Apple faces pricing dilemma as new CEO Ternus navigates rising chip costs, eyes €101.5bn revenue
Apple's first earnings report under CEO John Ternus comes as rising chip costs test its product pricing and margin strategy.
Apple is set to report quarterly earnings on Monday evening in Europe, presenting the first financial results under new chief executive John Ternus. The announcement comes at a pivotal moment as the company confronts rising memory chip costs, compelling investors to scrutinise whether Apple will adjust its pricing strategy to protect margins.
Analysts expect Apple to post revenue of nearly €101.5 billion, an increase of almost 11% year-on-year, with net profit seen rising about 6% to €26 billion. The performance will be closely watched as it covers the period before the launch of the new iPhone Duo, which began sales on 23 October with a starting price of €1,789.
The cost of memory and storage components for flagship devices is increasing sharply. TechInsights estimates that these components alone could cost Apple around €175 for the iPhone 18 Pro. Such increases threaten to erode profit margins, particularly as services revenue growth slows and the company faces pressure to maintain its premium market valuation, now at approximately €4.5 trillion.
Investors are seeking clarity on how Apple will manage these rising input costs. There is speculation that the company may have to pass on some of these expenses to consumers, potentially raising the prices of future models. The challenge is particularly acute ahead of the critical Christmas sales period, with iPhone revenue forecast to jump 15% to €50.6 billion and services revenue up nearly 10% to €28.2 billion.
The earnings report is also expected to offer the first indications of how John Ternus will position Apple on artificial intelligence, an area where rivals are investing aggressively. Analysts at AJ Bell note that Ternus’s approach to both AI and supply chain cost management will be pivotal for sustaining growth and justifying Apple's high valuation.
For European and Latin American consumers, any price increases could affect demand for Apple's high-end devices, while suppliers in the region may see changes in procurement strategies as Apple seeks to manage costs. The outcome of this earnings report will likely influence near-term investor sentiment and set the tone for Apple's strategy in the AI and semiconductor landscape.
