Apple Is Reportedly Launching a Device-Leasing Program With Klarna on July 28. Here's What It Means for iPhone Revenue.

Apple (AAPL -0.56%) is preparing to launch a device-leasing program called Apple Upgrade in the U.S. on July 28, Bloomberg reported this week. If the report is right, the program could push the tech company's biggest revenue line, the iPhone, toward faster upgrades and steadier, more subscription-like sales. The reported structure works much like a car lease. Klarna (KLAR -6.02%) would provide the financing, enrollment would involve a soft credit check, and leases would reportedly run 24 months for iPhone and Apple Watch and 36 months for Mac and iPad. During a term, customers could pay the device off early or upgrade to a newer model. At the end of one, they could keep the device or return it. The program would reportedly replace new enrollments in Apple's existing upgrade and financing options, though some lower-priced models wouldn't be eligible for it (including the iPhone 16, the entry-level iPad, and the Apple Watch SE). AppleCare coverage would no longer be included automatically. Image source: Apple. This could be material for Apple's business. The first effect is upgrade frequency. A lease with a built-in upgrade path tends to shorten the replacement cycle, and every shortened cycle means more device sales per customer over time. That matters most for the iPhone, which generated $57 billion of revenue in the March quarter, up 22% year over year and a record for the period. Leasing is a way to keep that momentum going after the iPhone 17's blockbuster run. Leasing could also smooth out demand cycles. Customers on standard two- and three-year terms can upgrade on a schedule rather than waiting for a hardware overhaul, ultimately making iPhone revenue less dependent on any single product cycle landing perfectly. Today's Change(-0.56%) $-1.85Current Price$325.89 And notably, Apple gets all of this without becoming a lender. Because Klarna would provide the financing, Apple keeps the customer relationship and the upgrade cadence while a partner carries the credit risk. Of course, the company hasn't said any of this publicly yet, and reported plans can change. But Apple's fiscal third-quarter earnings report is scheduled for July 30 -- two days after the program's reported launch date, and management will likely face questions about what leasing means for the business. July 28 -- when Klarna and Apple are expected to roll out this program -- may start providing answers. And July 30 could finish the job.