Apple (AAPL) has raised the prices of the iPhone 18 Pro series, but the increase is lower than what rising memory costs would require, with the difference being absorbed by profit margins. Management guidance indicates that gross margins are compressing, while demand remains growing. The new prices can only cover part of the added costs, and Apple is expected to continue absorbing the remaining pressure itself before memory prices turn.
Apple on Wednesday attached a higher price tag to its high-end iPhones. The iPhone 18 Pro starts at $1,199, up $100 from last year’s iPhone 17 Pro; the iPhone 18 Pro Max starts at $1,299. Above the two sits Apple’s all-new foldable phone, the iPhone Duo, priced at $1,999.
The $100 increase may seem like bad news for buyers, but it is good news for shareholders. Yet analysts who track Apple’s component costs had previously expected a larger increase. Research firm TrendForce had modeled an increase of $150 to $200, citing the fact that memory costs for the 256GB model were expected to be nearly 400% higher than a year earlier. Some analysts warned that costs could push prices up by as much as $300. In other words, Apple’s starting price increase this time is smaller than what the math of component costs requires, and the difference is coming out of the iPhone maker’s profit margins.
Both Pro models start at 256GB of storage and can be configured with up to 2TB. Pre-orders open on Saturday, September 12, with in-store sales beginning September 18. The Pro increase is about 9%, and the Pro Max about 8%. Higher-storage versions see larger increases, with 1TB models costing $300 more than last year and the Pro Max’s 2TB version costing $500 more.
This is not the first time Apple has adjusted prices because of memory issues. In June, Apple had already raised prices across its Mac, iPad, and home product lines because of a memory shortage, while leaving iPhone prices untouched at the time. Now that restraint has ended.
The pressure is also visible in the financial numbers. Apple’s gross margin in the June quarter was 50.1%, including about two percentage points of tariff refund benefits. For the September quarter, management guides gross margin between 47% and 48%, including about one percentage point of tariff refund help. Excluding refunds in both periods, the underlying gross margin is compressing by more than one percentage point per quarter even as revenue continues to grow.
The extra $100 is not expected to significantly boost Apple’s profits immediately. For a phone originally priced at $1,099, the increase means about 9% more revenue per unit, and a price increase is the most profitable type of revenue. If component costs stayed unchanged, most of that $100 would flow directly into gross profit. But component costs are not static. If supply chain estimates are close to reality, the new prices recover only part of the added costs for lower-storage models.
Ultimately, the extra $100 slows the decline in gross margin, but it does not stop it. The new prices appear to cover only part of the memory bill that management expects to continue growing, and Apple is currently absorbing the rest. This is more a cost problem than a demand problem, and cost problems tend to pass.
