Apple at $5 Trillion, Price Hikes Loom in Cook's Last Call

Tim Cook runs his final earnings call as Apple CEO on Thursday, the same week the company passed a $5 trillion market cap and overtook Nvidia as the world's most valuable public company. The stock sits at a record, up 25% this year.

Apple faces a memory crunch and a rush for chip manufacturing capacity that already forced $100 to $1,000 price increases on iPads and Macs. Analysts expect iPhone prices to follow. The company announced a leasing deal with Klarna on Tuesday that lets U.S. customers rent an iPhone for $17.99 a month over two years. The price hikes landed just before the quarter ended, so the impact shows up in the current period. For the June quarter, analysts project revenue growth of about 16%, slowing to 12% in the September quarter.

Counterpoint Research sees global smartphone shipments falling nearly 14% this year, the steepest drop since 2013. The low end of the market faces the most pressure, where manufacturers have less room to pass on higher memory costs. That largely means Android phones. Goldman Sachs analysts wrote in a note this week that Apple could gain market share given the pricing increases at competitors.

Morgan Stanley analysts said Apple's fundamentals remain strong, with price hikes likely to drive revenue and earnings-per-share upside over the next 6 to 18 months. They recommend buying the stock but cut their Mac forecast for the September quarter by 8% on supply challenges.

Apple's AI strategy is a longer-term question mark. Rather than spending heavily on AI infrastructure, Apple licenses much of its technology from Google and uses its cloud. Analysts at Baird wrote this month that investors are coming around to Apple's industry-leading free cash flow, even after the company was initially bruised for not joining the large-language-model investment cycle. Baird recommends buying the stock. Apple's earlier partnership with OpenAI has nearly fallen apart; Apple sued OpenAI on July 10, alleging trade secret theft. OpenAI denied the claim. A redesigned Siri is in beta and expected to launch this fall alongside new iPhones.

Cook steps down Sept. 1 and becomes executive chairman. John Ternus, Apple's hardware chief and a 25-year veteran, takes over as CEO. He said little on the April call. Under Cook, Apple bought back more than $1 trillion in stock. The company recently changed its cash policy from a goal of "net cash neutral" to assessing cash and debt independently, which could free up funds for AI spending. "We invest in the business first and foremost and then look to kind of return excess cash to shareholders," CFO Kevan Parekh said on the April call.

"Tim Cook, he's a really talented supply chain operations guy, and I think he's done just a remarkable job of navigating the environment," said Melissa Otto, head of Visible Alpha research at S&P Global, in an interview. "We'll get some visibility or some commentary at least around the current environment and how they're navigating it."

Thursday's call is the last with Cook at the helm. Investors will want to hear from Ternus on how he plans to handle the memory crunch, the AI gap, and the pressure to keep the stock's momentum alive.