Apple shares jumped 3% in premarket trading on Friday after the iPhone maker posted its strongest quarterly sales growth in more than four years, a show of momentum as it prepares to hand over the reins to a new CEO.
Its latest iPhone 17 Pro series and the newly launched low-cost MacBook Neo laptop are both drawing buyers at a time of low overall demand in the consumer electronics industry due to price hikes forced by the memory chip shortage.
Even though Apple's margins for the January-March quarter and its fiscal third-quarter forecast were above Wall Street estimates, outgoing CEO Tim Cook warned that higher memory costs would increasingly weigh on the business from June.
Limited supply of the advanced processors for iPhone have already hampered Apple's ability to capitalize on strong demand. The chips are made by Taiwan's TSMC, the leading producer of AI processors.
Analysts say Apple's clout with long-time suppliers could position it better than rivals in securing memory chips but it might have to raise prices later this year.
"The key question will be deciding the perfect balance strategically between increasing prices and maintaining profitability or focusing on gaining share by not increasing prices," said Nabila Popal, a senior research director at IDC.
"I think Apple will increase prices of the Pro and ProMax in upcoming fall launch, however even if they don't, with the super high-end iPhone fold coming up - which we expect to be well over $2,200– will help balance some of the increased costs."
RESULTS BODE WELL FOR NEW CEO
The results, including a forecast of 14% to 17% sales growth for the current quarter that was above estimates, bode well for the company before hardware chief John Ternus takes over as CEO in September. Cook will stay on as executive chairman.
The change comes as Apple looks to close the gap with rivals Microsoft and Alphabet, which have moved faster to roll out AI features and infrastructure.
Investors are expected to get more details about its AI plans at it annual software developer conference in June.
Some analysts said Apple's decision to no longer aim to bring its net cash - cash minus debt - to a net neutral position may help it manage its financial position better in the AI era.
The move gives it greater balance-sheet flexibility, allowing it to absorb higher costs, support share repurchases and deploy capital more strategically, TD Cowen analysts said.
