Apple Warns Memory Costs Threaten Margins

Apple has warned that rising memory-chip prices will squeeze its profits during the crucial holiday shopping quarter, despite reporting record September-quarter sales driven by strong demand for its latest iPhones.

The technology group generated $114.5 billion in revenue in its fiscal fourth quarter, up 12% from a year earlier. Earnings per share reached $2.10, while gross margin, the proportion of sales left after production costs, stood at 47.9%. Apple expects that margin to fall to between 45% and 46% in the December quarter, reflecting more expensive memory components and the cost of introducing its upgraded Siri artificial intelligence service.

Memory prices are climbing as data-centre operators compete for chips needed to run AI systems, tightening supplies available to consumer electronics manufacturers. Apple has benefited from previously negotiated prices, but executives expect that protection to weaken as new purchases become more expensive. Shares fell roughly 4% in premarket trading on Tuesday following the warning. The results were the first presented under chief executive John Ternus, who took over in September.

The squeeze illustrates how the AI investment boom can impose costs on technology businesses outside the data-centre market. Apple continues to benefit from iPhone demand and a growing services business, but its forecast suggests that even manufacturers with substantial purchasing power cannot entirely escape rising component prices. Higher costs could also narrow Apple's room to discount products during a competitive holiday season. Whether those increases ultimately reach consumers will depend on pricing choices, supply agreements and demand through the holiday season.