EquitiesMarket noteTuesday 3 November 2026, 09:30
Apple earnings beat forecasts with $114.5bn of sales, up 12%. But memory chip prices it calls unprecedented cut its margin forecast to 45–46%, and shares fell.
Apple earnings for the quarter to 26 September set September-quarter records for sales and profit, but the company told investors its margins will shrink because of the price of memory chips. Revenue rose 12% to $114.5bn and net income to $30.7bn, Apple’s results filing shows. For the December quarter it expects a gross margin of only 45% to 46%, against 47.9% in September and 50.1% in June.
“What we’re seeing with memory pricing right now is unprecedented,” John Ternus said on his first results call as chief executive, according to the transcript. The shares closed at $338.32 on Monday, down 1.83%, and fell another 2.8% after hours to $328.85.
The quarter was strong by any measure Apple reports. iPhone sales rose 17% to $57.6bn, Mac sales 24% to $10.8bn and services 10% to $31.6bn, a record. Sales in Greater China rose 21% to $17.5bn. Only the iPad and the wearables, home and accessories group sold less than a year earlier.
For the fiscal year to September, revenue was $478.8bn, up 15%, and diluted earnings per share were $8.98, up from $7.46. Apple returned $28bn to shareholders in the quarter and declared a dividend of 27 cents a share.
The headline numbers had help. About 1 percentage point of the 47.9% gross margin, and 5 cents of the $2.10 a share, came from tariff refunds, Apple says. In the June quarter the refunds added about 2 points to the margin and 11 cents a share, its July release shows. Kevan Parekh, the finance chief, said Apple has now received “the vast majority” of the refunds, so that help is ending.
Take the refunds out and the trend is clear: about 48% in June, about 47% in September, and 45% to 46% forecast for December. Parekh said he expects “most of that decline to be driven by higher memory costs”.
Memory chips are short as AI data centres take more of what chipmakers make, and Micron, one of the largest makers, said in October that the shortage will get worse in 2027 and 2028. “Looking beyond the December quarter, we see the pricing for memory purchases continuing to increase,” Ternus said.
Apple has already passed some of it on. It changed the price of many of its products, the Mac and iPad at the end of June and the iPhone in September, a decision Parekh said it made “reluctantly”.
The balance sheet shows Apple stocking up. Inventories rose to $14.5bn on 26 September, from $11.1bn in June and $5.7bn a year earlier. Ternus said the company’s manufacturing purchase obligations, the parts it has agreed to buy, rose by $33bn from June to September.
That stock of chips bought at older prices helps for now. But Ternus said Apple would “see a decreasing benefit from the carry-in inventory on memory over time”, which is why the margin forecast keeps falling.
Spending is rising too. Research and development cost $11.7bn in the quarter, up 32% on a year. The new lineup Apple is selling into the holidays includes what it calls “the all-new Siri AI”. Apple expects operating expenses of $20.4bn to $20.8bn in the December quarter, against $19.2bn in September.
Apple expects December-quarter revenue to grow 7% to 10% on a year, and services revenue 8% to 9%. Supply is tight: the new iPhone Duo “is constrained as of today”, said Sabih Khan, the chief operating officer, and “it is really hard to predict when supply and demand will be in balance.”
Costs that run ahead of sales have weighed on big technology shares this results season, as in the earnings rout of 30 October, when Alphabet, Amazon and Intel fell. Apple’s fall after hours was smaller. It is also the first results call for Ternus, who took over from Tim Cook as chief executive.
The next test comes with the December-quarter results: whether the iPhone Duo’s supply catches up, and how much of the memory bill Apple can still pass on to buyers.
This is analysis and opinion, not investment advice.
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