New Apple CEO John Ternus said the company is seeing “unprecedented” prices for memory, telling investors at the iPhone maker’s earnings call Monday he expects they will rise even higher through the upcoming quarter, amid a memory shortage caused by demand from artificial intelligence companies.
Key Facts
“These memory prices are unprecedented, and so that has put pressure on our prices,” Ternus said on Monday, after telling investors he expected memory prices would continue increasing through the upcoming quarter as the ongoing memory shortage continues to drive up prices for consumer electronics.
Apple’s CFO Kevan Parekh said the company was trying to manage higher prices by seeking out lower costs for non-memory components, but said the company had to “reluctantly” raise prices on iPads, Macs and iPhones over the course of the past year.
Parekh also said the company expected gross margins for the upcoming quarter of only 45% to 46%, driven primarily by memory costs and other costs related to Apple’s rollout of its new Siri AI—behind analyst estimates.
Ternus said Apple also expected memory prices would continue to increase “beyond the December quarter” as the company sees decreasing benefits from inventory moving forward.
Apple’s purchase obligations also rose to $33 billion from June to the last quarter, Ternus said.
Apple’s stock price slumped after markets opened on Tuesday, and was down about 1.5% as of 9:50 a.m. EST.
Crucial Quote
“So when we look at the margin change from the June quarter to the September quarter, and you remove the impact of the tariffs from both the June quarter and September quarter, we saw about a one-point sequential change in margin, and that was driven entirely by memory impacts,” Parekh told an analyst on the call who asked about memory inflation. The CFO said this was partially offset by inventory and pricing changes, but he said memory prices would continue to be a “challenge” for Apple in the near future. “If you look at the midpoint, most of the sequential decline we’re expecting for the December quarter we expect to be driven by higher memory costs.”
What to Watch For
Apple’s chief operating officer Sabih Khan also noted that the company saw supply constraints on iPhones, Macs and iPads in the most recent quarter, which he said was driven by “high levels of demand” and “less flexibility in the supply chain than normal.” The COO also said he expected supply constraints for some products to continue moving forward into the holiday shopping season. “For the December quarter, we expect constraints on Mac and iPad, primarily driven by memory, as demand has been higher than what we expected.”
Key Background
Apple, currently the world’s second-most valuable company with a $4.8 trillion market cap, reported earnings on Monday. The iPhone maker posted quarterly revenue of $114.5 billion, beating analyst expectations. iPhone sales were also robust, despite the price hikes, earning roughly $57.6 billion in revenue for the quarter, which included the first week of sales for the new iPhone 18.
Want to see more Forbes articles on your feed? Tap here to make Forbes Australia a preferred source on Google.
Look back on the week that was with hand-picked articles from Australia and around the world. Sign up to the Forbes Australia newsletter here or become a member here.
