Apple’s expensive new iPhones could be a double-edged sword for the company

Bernstein analysts argue that Wall Street may be underestimating the pressure rising component costs could place on Apple's gross margins — the share of revenue left after subtracting the direct cost of building its devices. As memory and other smartphone parts become more expensive, the profitability of each iPhone sold could narrow, even if headline selling prices stay high.

That tension is what makes Apple's premium pricing strategy a double-edged sword. Higher prices support revenue per unit, but they also depend on consumers continuing to accept those price points while the underlying cost of components climbs. If margins compress, the profit Apple keeps from each sale shrinks regardless of how strong demand appears at the top line.

For investors, the key variable to watch is the gap between average selling prices and bill-of-materials costs, along with any commentary from Apple on margin guidance in coming quarters. The debate is less about whether iPhones remain popular and more about how much profit each one ultimately delivers.