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

Apple's latest iPhone lineup carries premium price tags, but Bernstein analysts argue that Wall Street may be underestimating the pressure on the company's gross margins—the share of revenue left after subtracting the direct cost of producing its devices. As smartphone components grow more expensive, the gap between what Apple charges and what it spends to build each phone could narrow more than current models assume.

That matters because gross margin is a key gauge of profitability, and Apple has long been admired for sustaining unusually high margins in hardware. If component costs keep climbing while pricing power has limits, the company could absorb the difference or pass it along to consumers—each path carrying trade-offs.

For investors, the takeaway is not a verdict on Apple's stock but a reminder that headline revenue figures don't tell the whole story. Watch upcoming earnings reports for gross margin guidance, commentary on component pricing, and any signs of demand elasticity at higher price points. Those details will reveal whether expensive iPhones remain a profit engine or become a drag.