Apple: New Products May Lower Overall Profit Margins

Big Tech firm Apple is warning investors that its newest lines of products may not live up to the success of its iPhones.

This comes as it ventures into new technology like artificial intelligence and wearable tech like virtual reality headsets, according to a Tuesday (Nov. 5) report from the Financial Times.

In its Form 10-K to the Securities and Exchange Commission, Apple added a new warning on growth and profit margins to the list of “risk factors” facing its business.

“New products, services and technologies may replace or supersede existing offerings and may produce lower revenues and lower profit margins, which can materially adversely impact the company’s business, results of operations and financial condition,” Apple wrote in the report.

In past years, Apple has also flagged issues like competition, foreign exchange and supply chain issues as similar threats to its bottom line. The company has also noted in the past that new products could have “higher cost structures.” However, according to the FT report, this year marks the first time that Apple has explicitly addressed the potential success of its future products.

This report comes as Apple explores an entry into the smart glasses market.

As PYMNTS reported Monday (Nov. 4), Apple is reportedly conducting an in-house study into the industry. The project, dubbed Atlas, began last week and is getting feedback from Apple workers on smart glasses, with focus groups planned in the near future.

Despite this foray into new products, investors have been leery of the tech giant.

Apple’s shares saw a decline last week as its guidance for the current quarter — low- to mid-single-digit revenue growth — fell below analysts’ expectations of 7%.

At the same time, billionaire investor Warren Buffett sold off another large piece of his stake in the tech giant, PYMNTS reported Sunday (Nov. 3).

His investing company Berkshire Hathaway had $69.9 billion worth of Apple shares at the end of September, according to its latest earnings report. This implies Buffett had sold around a quarter of his stake, with about 300 million shares remaining. Overall, the stake is down 67.2% from the close of Q3 2023.

Buffett began shedding his stake in the tech giant in the closing quarter of 2023, and continued this trend in August  with an unexpected sale of nearly half his shares.