Apple Just Raised iPhone Pro Starting Prices by $100. Its Memory Costs Are Rising Even Faster.

Apple (AAPL +2.69%) put bigger price tags on its best iPhones on Wednesday. The iPhone 18 Pro starts at $1,199, up $100 from last year’s iPhone 17 Pro, and the iPhone 18 Pro Max starts at $1,299. Above both sits the iPhone Duo, Apple’s new $1,999 foldable.

A $100 increase may sound like bad news for buyers and good news for shareholders. But the analysts who track Apple’s component costs expected worse.

Research firm TrendForce had modeled a jump of $150 to $200, citing memory costs for the 256GB model that it expected to be nearly 400% higher than a year earlier. One analyst warned costs could push prices as much as $300 higher.

In other words, Apple raised starting prices by less than the component math seemed to demand. The difference is coming out of the iPhone maker’s profit margins — and the company’s own margin guidance already shows the memory squeeze.

A smaller hike than expected

Both Pro models start at 256 gigabytes of storage and top out at 2 terabytes. Preorders open Saturday, Sept. 12, and the phones hit stores on Sept. 18.

The increase works out to about 9% on the Pro and 8% on the Pro Max. Higher-storage versions climbed more — the 1-terabyte models cost $300 more than last year’s, and the Pro Max’s 2-terabyte version costs $500 more.

And it isn’t the company’s first memory-driven price move: In June, Apple raised prices across its Mac, iPad, and home product lines in response to the memory shortage while leaving iPhone prices untouched.

That restraint is over. But the increase didn’t turn out to be too bad.

Memory costs are outrunning the increase

The tech giant has been unusually specific about its memory problem. The company “paid more for memory in the March quarter than the December quarter,” then-CEO Tim Cook said on Apple’s July 30 earnings call, his last before handing the job to John Ternus. Costs stepped up significantly again in the June quarter, he explained. “For September, we expect to pay even higher memory costs,” Cook said, describing the environment as “a 100-year flood on the memory pricing.” He also warned that memory prices across the broader market look set to keep climbing beyond September.

The squeeze shows up in the reported numbers, too. Apple’s gross margin was 50.1% in the June quarter, and that figure included a benefit of about two percentage points from tariff refunds. For the September quarter, management guided for gross margin between 47% and 48%, including about one percentage point of tariff-refund help.

Strip the refunds out of both periods, and the underlying margin is compressing by more than a point per quarter — even as revenue keeps growing.

Does the extra $100 reach the bottom line?

I don’t expect much of the extra $100 to reach Apple’s bottom line right away. On a phone that sold for $1,099, the increase is about 9% more revenue per unit, and a price increase is the most profitable kind of revenue (there is no additional device to build behind it). If component costs were standing still, most of that $100 would fall straight to gross profit.

But component costs aren’t standing still. If the supply chain estimates are anywhere close, the new prices recover only part of the added cost of building the lower-storage models.

Timing, of course, works against this quarter. The new models don’t go on sale until Sept. 18, so the September quarter captures less than two weeks of sales at the new prices. The December quarter is the first full test.

However, demand is doing its part. Not only did Apple’s revenue rise 16% year over year to $109.4 billion in the June quarter (management called it the company’s strongest June quarter ever), but earnings per share also climbed 29% to $2.02. Management expects September-quarter revenue to grow between 9% and 11% from a year ago. With growth like that, gross profit dollars can keep rising even while the margin rate falls.

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Ultimately, the extra $100 slows the margin slide without stopping it. The new prices appear to cover only part of a memory bill management expects to keep growing, and Apple is absorbing the rest for now.

I’d call that a cost problem, not a demand problem. And cost problems tend to pass.

At around $315 as of this writing, the stock sits about 8% below a 52-week high of $344.57 — and shares trade at about 33 times what Apple is expected to earn next fiscal year.

A quick end to the memory squeeze is arguably baked into the stock’s valuation. But until memory prices turn, Apple is likely to keep absorbing part of the increase rather than passing all of it on.