Apple Warns Rising Memory Costs Will Cut Holiday-Quarter Margins
Apple reported fiscal fourth-quarter revenue of $114.5 billion, but warned that rising memory chip costs will reduce gross margins in the holiday quarter. CEO…
Apple CEO John Ternus said the company faces “unprecedented” memory chip costs on Monday, warning that rising prices will cut gross margins to 45%–46% in the current holiday quarter. The forecast puts pressure on profitability even after Apple reported stronger-than-expected quarterly revenue.
The warning matters because the holiday period is Apple’s strongest sales quarter of the year, and memory costs are rising as the company manages demand across its products. Apple said it expects overall revenue to grow 7% to 10% year over year in the quarter, a forecast range of $153.8 billion to $158.2 billion.
Why does Apple warn unprecedented memory costs will hit margins?
Higher memory prices are increasing the cost of making Apple’s products. Chief Financial Officer Kevan Parekh said tariff refunds lifted the company’s gross margin by roughly one percentage point in the quarter that ended September 26; without those refunds, the margin would have been lower.
Apple’s gross margin was 47.9% in that quarter, near the high end of its forecast range and above the 47.2% recorded a year earlier. For the holiday quarter, the company expects the margin to fall to 45%–46%, citing memory costs and expenses tied to ramping up its Siri AI service.
“What we're seeing with memory pricing right now is unprecedented,” Ternus said during the earnings call. He said Apple expected even higher memory costs in the December quarter, partly offset by recent price increases and inventory carried into the period. He also warned that prices could continue rising beyond the quarter.
Apple has raised prices across its product line to help absorb the pressure. That response may support margins, but the company’s forecast still points to a decline during a period when it expects revenue to reach a new seasonal high.
Strong iPhone sales meet supply constraints
Apple reported fiscal fourth-quarter revenue of $114.5 billion, up 12% year over year, and profit of $30.7 billion, or $2.10 per share. Its iPhone business generated $57.58 billion, up 17% in the three months ending September 26.
The quarter was Ternus’s first earnings report as chief executive after he took over from Tim Cook in September. He said iPhone revenue reached a September-quarter record, while Services posted an all-time high.
There is a catch. Apple Chief Operating Officer Sabh Khan said production of the iPhone Duo was constrained, and the company could not predict when supply and demand would balance. Ternus said recent price increases and existing inventory would help offset memory costs, but only marginally.
That combination gives the cost forecast a direct connection to shoppers: Apple is entering its busiest sales period with memory costs rising and supply of its foldable phone constrained. The company has already increased prices across its lineup, while customers face limited availability of the Duo.
Apple said revenue from Services, including iCloud and the App Store, reached $31.57 billion, up roughly 10% year over year. Sales in its iPad and wearables businesses declined.
Ternus described the company’s holiday lineup as ambitious and pointed to the all-new Siri AI. For the coming quarter, Apple’s forecast places gross margins at 45% to 46%.
