Bad news for Brits waiting for cheaper Apple products
Apple faces continued pressure on its profit margins as memory costs continue to climb and increase the price of manufacturing.
The group’s gross margin reached 49.7% in the three months to 26 September its latest results published on Monday (2 November) shows.
Commenting on the results, Ben Barringer, Head of Technology Research at Quilter Cheviot noted that memory costs remain a significant headwind for company.
“Where investors were left wanting was in the margin. Gross Margins reached 47.9%, but some of this is due to tariff benefits, while memory costs continue to be a significant headwind.
“Once those tariff benefits roll off, the margin will get hit and as such the guidance is for that to decline. The company also guided for revenues in the next quarter to be 7-10%, while the group is not substantially expanding its capex, despite the desire for Siri to compete as an AI tool.”
All of this leaves Apple in an intriguing position, said Barringer, as the current valuation does not scream attractive given the level of revenue and earnings growth on offer.
“That said, it remains a defensive place to be especially given the recent tech related sell off we have seen. Apple isn’t beholden to the fortunes of the AI trade like some of the hyperscalers, and certainly isn’t seeing the same pressures on cashflows. This is beneficial in the short-term, but the company needs to ensure that doesn’t leave them behind in the long-term.”
Price increases drive value
Apple raised prices across much of its hardware range in late June and this quarter was the first full period to reflect those increases.
In the UK, Apple raised the price of its iPhone 17 range in September, with last year’s device now priced at £100 higher than before the launch of the iPhone 18 Pro.
When the iPhone 17 first launched in the UK last year, the base model was priced at £799 from the Apple store. Traditionally, the launch of a new iPhone generation sees the price of the previous range drop somewhat, making older flagships more accessible to buyers.
High-throughput memory, storage, and graphics hardware have been in increasingly short supply, as AI companies use the same hardware to train and power their models, leading to a global shortage that has had a knock-on effect across the computing, smartphone, and gaming industries.
For this reason, although Apple has not officially justified its increase, the previous-generation iPhone 17 is now more expensive than it was at launched, and today is priced from £899 on the Apple Store in the United Kingdom.
Even the lower-end iPhone 17e saw its price rise by £100, sorely disappointing those who might have been waiting to pick up a discounted previous-generation device following the iPhone 18 Pro launch.
The iPhone Air was also hit by the same hikes, with the base 256GB model now priced at £1,099 from the Apple Store and the top-end 1TB model at a whopping £1,699.
The price hikes have paid of for Apple as total revenue rose 11.7% to $114.48 billion, ahead of the 9% to 11% growth Apple forecast in July. Net income climbed 11.8% to $30.71 billion. iPhone revenue grew 17.5% to $57.58 billion, while Mac revenue jumped 23.7% to $10.79 billion.
