Credit: Data for chart retrieved from respective quarterly filings. Image source: Author.Amid all the headlines that have predicted Apple 's doom over the last decade, one fact has stood out consistently in the company's defense: its unorthodox gross profit margins. Apple's gross profit margin during the last 10 years has ranged between 29% and 44% -- a range most other consumer electronics hardware companies couldn't even dream of. Its ability to maintain such robust profit margins has served as partial evidence to a number of Apple's competitive advantages, including pricing power, customer loyalty, and formidable economies of scale.
Data for chart retrieved from respective quarterly filings. Image source: Author.
As its most profitable product segment, a higher average selling price for iPhone is likely to serve as a catalyst for the company's overall gross profit margin.
Apple's new iPhone upgrade program looks promising
When Apple announces its latest iPhones in September, it also made the surprise announcement about its own iPhone upgrade program for customers. The program allows customers to spread the cost of an iPhone over 24 months, with the option to get a new iPhone every year. The program comes with AppleCare+.
RBC Capital Markets analyst Amit Daryanani believes (via AppleInsider ) that the program will be a catalyst for the company's profit margins. It will bolster iPhone upgrades, encourage greater customer loyalty, and help Apple build a profitable business selling refurbished iPhones, he argues. Each of these trends could help Apple's profit margins. Daryanani predicts the positive effect on the iPhone's gross profit margin will be significant, boosting it from an estimated 50% today to as high as 55%.
With iPhones accounting for 63% of revenue and Apple's gross profit margin across all of its products at about 40% today (well below Daryanani's predicted target for iPhone gross margin), the impact on Apple's reported gross profit margin would be noticeable if the analyst ends up being correct.
Reviewing these catalysts for Apple's gross profit margin, its impressive profitability looks set to continue to help the tech giant rake in billions in cash every quarter for years to come.
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The article Apple, Inc.'s Robust Profit Margin: 2 Reasons to Expect Continued Strength originally appeared on Fool.com.
Daniel Sparks owns shares of Apple. The Motley Fool owns and recommends Apple. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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