also dragged on overall ASP. On the supply chain side, sentiment is strong for Luxshare and Largan; TSMC continues to be supported by advanced process technology and AI demand; Sony faces risk from the lack of CIS upgrades and potential share loss in 2027; Qualcomm may be affected by Apple's in-house substitution, weak Android demand, and rising memory prices.

Analysis framework

The report uses monthly and quarterly tracking of iPhone sell-through, sell-in, ASP, channel inventory, and regional data, combined with Counterpoint smartphone market data, Sensor Tower App Store revenue data, and breakdowns of iPhone processor nodes and DRAM configurations, to cross-validate Apple FQ3'26 and supply chain impacts. For services revenue, it uses the regression relationship between year-over-year changes in Sensor Tower global App Store quarterly revenue and year-over-year changes in Apple services revenue for forecasting.

Methodology notes

• Data trackingCounterpoint iPhone sell-through / sell-in tracker

  Measure iPhone demand and channel changes using monthly and quarterly sell-through, sell-in, ASP, and share data.

  The report states that June sell-through revenue grew 11.2% year over year and unit sales grew 9.5% year over year; in CQ2'26, sell-through revenue and units grew 6.1% and 4.6% year over year, respectively, while sell-in units grew 9.5% year over year.

• Forecasting modelSensor Tower App Store regression

  Use regression on year-over-year changes in Sensor Tower App Store revenue to infer growth in Apple services revenue.

  Based on Sensor Tower FQ3'26 quarterly revenue growth of 3% year over year, the model derives Apple services revenue growth of about 6.5% year over year, or about $30.34bn, broadly in line with Bernstein and Bloomberg consensus expectations.

• Supply chain analysisprocessor node and memory content analysis

  Assess impacts on TSMC and the memory supply chain based on iPhone processor nodes, A19/A19 Pro shipment trends, and DRAM capacity mix.

  The report compares the N3P and N3E cycles, A19 and A19 Pro shipments, and tracks the mix of 12GB DRAM models, average DRAM content, and the potential impact of rising memory prices on demand.

Asset mapping & comparison

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

• AAPL

  Core covered name

  Strengths

  Strong iPhone unit sales, market share gains, services revenue roughly in line with expectations, and an Outperform rating.

  Weaknesses

  A higher iPhone 17e mix depresses ASP, creating slight downside risk to FQ3'26 iPhone revenue.

  Comparison

  Apple is clearly outperforming the industry while the global smartphone market is weak, and it is the only major OEM in the quarter that did not raise prices.

  Risks

  ASP below expectations, rising memory costs, and regional demand divergence, especially year-over-year weakness in China.

• TSMC / 2330.TT / TSM

  Apple advanced process supply chain beneficiary

  Strengths

  N2 migration, WMCM packaging upgrades, and AI demand can increase silicon content and value capture; TSMC still leads in advanced processes and capacity remains tight.

  Weaknesses

  The recent N3P cycle is weaker than the prior N3E cycle because iPhone 17e is weaker than 16e and 618 discounts were lower.

  Comparison

  Even if Samsung Foundry and Intel Foundry gain some customer traction, the report believes TSMC remains stronger in technology generation, scale, and delivery track record.

  Risks

  Weak consumer electronics demand, customers shifting to alternative foundries, and the pace of leading-node capacity ramp.

• Luxshare

  Apple supply chain beneficiary

  Strengths

  iPhone shipments are stronger than Android, and AI-related businesses are progressing steadily.

  Weaknesses

  Sensitive to Apple's shipment cadence and product mix.

  Comparison

  More supported relative to supply chain names affected by weak Android demand.

  Risks

  Changes in Apple orders and overall weak demand in the smartphone industry.

• Largan

  Apple optical supply chain-related name

  Strengths

  Benefits from iPhone shipments being stronger than Android, along with progress in AI-related business.

  Weaknesses

  The report rates it Market-Perform, with positive sentiment driven more by iPhone supply chain fundamentals.

  Comparison

  Relative to Sony, the report is more positive on its supply chain sentiment.

  Risks

  The pace of smartphone camera upgrades and changes in customer share.

• Sony

  CIS supply chain-related name

  Strengths

  Still belongs to Apple supply chain-related assets.

  Weaknesses

  The report believes CIS may not see upgrades this year, and there is elevated risk of share loss to Samsung in 2027.

  Comparison

  Relative to Luxshare and Largan, the report is more cautious on Sony's supply chain outlook.

  Risks

  Lack of CIS upgrades, Samsung competition, and declining customer share.

• QCOM

  Smartphone semiconductor and Apple substitution risk-related name

  Strengths

  The data center narrative has some support.

