The margin guidance is the figure most likely to set the tone for Apple shares at Tuesday’s open, as it shows component inflation eating into profitability just as the tariff refund tailwind fades. The warning that memory prices will keep rising is a supportive signal for memory chipmakers’ pricing power. It is a cautionary one for other hardware makers with less scope to pass on costs. The revenue guidance points to solid holiday demand, which may cushion the margin disappointment. The $33 billion jump in purchase obligations suggests Apple is locking in supply at higher prices rather than risking shortages.
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Apple is heading into the holidays with solid demand but thinner margins, as rising memory prices and AI costs take the shine off a record September quarter.
Summary:
- Apple expects total revenue growth of 7% to 10% in the fiscal first quarter (the December quarter) and services growth of 8% to 9%
- Gross margin is forecast at 45% to 46%, below the 47% to 48% range Apple had guided for the September quarter
- The margin outlook factors in memory chip costs and Siri AI expenses, and the CFO said memory purchase prices are expected to keep rising
- Manufacturing purchase obligations rose by $33 billion between the June and September quarters
- Apple bought back $24 billion of its shares in the fourth quarter
- Apple said it has received the vast majority of its tariff refunds
Apple expects revenue growth of 7% to 10% in its holiday quarter, but warned that rising memory chip prices and spending on Siri AI will squeeze its gross margin to 45% to 46%. Chief Financial Officer Kevan Parekh made the comments on the company’s earnings call.
The margin outlook for the fiscal first quarter, which covers October to December, is below the 47% to 48% range Apple had guided for the September quarter. Parekh said the forecast takes into account higher memory costs and expenses linked to Siri AI, and that the company expects memory purchase prices to keep rising.
Apple also signalled it is committing more heavily to supply. Parekh said manufacturing purchase obligations rose by $33 billion between the June and September quarters, suggesting the company is securing components in a tight and increasingly expensive market.
Services, Apple’s high-margin business, is expected to grow 8% to 9% in the quarter. The December period will include the first full holiday season of iPhone 18 Pro sales, after the September quarter captured only around nine days of sales.
The guidance followed record fourth-quarter results, with revenue of about $114.5 billion, up 12% from a year earlier, and earnings of $2.10 per share against estimates of $2.00. Apple said on the call that tariff refunds added 5 cents to earnings per share. Parekh said the vast majority of those refunds have now been received, indicating that support will not repeat in coming quarters. Chief Executive John Ternus said Apple had raised prices to help offset higher component costs.
Apple returned capital at a steady pace, buying back $24 billion of its shares in the fourth quarter.
The call, Ternus’s first as chief executive, leaves investors weighing healthy demand against mounting cost pressure. How far memory prices climb, and how much of that Apple can pass on to customers without hurting sales, is likely to be the central question heading into 2027.
This article was written by Eamonn Sheridan at investinglive.com.