Apple Sets a Record, Then Warns of Dearer Memory

CUPERTINO, Calif., Nov. 2 — Apple’sApple’s revenue rose 12 percent to $114.5 billion in the three months to Sept. 26, a record for its September quarter, the company reported on Monday. Then John Ternus, on his first earnings call as chief executive, turned to the price of memory chips. “What we’re seeing with memory pricing right now is unprecedented,” he said, according to a transcript published by The Motley Fool.

Apple expects its gross margin to fall to between 45 and 46 percent in the December quarter, from 47.9 percent, mostly because of higher memory costs. Beyond December, Mr. Ternus said, “we see the pricing for memory purchases continuing to increase.”

What memory makers gain, their customers pay, and Apple is passing part of its bill on. It raised prices on many of its products, including Macs and iPads at the end of June and iPhones in September, Mr. Ternus said, and its executives expect memory to limit how many Macs and iPads it can supply this quarter. Kevan Parekh, the chief financial officer, said Apple had changed its prices “reluctantly” and that it was “early to really read price elasticity.” Sabih Khan, the chief operating officer, put the Mac and iPad constraints “primarily” down to memory, “as demand has been higher than what we expected.”

Even so, Apple expects December-quarter revenue to grow 7 to 10 percent, a forecast that Mr. Parekh said “reflects our best view of constrained supply” and would make it “the best quarter for revenue in the history of the company.” Against $143.8 billion a year earlier, that is $153.8 billion to $158.1 billion, by our arithmetic.

What we’re seeing with memory pricing right now is unprecedented.

The Margin

The September quarter already showed the strain. Its 47.9 percent gross margin included about 1 percentage point from tariff refunds, and June’s 50.1 percent about 2 points, Apple said. Without the refunds, Mr. Parekh said, gross margin fell about 1 point from June, “primarily driven by higher memory costs.” Apple has now received “the vast majority of the refunds related to tariffs paid,” he said.

Amit Daryanani of Evercore reckoned that, excluding the refunds, the new forecast implied a fall of about 1.4 points from September, at least. Mr. Parekh said the midpoint implied a decline of that size, and that he expected “most of that decline to be driven by higher memory costs,” with some costs of rolling out Siri AI. A year earlier, Apple’s December-quarter gross margin was 48.2 percent, by our arithmetic.Carry-InApple held $14.5 billion of inventories on Sept. 26, against $5.7 billion a year earlier; it does not say how much is memory. Mr. Ternus said inventory carried in would help in December, but expects “a decreasing benefit from the carry-in inventory on memory over time.”

Most lines grew. iPhone revenue rose 17 percent, to $57.6 billion, and Mac revenue 24 percent, to $10.8 billion, both despite supply constraints, Apple said; services set a record at $31.6 billion, up 10 percent. iPad revenue fell 10 percent, to $6.2 billion, and wearables, home and accessories 8 percent, to $8.3 billion. Sales in Greater China rose 21 percent, to $17.5 billion. Diluted earnings per share were $2.10, including 5 cents from tariff refunds.

The Supply

Apple’s manufacturing purchase obligations rose by $33 billion between June and September as it works to improve supply, Mr. Ternus said, a figure its annual report, due on Tuesday, will show.Purchase ObligationsApple’s June-quarter report put its manufacturing purchase obligations at $57.0 billion on June 27, $56.2 billion of it payable within 12 months. A $33 billion rise would take them to about $90 billion, by our arithmetic. Wamsi Mohan of Bank of America told the executives that Apple was now competing for memory, more than in the past, with “pretty well capitalized companies who are signing long-term agreements.” He named none.

Some of the pressure is Apple’s own AI. As Siri AI reaches more customers, Mr. Parekh said, “the associated cloud costs will be recognized through services cost of sales.” Operating expenses will grow 11 to 13 percent from a year earlier this quarter, “driven by increased and continued investment in R&D, in particular, AI,” he said. Apple’s payments for acquisition of property, plant and equipment went the other way: $9.0 billion in fiscal 2026, against $12.7 billion the year before.

Apple’s warning did not lift the memory makers in Seoul on Tuesday: SK hynix fell 5.03 percent and Samsung Electronics 4.15 percent, in a sell-off of chip shares that Korea JoongAng Daily put down to worries about AI spending.

Apple’s shares closed Monday at $338.32, down 1.83 percent, before the report, and stood at $323.28 at 5:03 a.m. Eastern on Tuesday, down 4.45 percent in trading before the open, according to CNBC.AAPLNasdaq350.69▲8.32+2.4%Apple · Monday’s session The annual report had not reached the S.E.C.’s EDGAR system by 5:44 a.m.What Apple Told the S.E.C. in JulyIn its June-quarter report, Apple said it expected rising costs and supply constraints for components, including memory, “to intensify,” and warned that price increases “may also reduce demand for the Company’s products.” On Wednesday, Nov. 4, Apple opens testing of Apple Intelligence features in mainland China in a developer beta, by its own account; the call did not mention Alibaba, whose Qwen Apple has said it will support in some of those features.