Apple has warned investors that future products may never be as profitable as its iPhone business which make up nearly half of the company’s revenue.
Earlier this year, Apple killed its electric car project. Meanwhile, its Vision Pro which has a starting price of nearly A$6,000 has failed miserably in capturing any significant market share.
In their fourth-quarter results posted last week, Apple reported sales of $94.9 billion (A$144.34 billion), with revenue from the iPhone coming in at $46.2 billion (A$70.27 billion).
The company added the new warning on growth and profit margins to its latest annual report, in the list of “risk factors” that it was facing. “New products, services and technologies may replace or supersede existing offerings and may produce lower revenues and lower profit margins,” Apple said, “which can materially adversely impact the company’s business, results of operations and financial condition”.
The same 10-K regulatory filing in previous years suggested that new product introductions could have “higher cost structures”.
But, as the Financial Times has pointed out, until now, Apple hasn’t been as direct in addressing the financial expectations of its future products.
The filing also pointed out to the potential impact of “geopolitical tensions” as one of the risk factors. That phrase has been missing from its potential risk factor assessments for several years and has come as the US enters into a more hawkish stance with regards to China and the Asian country’s trade policies. Already, Apple has begun to shift production of its iPhones away from China – a country that at one point manufactured 80 per cent of its devices – to countries such as India.
Furthermore, the company is coming under increasing pressure in Europe where regulators are scrutinising its practices there. Recently, the bloc’s top court ruled that Apple must pay a A$21.55 billion Irish tax bill.
Media reports this week also suggest that Apple will become the first Big Tech company to be hit with a fine under the EU’s new Digital Markets Act over its alleged anticompetitive App Store practices.
A strong indicator of current overall investor sentiment comes by way of Warren Buffet who has cut Berkshire Hathaway’s Apple holdings by as much as 60 per cent since the start of this year. Berkshire’s Apple holdings are now valued at around A$106.02 billion, versus A$263.9 billion at the end of last year.
