Tenus Apple's (AAPL.US) debut earnings face a tough challenge: storage costs devour profits, can iPhone Duo save the day?

Zhitong Finance APP notes that John Ternus will preside over his first earnings call as Apple (AAPL.US) CEO on Monday. Investors will focus on the company's guidance to assess whether a wave of intensive new product launches can help offset rising storage chip costs.

Ternus took over from Tim Cook in September and has already overseen the launch of Apple’s first foldable-screen phone, a smart home hub, and Apple’s first touchscreen laptop. All these products began shipping in the first quarter of the company’s current fiscal year, just as what Cook called a “once-in-a-century flood” of rising storage costs hit.

Apple will face scrutiny over three key issues: crucial holiday season guidance, Ternus’ stance on AI and a revamped Siri, and the cost of storage chips—which analysts expect will drag quarterly profit growth to its weakest in six quarters.

Apple has been trying to differentiate its AI products from competitors like Meta’s (META.US) Muse AI agent, which has surged in the app store rankings in recent weeks.

Apple is suing competitors such as OpenAI for allegedly stealing trade secrets and is also developing hardware intended to replace the iPhone as the central device in people’s lives. How Apple embraces AI may also have a major impact on the future of its services business, whose growth has slowed after years of rapid expansion, raising concerns among investors.

Dan Morgan, portfolio manager at Synovus Trust, which holds Apple shares, said, “Recent innovation in AI agents far surpasses our experience with Siri AI, but Apple has already acknowledged that Siri AI ... is more focused on trust and privacy.”

Apple is marketing its AI system to “ordinary people” rather than Silicon Valley insiders, the heavy users of cutting-edge AI models like those of OpenAI.

Morgan added that investors want to know whether Apple can distribute third-party AI agents via its app store and profit by taking a commission from the associated business.

Stock Price Outperforming the Market

For now, Apple’s reluctance to join the large-scale AI spending race is working in its favor. Its shares are up about 27% this year, outperforming tech giants like Microsoft (MSFT.US), Alphabet (GOOGL.US), Meta, and Amazon (AMZN.US), as investors look to avoid rising concerns over the cost of building out AI infrastructure.

LSEG data shows analysts expect Apple to report near 11% revenue growth in the July–September quarter (the company’s fiscal fourth quarter), reaching $113.39 billion. Net profit is expected to rise about 6% to $29.04 billion.

Apple’s services business is expected to grow nearly 10% to $31.56 billion, its slowest pace in more than three years.

iPhone sales are projected to increase by about 15% to $56.54 billion, slowing from around 22% growth in the past three quarters. The earnings report will only include nine days of sales for the new iPhone 18 Pro models, while Apple’s first foldable phone, the iPhone Duo, launched on October 23 and is expected to boost holiday season results.

In the US, some buyers have reported cracks or lines along the fold in the inner screen of this device, which starts at $1,999, prompting Apple to offer device replacements. Online orders for the Duo sold out within minutes, and sales performance updates will be closely watched.

IDC analyst Nabila Popal said she expects demand for the Duo to continue exceeding supply despite the screen issues. She noted the challenge is how quickly Apple can provide replacements for affected devices given supply constraints.

Bank of America (BAC.US) estimates that Duo buyers face an average wait of 79 days for delivery, with shipments extending into January next year.