Apple CEO John Ternus warned that memory costs will continue rising beyond the December quarter, after the company issued a gross margin forecast of 45%–46% that missed Wall Street's 46.3% estimate, sending shares down nearly 4% in premarket trading.
Apple CEO John Ternus delivered a mixed debut earnings report Monday, posting better-than-expected revenue and profit but issuing a gross margin forecast that fell short of Wall Street's expectations and sent shares lower in extended trading.
CFO Kevan Parekh disclosed that Apple's gross margin for the December quarter — its critical holiday period — would land between 45% and 46%, below the 46.3% average analyst estimate compiled by LSEG.
"This includes primarily the impact of higher memory costs, as well as some costs related to the ramp of Siri AI," Parekh said on the earnings call.
Apple shares slid about 3% in extended trading, following a drop of nearly 2% during regular market hours on Monday. By premarket trading Tuesday, shares were down nearly 4%.
The margin forecast represents a potential third consecutive quarterly decline for Apple. The company posted gross margins of 50.1% in the June quarter and 47.9% in the September quarter — the latter boosted by 1 percentage point of tariff refunds. At the midpoint of the new guidance range, it would mark Apple's lowest gross margin since the fiscal fourth quarter of 2023.
The culprit is a global memory shortage driven by surging demand from artificial intelligence infrastructure. AI server builders, including Nvidia, and large cloud providers have been absorbing available RAM at premium prices, leaving constrained supply for consumer device makers.
Ternus, who took over from Tim Cook on September 1, addressed the situation directly. "What we're seeing with memory pricing right now is unprecedented," he said on the call. "Looking beyond the December quarter, we see the pricing for memory purchases continuing to increase."
The problem is not unique to Apple. On Friday, Intel recorded its worst single-day market decline since the 1970s, driven by a weak forecast tied to softening PC demand amid the same component pressures.
Apple said it expects supply constraints on iPhones and Macs in the holiday quarter, primarily driven by memory availability. Chief Operating Officer Sabih Khan — the first Apple COO to appear on an earnings call since Tim Cook held that role in 2010 — told analysts the company is seeing "less flexibility in the supply chain than normal."
To counter the shortage, Apple has sharply increased its purchase obligations. Khan said those obligations rose by $33 billion from the June quarter to the September period, though he declined to say whether Apple had signed long-term agreements with memory manufacturers.
Apple has already begun passing some costs to consumers. The company raised prices across Macs, iPads, and accessories earlier this year, and in September increased iPhone prices by $100 — a move Ternus said the company made "reluctantly."
The core business, however, held up. Apple reported better-than-expected earnings and revenue for the fiscal fourth quarter, with its iPhone unit performing above estimates. The company also projected current-quarter sales ahead of consensus.
Despite the margin pressure, some analysts see a competitive opening for Apple. Because the company carries higher margins than most rivals, it has more capacity to absorb elevated component costs than Windows PC or Android smartphone makers — a dynamic that could translate into market share gains.
Ternus pointed to early evidence of that shift. "According to IDC, we gained share globally for the quarter and for the full fiscal year," he said. "And we have never sold more Macs in a fiscal year than we did this time."
How long Apple can absorb rising memory prices without further consumer price increases — or additional margin compression — will be among the most closely watched questions heading into 2027.
Jay Goldberg is a staff writer at TechEchelon covering technology, markets, and policy. He files the breaking news and deal coverage that move the publication's core desks.
More from Jay →Intel's stock fell 45% in October — its steepest monthly decline on record — after a revenue warning tied to a weakening PC market, raising fresh doubts about the viability of the company's foundry ambitions.
A bruising October for technology stocks — the Nasdaq-100 finished the month down nearly 7% — sent investors rotating into consumer staples, which surged 11.4%, as a packed week of earnings, the midterm elections, and the jobs report looms.
S&P Global Ratings revised Meta Platforms' credit outlook from stable to negative, pointing to the company's $135–$145 billion capital expenditure forecast and its first-ever quarter of negative free cash flow of $2.12 billion.
Written for readers who already know the basics — markets, AI, and the policy decisions that shape both.