Apple’s warnings to its investors

Apple has admitted in its annual report, Form 10-K, that its future products may not reach the historical profitability that the iPhone has achieved, among other warnings made to its investors for the future.

Why is it important. It is the first time that Apple has so openly acknowledged that its next products may not reach the profitability levels of the iPhone. It represents a change in its communication with the markets, as highlighted Financial Times.

It’s not something you didn’t see coming either. Although Apple has been entering new ranges and industries for decades, a success like the smartphone, so universal, so important, with an average Price of three figures and with a renewal cycle of between one and five years, is something that will be very difficult to see again. The difference is that now Apple talks openly about it.

The key warnings.

• Future products: could lead to “lower revenues and lower profit margins.”
• Financial impact: These changes may “materially” affect the business and its results.
• AI Risks. First specific mention of security risks from new AI features.
• Geopolitical tensions. They reappear as a risk factor after years of absence.

In perspective. The document reveals a particularly cautious Apple for the future. Previously I only mentioned that new products might have “higher cost structures.” It now explicitly warns about lower margins.

It also includes for the first time an alert on AI security, just at the end of the year in which Apple Intelligence was released, and has expanded the geopolitical risks section.

Concerns.

• The Vision Pro costs $3,500 plus taxes and its initial sales have been moderate, something to be expected in a product like this… we have to see how it evolves in the future.
• Revenue from the Google deal, which accounts for about a fifth of its annual profit, is at risk from antitrust decisions.
• A significant fine is coming from the European Union for practices with the App Store.

Between the lines. Apple seems to be preparing the ground for a “post-iPhone” era that will take a while to see but will eventually arrive. Cook himself has already anticipated something like this on some occasions, leaving in the air the possibility that other devices will end up replacing the iPhone in the long term.

In this area we would expect lower profitability, higher technological risks, fierce competition in AI and increasing regulatory scrutiny. And Apple is already anticipating something like this.

Featured image | Apple

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