Apple expects its gross margin to fall to between 45% and 46% in the holiday quarter, from 47.9%, as memory chip prices rise. Apple gave the forecast on its earnings call on Monday. Its earnings release, the first under chief executive John Ternus, showed record September-quarter revenue of $114.5bn, up 12%.
Revenue beat the $113.39bn analysts expected, according to LSEG data reported by Stephen Nellis for Reuters. Apple earnings of $2.10 a share, which included 5 cents from tariff refunds, beat the $1.99 forecast. Net income rose to $30.71bn from $27.47bn a year earlier.
iPhone revenue rose 17% to $57.58bn, a September-quarter record. The quarter included eight days of iPhone 18 Pro sales, CNBC reported. The iPhone Duo went on sale on 23 October, after the quarter ended. Mac revenue rose 24% to $10.79bn, and services rose 10% to an all-time high of $31.57bn.
iPad revenue fell 10% to $6.23bn. Wearables, home and accessories fell 8% to $8.30bn.
Revenue from Greater China rose 21% to $17.54bn. Analysts expected $18.58bn, according to Visible Alpha data cited by Reuters. Japan was the only region where sales fell. On the earnings call, Ternus said Apple set an all-time revenue record in India.
“What we’re seeing with memory pricing right now is unprecedented,” Ternus said on the call.
Memory cost more than in the June quarter, he said. Stock bought earlier and cheaper non-memory parts made up part of that. He expects “even higher memory costs” in the December quarter. Higher Mac and iPad prices from the end of June will cover some of the gap. So will higher iPhone prices from September.
“Looking beyond the December quarter, we see the pricing for memory purchases continuing to increase,” Ternus said.
Tariff refunds added about 1 percentage point to the gross margin, Apple said. Without the refunds, the margin would have fallen about 1 point from the June quarter, mainly because of memory, chief financial officer Kevan Parekh said. Apple has now received most of the refunds, he added.
Apple’s balance sheet shows $14.54bn of inventory at the end of September, up from $5.72bn a year earlier. Its manufacturing purchase obligations rose by $33bn between June and September, executives said. In October, Ternus told Time the shortage was a memory chip crisis.
A bigger holiday quarter
Parekh forecast revenue growth of 7% to 10% for the December quarter. That reflects Apple’s “best view of constrained supply”, he said. He expects it to be Apple’s best quarter for revenue ever. Analysts had expected growth of 6.1%, according to LSEG data reported by Kif Leswing for CNBC.
The margin forecast trailed the 46.3% analysts expected, CNBC reported. Parekh blamed memory and the cloud costs of rolling out Siri AI. He forecast services growth of 8% to 9%, below the 10.7% analysts expected, according to Reuters.
“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.
No date for more iPhone Duos
“iPhone Duo is constrained as of today,” chief operating officer Sabih Khan said on the call. “But at this time, it’s really hard to predict when supply and demand will be in balance.”
Khan will join Apple’s earnings calls from now on. He said Macs and iPads will also be short of supply in the December quarter, mainly because of memory. Ternus told Reuters that “a very small percentage” of Duos had been returned for display problems, and that Apple is replacing affected phones.
Shares fall
Apple shares closed 1.8% lower at $338.32 on Monday, before the results. They fell 4% after hours during the call, then pared the loss to 2%, Reuters reported. On Tuesday they were 3.8% lower in premarket trading, according to CNBC. In July, the stock fell on supply snags after Apple’s previous results.
“Greater China came in about $1 billion below forecast; that’s not a rounding error, it’s a worrying pattern,” Investing.com senior analyst Jesse Cohen said in a note cited by Business Insider.
Sunil Krishnan of Aviva Investors called it “a reasonably solid set of results” on the BBC’s Today programme. Margins “well north of 45%” for an established company were “pretty impressive”, he said.