Analysts believe Apple may be adopting a very uncharacteristic policy in pursuit of accelerated growth. The company has traditionally protected its industry-leading profit margins, but now appears to be willing to sacrifice these to some degree in order to prioritize increased market share.
Analysts believe this is creating enormous opportunities for increasing the Mac user base in particular, with a big name suggesting that a doubling within the next decade is “certainly achievable” …
The entire tech industry is being hammered by dramatic increases to memory costs resulting from demand for AI servers. While most PC makers seem to be passing costs on to consumers in the form of price increases, Apple has so far resisted doing the same.
It’s been unclear how long that might last, as historically Apple has targeted a gross profit margin of around 37% to 38% and seemed very unwilling to accept any dent in this enviable markup.
However, Horace Dediu, a noted Apple analyst, has said that he and at least two of his peers believe the company may have decided to prioritize growth at a time when many of its competitors are suffering. He cites Seaport analyst Jay Goldberg arguing that Apple is exploiting the fact that its competitors operate on much tighter margins in order to boost market share, relying on new Services revenue to help balance the books.
Apple has been paying a premium to buy up memory chips in what Goldberg believes is a “is part of a deliberate strategy for the company to tighten conditions for its competitors” […] This strategy “will not come cheap for Apple,” Goldberg warned, noting that Apple’s product gross margin could sink to the low-30% range from the high-30% range seen a year ago.
“That said, we think the company can make up for some of this lost ground through its share gains,” he wrote, as new Apple users are likely to subscribe to Apple’s higher-margin subscription services to offset the hardware costs.
A second analyst cited agrees, and Dediu himself thinks the impact could be dramatic.
The key metric is the number of Mac users. 260 million is a reasonable assumption [for the current installed base, and] a doubling of the Mac user base is certainly a worthy and achievable goal over the next decade.
I’d normally be skeptical of any claims that Apple was willing to prioritize growth over margin. However, the current industry conditions do represent a perfect storm for competitors, and the surprisingly low price of the MacBook Neo is decent evidence of the company choosing to take full advantage of a unique opportunity to accelerate growth.
The credibility is further boosted by references to the opportunity to make up ground with sales of Services, which are an exceedingly profitable sector for the company. I suspect the analysts are right on the money with this.
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