Ed Ludlow

Apple has had the best supply chain in the world for years.

They have $200 billion of product COGS.

This quarter, gross margins went up year on year and sequentially, and they're guiding to an excellent gross margin and implied product gross margin next quarter.

Now, when we get later into the year, if they face significant increases in memory cost, they have one lever that they can pull, which is they can raise prices on the devices, or they can raise prices when you get the higher memory spec variant of the product and offset some of those higher supply chain prices.

One other thing that I think people should pay attention to

is the way that Apple has vendor non-trade receivables.

They've funded production equipment at their suppliers so that they have that superior supply chain.

And I think that puts them in a comparatively much better position than everyone else in the tech hardware space.

Let's go to the product.

iPhone sales were about $4 billion above consensus, 9% beyond consensus.

Even the top end of the range that I saw was about $81 billion.

This iPhone 17 generation has been a success, has it not?

Yeah.

Well, I think there's two things about that you need to appreciate.

One is the company is saying they are still considerably supply-constrained.

And the day that that supply-demand balance kicks in, they can rebuild channel inventories.

And four weeks of channel inventory is another $15 billion of iPhone sales just to get back to normal distribution and to have warehouses full.

So they have a long runway to realize what is now, obviously, this last quarter, 23% growth in iPhone implied in the guidance.

We were at 14%.

The street was at 8%.