Apple warns future profits may not match iPhone as the company invests in AI and virtual reality glasses.
Apple has warned investors that future products may never be as profitable as its iPhone business as it explores new, untested markets like artificial intelligence and virtual reality glasses.
The iPhone is a huge source of profit for Apple.
The iPhone is a huge source of profit for Apple.
In its recent financial report, Apple issued a new warning about factors that could affect its revenue and profit growth.
The company said: “New products, services and technologies may displace existing products, resulting in reduced revenues and profits, which could have a material adverse effect on our business, results of operations and financial condition.”
In its annual report, the company typically warns investors about factors like competition, currency fluctuations, and supply chain issues that could cause volatility and reduce profits.
This year, Apple also added warnings about the potential impact of “geopolitical instability” and about security risks related to artificial intelligence.
The announcement comes amid Apple’s heavy investment in its Vision Pro mixed-reality glasses and integration with Apple Intelligence, Siri, and ChatGPT.
Gene Munster of Deepwater Asset Management noted that Apple is in a period of uncertainty when it comes to entering new product categories.
For example, the Vision Pro glasses cost $3,500 and are available in limited quantities. Munster also asked how Apple plans to monetize AI if it doesn’t charge for access to AI features.
It’s worth noting that Apple is also facing regulatory pressure over its App Store and other segments of its services business, with the recent US antitrust victory over
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Google in particular threatening to deprive Apple of the billions of dollars in licensing fees it currently receives from the search giant as a partner.
Many products do not generate as much profit as the iPhone for the company.
Many products do not generate as much profit as the iPhone for the company.
Despite this data, Apple's gross profit margin has increased, from 33% in 2007 to over 40% in 2021.
This is happening because more and more customers are opting for expensive iPhone models despite fierce competition from cheaper device makers.
Also in the latest quarter, Apple reported revenue growth of 6% to $94.9 billion, with a record gross margin of 46.2%.
However, most Wall Street analysts expect Apple's gross margin to increase in the coming years, reaching 49% by the end of the decade.
Growth in its services business also helps boost margins, thanks to payments from Google to be the default search engine on iPhones.
