Apple iPhone pricing drives strongest June sales in five years
Apple is expected to report its strongest June-quarter revenue growth in five years after holding iPhone prices steady, a capital-discipline strategy that has helped it reclaim the title of the world's most valuable company.
Apple is projected to report a 15.5% increase in fiscal third-quarter revenue to $108.65 billion when it publishes earnings. Profit is expected to rise 18.1%, though gross margins are forecast to slip to 47.9% from 49.3% in the prior quarter. According to data compiled by LSEG, the anticipated sales jump marks the company's strongest third-quarter performance since 2021.
The primary driver is Apple's decision to absorb rising component costs rather than pass them on to iPhone buyers. A global shortage of memory and storage chips, driven by massive AI datacenter buildouts, forced rival smartphone makers to raise prices. This pushed global April-June smartphone shipments to a 13-year low.
Apple spared its flagship product, yielding a 3% increase in iPhone shipments and growing its market share to nearly a fifth, according to research firm Counterpoint. The company did raise prices on MacBooks and iPads last month to offset those exact same chip cost increases. Earlier this month, it also implemented price hikes for its Apple Music and Apple One subscription services.
This selective pricing strategy has resonated with investors increasingly skeptical of Big Tech's massive capital expenditure. Alphabet stunned markets last week by posting negative free cash flow for the first time in its history. Apple, having avoided spending hundreds of billions on data centers, has reaped the benefits of a shifting narrative.
"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.
The stock has climbed 25% this year, vastly outperforming the rest of the "Magnificent Seven." On Tuesday, Apple's market capitalization briefly surpassed $5 trillion for the first time, allowing it to reclaim the top spot from Nvidia.
However, the company's pricing restraint may be nearing its end. Analysts widely expect Apple to raise iPhone prices when it unveils its next series of devices in September. Morgan noted that this could dampen demand and put pressure on a company whose high valuation does not leave "a lot of room for error."
