Ternus's Apple Inc. (AAPL.US) Earnings Debut Faces a Major Test: Memory Costs Devour ProfitCan the iPhone Duo Save the Day?

Note that John Ternus will host his first earnings call as Apple Inc. (AAPL.US) CEO on Monday, and investors will focus on the company's guidance to judge whether a dense wave of new product launches can help offset rising memory chip costs. Ternus, who took over from Tim Cook in September, has presided over the launch of Apple Inc.'s first foldable phone, a smart home hub, and Apple Inc.'s first touchscreen laptop. All of these products began shipping in the company's current fiscal first quarter, coinciding with what Cook called a "once-in-a-century flood" of memory cost increases. Apple Inc. will face scrutiny on three key questions: the crucial holiday-quarter outlook, Ternus's comments on AI and the revamped Siri, and the memory chip cost increases that analysts expect to drag quarterly profit growth to its weakest in six quarters. Apple Inc. has been trying to differentiate its AI products from competitors such as Meta's (META.US) Muse agent, which has been gaining momentum in app store rankings in recent weeks. Apple Inc. is suing competitors including OpenAI over alleged trade secret theft, and is also developing hardware intended to replace the iPhone as the core device in people's lives. How Apple Inc. embraces AI could also have a major impact on the future of its services business, which has slowed after years of rapid expansion, worrying investors. Dan Morgan, a portfolio manager at Synovus Trust, which holds Apple Inc. shares, said: "Recent agent innovation far exceeds what we have experienced with Siri AI, but Apple Inc. has acknowledged that Siri AI ... is more focused on trust and privacy." Apple Inc. is marketing its AI system to "ordinary people" rather than Silicon Valley insiders, who are heavy users of frontier AI models such as OpenAI's. Morgan added that investors want to know whether Apple Inc. can distribute third-party AI agents through its app store and take a cut of the business they generate. Stock Outperforms the Market For now, Apple Inc.'s reluctance to join the massive AI spending race is working in its favor. Its shares have risen about 27% this year, outperforming tech giants such as Microsoft Corporation (MSFT.US), Alphabet (GOOGL.US), Meta and Amazon.com, Inc. (AMZN.US), as investors seek to avoid growing concerns about the cost of building AI infrastructure. LSEG data shows analysts expect Apple Inc. to report revenue growth of nearly 11% to US$113.39 billion for the July-to-September quarter, the company's fiscal fourth quarter. Net profit is expected to rise about 6% to US$29.04 billion. Apple Inc.'s services business is expected to grow nearly 10% to US$31.56 billion, the slowest pace in more than three years. iPhone sales are expected to grow about 15% to US$56.54 billion, slowing from about 22% growth in the previous three quarters. The results will cover only nine days of sales of the new iPhone 18 Pro models, while Apple Inc.'s first foldable phone, the iPhone Duo, went on sale on October 23 and will benefit the holiday quarter. In the United States, some buyers of the device, which starts at US$1,999, have reported cracks and lines at the center fold of the inner screen, prompting Apple Inc. to offer replacements. Online orders for the Duo sold out within minutes, and comments on its sales performance will be closely watched. IDC analyst Nabila Popal said she expects demand for the Duo to continue exceeding supply despite the screen issues. She said the test is how quickly Apple Inc. can provide replacements for affected devices amid tight supply. Bank of America Corp (BAC.US) estimates that Duo buyers will wait an average of 79 days to receive their devices, with shipping times extending into January next year.