  Weaknesses

  Apple's gradual diversification and internalization may lead to a significant decline in AAPL-related sales, while weak Android demand and rising memory prices may also pressure handset revenue.

  Comparison

  Relative to AVGO, which is more strongly supported by AI demand, pressure on QCOM's handset business is more pronounced.

  Risks

  Apple in-house substitution, weaker Android demand, and rising memory prices suppressing device shipments.

• Memory suppliers

  Beneficiaries of rising DRAM content

  Strengths

  The mix of iPhone 12GB DRAM models is increasing, and average DRAM content reached 9.7GB in June, up 27% year over year.

  Weaknesses

  A high base and rising memory prices may slow subsequent year-over-year growth.

  Comparison

  iPhone content growth is faster than the overall smartphone market, while non-iPhone smartphones are more clearly dragged down by contraction in the low-to-mid end.

  Risks

  Rising memory prices may suppress smartphone demand or delay increases in memory content.

Key data

• Global smartphone market Q2 2026 shipmentsdown 11% year over yearThe decline widened from a 6% year-over-year drop in Q1, mainly against the backdrop of worsening memory shortages.
• Apple global smartphone share20%Higher than 17% in CQ2'25.
• June iPhone sell-through revenueup 11.2% year over yearUnit sales increased 9.5% year over year, and ASP increased 1.5% year over year.
• CQ2'26 iPhone sell-throughrevenue up 6.1% year over year, units up 4.6% year over yearDuring the same period, sell-in units increased 9.5% year over year.
• U.S. June sell-through revenueup 8.7% year over yearMainly driven by an 8.4% year-over-year increase in ASP.
• China CQ2'26 sell-through revenuedown 7.2% year over yearMainly reflects a 6.9% year-over-year decline in unit sales.
• e-series CQ2'26 unit sales5.8 million unitsHigher than 5.0 million units in CQ2'25, up 16% year over year.
• June channel inventory42.9mn units, 10.3 weeks of inventoryInventory units rose for the fourth consecutive month, but inventory weeks were broadly flat versus 10.4 weeks in May.
• FQ3'26 iPhone sell-in units55.2mnAbove the consensus expectation of 53.3mn and close to Bernstein's estimate.
• FQ3'26 services revenue forecastabout $30.34bnDerived from regression on Sensor Tower App Store data and broadly in line with Bernstein and Bloomberg consensus expectations.
• Average iPhone DRAM content9.7GB in June, 9.6GB YTD 2026Up 27% year over year in June, and up 27% year over year year-to-date in 2026.
• AAPL rating and price targetOutperform, $350Current price in the table is $333.02.

Impact & implications

For AAPL, strong unit sales and market share gains support a positive medium-term view, but the product mix shift toward iPhone 17e makes ASP weaker than expected, creating a slight downside risk to FQ3'26 iPhone revenue versus consensus expectations. For the supply chain, Apple's share gains relative to Android benefit some assembly and optical suppliers; demand for TSMC's advanced process technologies remains supported by AI and future N2/WMCM upgrades; rising memory prices may suppress Android and lower-end smartphone demand, but iPhone has greater ability to absorb costs due to its higher margins.

Risks

• FQ3'26 iPhone ASP may come in weaker than expected, potentially offsetting the revenue contribution from strong unit sales.
• China market CQ2'26 iPhone revenue and unit sales declined year over year, and regional divergence still warrants attention.
• Channel inventory has risen for the fourth consecutive month, and weeks of inventory are slightly above historical seasonality.
• Memory shortages and rising memory prices may suppress smartphone demand, especially affecting Android and lower-end models.
• iPhone 17e and lower-end A19 version shipments are weaker than some prior-generation metrics, making the recent N3P cycle weaker than the N3E cycle.
• Sony may face CIS share loss risk in 2027; Qualcomm faces pressure from Apple's internalization and weak Android demand.

What to watch

• The actual variance in iPhone revenue, unit sales, and ASP in Apple's FQ3'26 results after the July 30 close.
• Whether follow-up sales of iPhone 17e and the e-series continue to improve, and whether the drag on ASP expands.
• Regional divergence in sell-through revenue, units, and ASP across the U.S., China, Europe, Japan, and Rest of APAC.
• Whether channel inventory units and weeks of inventory fall back from around 10.3 weeks, or remain above historical seasonality.
• Whether the relationship between Sensor Tower App Store revenue and Apple services revenue remains intact.
• TSMC's N2 and WMCM transition progress, and whether AI demand can continue to offset weak handset demand.
• Whether rising DRAM prices affect increases in average iPhone memory capacity and overall smartphone demand.