iPhone Storage Boosts Revenue and Profit

Apple announced its quarterly results last week, and consistently superior iPhone gross margins helped offset stagnating iPhone revenues. We’ve long thought one steady driver of high margins is Apple’s success encouraging iPhone buyers to upgrade the storage capacity of their new iPhone.

Upgraded storage adds significantly to the price of an iPhone, ranging from 10% to 50% of the base price depending on the model and amount of added storage. Yet, the cost of the components is small relative to the added revenue. The increased revenue from upgraded storage is important, but the gross margin impact is even more significant.

Overall, 44% of iPhone buyers pay to upgrade the storage on their new iPhone, rather than buying the base storage model at the base price (Chart 1). The base storage for all current models is 128 GB, except for iPhone SE which starts at 64 GB and iPhone 15 Pro Max, where the base storage is 256 GB. Storage upgrades go as high as 1 TB on the iPhone 15 Pro and Pro Max models.