- The margin forecast spoiled a solid quarter. CFO Kevan Parekh guided December-quarter gross margin to between 45% and 46%, below the 46.3% average analyst estimate compiled by LSEG, citing “primarily the impact of higher memory costs, as well as some costs related to the ramp of Siri AI.” Apple shares slid 3% in morning trading on Tuesday.
- It would be a third straight margin decline. Gross margin was 50.1% in the June quarter and 47.9% in the September quarter, which was boosted by 1 percentage point of tariff refunds. At the midpoint of the new range, Apple would post its lowest gross margin since the fiscal fourth quarter of 2023.
- Memory is also limiting supply. Apple expects supply constraints on iPhones and Macs in the holiday quarter, primarily because of memory, and its purchase obligations rose by $33 billion from the June quarter to the September quarter as it scrambles to secure parts. Chief operating officer Sabih Khan, the first Apple COO on an earnings call since Tim Cook in 2010, said the company is “seeing less flexibility in the supply chain than normal.”
- Investors had priced in little room for error. Apple shares have risen 25% in 2026, ahead of other big tech names, a premium that leaves “little room for disappointment,” according to Violeta Todorova, senior research analyst at Leverage Shares. She called profitability “the concern,” with memory and the Siri AI rollout as the main pressures.
What Happened?
Apple reported better-than-expected earnings and revenue on Monday, including in its core iPhone business, and projected current-quarter sales above estimates in John Ternus’ first report as chief executive since he succeeded Tim Cook on Sept. 1. The bad news came from the gross margin forecast for the December quarter. “What we’re seeing with memory pricing right now is unprecedented,” Ternus said on the call, adding that “looking beyond the December quarter, we see the pricing for memory purchases continuing to increase.” Apple raised iPhone prices by $100 in September, a move Ternus said the company made “reluctantly,” after earlier raising prices on Macs, iPads and accessories.
Why It Matters?
The memory shortage is an AI story. Nvidia and the hyperscalers are buying up all the RAM they can find and paying a premium for it, leaving little supply for smartphone and tablet makers, and Intel had its worst day on the market since the 1970s on Friday on a weak forecast tied to the softening PC market. Apple’s scale does not make it immune, but its margins remain well above the 38% to 39% range of the early Cook era, after the high-margin services business lifted gross margin to 40% in 2021 and higher from there. That cushion is why some analysts expect Apple to take share from Windows PC and Android makers that cannot absorb rising costs as easily.
What’s Next?
The key question is how long memory inflation lasts, since Ternus has already signaled pricing will keep rising beyond the December quarter. Khan declined to say whether Apple has signed long-term agreements with memory makers, so investors will look for signs that the higher purchase obligations translate into steadier supply and costs. Market-share data will also matter: Ternus said IDC data show Apple gained global share for the quarter and the fiscal year, and that Apple has never sold more Macs in a fiscal year.
