Apple is on track for its strongest June-quarter sales growth in five years after holding iPhone prices steady amid rising component costs, according to Reuters reporting. Investors, however, will be watching closely for signals on how long the company can avoid price increases on its flagship product.
Reuters reported that the consumer electronics giant raised prices on iPads and MacBooks last month to offset higher costs from a shortage of memory and storage chips driven by massive AI datacenter buildouts. It spared iPhones, even as rival smartphone makers passed on those costs, contributing to a decline in global smartphone shipments in the April-June quarter to the lowest level in 13 years.The strategy appears to have paid off. iPhone shipments rose 3% and Apple’s market share climbed to nearly a fifth, according to estimates from research firm Counterpoint cited by Reuters. Combined with the fact that Apple has not spent hundreds of billions of dollars on data centers, this helped the company reclaim the title of the world’s most valuable company from Nvidia after two years, as doubts about the AI boom grow.
Apple shares, up nearly 25% so far this year, briefly pushed the company’s market value above $5 trillion for the first time on Tuesday and have widely outperformed the rest of the stocks among the “Magnificent Seven.”
“Apple was initially scorned by many investors for not joining the AI investment cycle. Now, it is actually being rewarded as investors question the relationship between (Big Tech’s) spending and return on investment,” said Dan Morgan, portfolio manager at Synovus Trust, which owns Apple shares, according to Reuters.
Last week, Alphabet stunned investors with a negative free cash flow for the first time in its history, Reuters noted. Morgan said he expects Apple to increase prices later this year, which could dampen demand and put pressure on a company whose high valuation does not leave “a lot of room for error.”
Analysts expect Apple to raise prices when it releases its next iPhone series, typically in September. Earlier this month, the company raised the price of Apple Music and Apple One, a subscription bundle for multiple Apple services, Reuters reported.
According to LSEG data cited by Reuters, Apple is expected to report that revenue rose 15.5% to $108.65 billion in the April-June period, its fiscal third quarter. That is slightly slower than the previous three months but marks the strongest third-quarter sales growth since 2021. Profit growth is expected to slow slightly to 18.1% as gross margin slips to 47.9% from 49.3% in the previous quarter.
Some analysts said the popularity of Apple’s devices and its strong ecosystem is likely to stave off any major demand hit for iPhones from price hikes, which could protect margins.“Apple’s core product demand has been somewhat inelastic, with iPhone being the most inelastic product within Apple’s product ecosystem, followed by Mac and then iPad,” Morgan Stanley analysts said. “This generally means that recent price increases are unlikely to materially disrupt demand, especially considering supply challenges at peers.”
iPhone sales likely increased 20.8% in the period, also marking the strongest third-quarter growth since 2021, Reuters reported. Mac revenue growth is expected to improve to 8.7% from 5.7% in the previous quarter despite the price increase, while iPad sales are expected to slow slightly to 5.2% from 8% in the second quarter.
MacDailyNews Note: As usual, we’ll have Apple’s earnings results for you as soon as they are released on Thursday, July 30th right around 4:30pm EDT / 1:30pm PDT. We’ll follow that with live notes from Apple’s conference call with analysts starting at 5:00pm EDT / 2:00pm PDT.
Please help support MacDailyNews — and enjoy subscriber-only articles, comments, chat, and more — by subscribing to our Substack: macdailynews.substack.com. Thank you!
Support MacDailyNews at no extra cost to you by using this link to shop at Amazon.
