Apple warns on rising costs from memory chip shortage

Apple on Monday said the “unprecedented” rise in memory chip prices and the cost of serving its AI tools will squeeze its margins even as it forecast better than expected sales for the crucial Christmas season.

The iPhone maker said sales would rise between 7 and 10 per cent year on year in the final quarter of 2026, better than Wall Street forecasts of 6 per cent. But Apple’s shares slipped about 3 per cent after-hours as it said rising component prices and the cost of powering its new AI Siri would erode its historically high margins.

Apple predicted gross margins of 45 to 46 per cent in the fourth quarter of the year, less than analyst forecasts of 47 per cent.

Chief executive John Ternus pointed to the shortage of memory chips as the boom in data centre building hoovers up supply. “What we are seeing with memory pricing right now is unprecedented,” he said.

Apple sales held up in the quarter to the end of September, with better than expected revenue of $114.5bn.

Investors were more focused on Apple’s financial outlook for the holiday season as consumers digest recent price increases and a rocky launch for the foldable iPhone Duo, which has seen long delivery delays and reports of cracks in its screen.

Apple insists the screen issues have affected only a limited number of devices.

Monday’s earnings are the first since Ternus, Apple’s former hardware boss, took over as CEO in September. It is also the first quarterly report to fully reflect the effect of Apple’s decision to start raising prices across its device line-up in late June, citing the skyrocketing memory chip prices.

Apple’s gross margin was 47.9 per cent in the third quarter, compared with its previous forecast of 47-48 per cent.

Sales in China were $17.5bn, up about 20 per cent but below estimates of $18.9bn. Chief financial officer Kevan Parekh blamed the softness in China on supply-chain constraints that have limited its ability to deliver products to meet demand this year.

Apple reported stronger than expected sales of Mac PCs at $10.8bn, about $1bn higher than Wall Street had forecast.

Revenue for Apple’s services business, which includes the App Store, Apple Pay and iCloud, was $31.6bn. Net income was $30.7bn.

Apple’s results come after a sharp decline in tech stocks over the past week, with disappointing earnings from Google, Amazon and Intel triggering a sell-off and adding to concerns about unchecked AI spending.

The iPhone maker has defied the slump, with its shares climbing slightly over the past month, ahead of Monday’s earnings report, to hover around a $5tn market valuation as it vies with Nvidia for the title of the world’s most valuable public company.

Unlike its Big Tech peers, Apple has not engaged in a massive spending spree on data centre infrastructure, making it a potential safe haven for investors wary of the AI trade.

But the Cupertino, California-based company is not immune from a global semiconductor component shortage, particularly for memory chips, caused by the rush to build data centres, which has placed intense pressure on a small number of suppliers.

Global smartphone shipments declined 20 per cent in the third quarter, according to data from Counterpoint Research, reflecting higher prices caused by the component crunch.

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This has had a more severe impact on affordable smartphone makers. Apple held off iPhone price increases until September and grew its market share from 18 per cent to 22 per cent in the third quarter despite the broader market shrinking, the research found.

The iPhone 18 Pro and Pro Max, unveiled in September, were priced about $100 higher than last year. Instead of launching the new line-up together, Apple has also delayed the cheaper base model until next year, complicating comparisons to previous years and analysts’ ability to predict holiday sales.

Parekh added that it was “difficult” to measure how much stronger iPhone sales in the third quarter could be attributed to consumers buying before anticipated price increases.