Apple forecasts margin drop in holiday quarter as rising memory costs bite
Apple 18 pro mobiles on display at the Apple store in Mumbai, India on Oct 23, 2026. (Photo: Reuters/Francis Mascarenhas)
Read a summary of this article on FAST.
Get bite-sized news via a new
cards interface. Give it a try.
Click here to return to FAST
Tap here to return to FAST
FAST
SAN FRANCISCO : Apple warned on Monday (Nov 2) that the cost of memory chips would continue to rise, pressuring gross margin for the crucial holiday quarter, but said it had taken steps to lock in supplies.
Shares, little changed in after-hours trading after fiscal fourth-quarter results beat expectations, fell 4 per cent during a conference call after executives outlined the weaker outlook, but later pared losses to a 2 per cent decline. Early demand for the iPhone 18 Pro lineup and higher prices boosted the quarter.
Apple said it expects gross margin of 45 per cent to 46 per cent in the quarter ending in December, down from 47.9 per cent in the fourth quarter. It forecast services revenue growth of 8 per cent to 9 per cent, below analysts’ expectations of 10.7 per cent.
The results come as Apple experiments with a string of firsts under new CEO John Ternus, who took over in September. After nearly two decades of launching most new iPhones each autumn, Apple this year is spacing them out, with iPhone Pro and Duo models shipping this year and other models expected next year.
Guess Word
Crack the word, one row at a time
Buzzword
Create words using the given letters
Mini Sudoku
Tiny puzzle, mighty brain teaser
Mini Crossword
Small grid, big challenge
Word Search
Spot as many words as you can
Apple also released a bevy of new non-iPhone products this quarter, including its first touchscreen laptops and first smart-home hub. The steady drumbeat of releases, analysts said, is meant to smooth out Apple’s yearly revenue cycle, which for decades showed a huge holiday-quarter boom that petered out by late summer.
Apple in recent weeks has grappled with customer reports of cracked screens on the iPhone Duo, its first foldable phone, which sold out within hours online and spurred lines at stores last month.
Fiscal fourth-quarter sales were US$114.48 billion, above analyst estimates of US$113.39 billion, according to LSEG data. Profit was US$2.10 per share, above estimates of US$1.99 even when excluding 5 cents from tariff refunds.
IPHONE DUO SUPPLY CONSTRAINTS
In an interview with Reuters, Ternus said “a very small percentage” of iPhone Duo units had been returned for display issues and that Apple is replacing them. He said the company is overall unable to meet demand, with no timeline for catching up.
“Duo is constrained as of today,” Ternus said. “The ramp is going well … but at this point, we’re not able to predict when supply and demand will be in balance.”
Fourth-quarter iPhone sales, which included iPhone 18 Pro models but not Duo, were US$57.58 billion, above estimates of US$56.54 billion, according to LSEG data.
The staggered launch strategy comes as Apple faces headwinds from an AI-driven memory-chip price spike that could dampen the margin boost Apple derives from storage upgrades.
“The big question for Apple moving forward will be how well they can weather the significant component price increases that have slowed their PC and smartphone competitors,” said Bob O’Donnell, chief analyst at TECHnalysis Research.
“The new iPhone Duo looks to be a big hit, but the company has to solve the screen glitches and ramp up its manufacturing output.”
PRICE RISES OFFSET CHIP COSTS
As it launched the iPhone 18 Pro, Apple also raised iPhone 17 prices by US$100 and increased some MacBook prices, softening the blow of rising memory costs.
“We did see higher memory costs as compared to the June quarter, which was partially offset by the benefit of carrying inventory and lower costs on certain non-memory components,” Ternus said. “These price increases provided some offset.”
Fourth-quarter gross margins were 47.9 per cent, above estimates of 47.5 per cent, according to LSEG data.
On the investor call, Chief Financial Officer Kevan Parekh said Apple expects memory costs to keep rising into next year. Asked whether Apple had signed a long-term supply agreement, Chief Operating Officer Sabih Khan did not directly confirm a deal but said Apple is working closely with memory suppliers and that its purchasing commitments increased by US$33 billion during the quarter.
Shares of memory-chip maker Micron rose more than 1 per cent in after-hours trading on Monday, and shares of chip-manufacturing equipment makers KLA and Applied Materials also rose.
Apple also pointed to Siri AI, which runs partially in Google’s cloud, as a factor impacting margins. The company plans to charge more for iCloud+ subscriptions to offset AI costs, though it has not rolled out specific pricing.
“There are going to be some usage limits on features that rely on server-side models, which include Siri AI and intelligent photo editing,” Ternus said during the call.
Mac sales were $10.79 billion, above estimates of US$9.61 billion. Services revenue was US$31.57 billion, in line with estimates of US$31.58 billion. iPad and wearables sales were US$6.23 billion and US$8.30 billion, both below estimates. Chinese sales were US$17.54 billion, below the US$18.58 billion analysts estimated, according to Visible Alpha data.
Source: Reuters/nh
Sign up for our newsletters
Get the CNA app
Stay updated with notifications for breaking news and our best stories
Get WhatsApp alerts
Join our channel for the top reads for the day on your preferred chat app
Get bite-sized news via a new
cards interface. Give it a try.
Click here to return to FAST
Tap here to return to FAST
FAST
