Tim Cook holds his last earnings call as Apple CEO on Thursday, the same week the iPhone maker briefly passed a $5 trillion market cap and surpassed Nvidia as the world's most valuable company. The record stock price sits next to a memory crunch lifting device prices and an AI strategy still waiting on a redesigned Siri.
Tim Cook's final earnings call as Apple CEO comes the same week the iPhone maker briefly pushed its market capitalization past $5 trillion and surpassed Nvidia as the world's most valuable company. The stock trades at a record price and is up 25% this year, topping its megacap peers. Yet Apple is reckoning with a memory crunch and a rush for chip manufacturing capacity that is forcing it to lift device prices.
Cook steps down on Sept. 1 and becomes executive chairman, handing those challenges to John Ternus, a 25-year Apple veteran and its head of hardware. Ternus said little on the April earnings call, so investors are likely to ask more of him after Apple reports fiscal third-quarter results.
Over 15 years at the top, Cook has presided over a fourteen-fold increase in the company's valuation, despite its inability to launch a major hardware platform after the iPhone.
Melissa Otto, head of Visible Alpha research at S&P Global, described Cook as a talented supply chain operations executive, adding: "he’s done just a remarkable job of navigating the environment".
Price hikes land in the current quarter
Last month, citing the global memory shortage, Apple raised starting iPad and Mac prices by at least $100, with some models increasing by more than $1,000. The increases of up to 20% on some devices arrived just before the quarter closed, so their impact will not be felt until the current period. For the quarter ended in June, analysts expect total revenue to rise about 16%, with that growth slipping to 12% in the current period.
Smartphone shipments head for steepest drop since 2013
Counterpoint Research sees total smartphone shipments falling nearly 14% this year, the steepest decline since 2013, with the greatest risk at the lower end of the market, where manufacturers have less room to pass on skyrocketing memory costs. Goldman Sachs analysts, who have a buy rating on the stock, wrote this week that Apple could signal market share gains given pricing increases at competitors.
AI spending is the longer-term question
The memory shortage is the biggest near-term challenge facing Apple, but the more significant longer-term risk likely has to do with its AI strategy. Instead of spending heavily on AI infrastructure, Apple licenses much of its AI technology from Google, and analysts expect it to spend just more than $11 billion this year against the well over $100 billion the hyperscalers are shelling out.
Its redesigned Siri, released in beta in June, is expected to launch this fall alongside new iPhones. In its last earnings report Apple dropped the net cash neutral goal it had held since 2018, saying it will assess its cash and debt independently, which could free up funds for AI.
Source: CNBC
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