Gross margins slipped to 47.9 percent in the September quarter and are projected to contract further to between 45 and 46 percent in the December quarter. To counter the supply crunch, Apple expanded its manufacturing purchase obligations by $33 billion to reach $89.7 billion. These rising production and AI rollout expenses arrive just as the company prepares to introduce its first foldable phone and touchscreen MacBooks. While revenue forecasts remain positive, analysts warn that passing these expenses onto inflation-weary consumers through price hikes carries significant risk.
Key points
Severe memory cost inflation linked to data-center artificial intelligence demand is mate…: Severe memory cost inflation linked to data-center artificial intelligence demand is materially weakening Apple's profit outlook.
Upcoming hardware rollouts such as the iPhone Duo and an AI-powered Siri face severe cost…: Upcoming hardware rollouts such as the iPhone Duo and an AI-powered Siri face severe cost pressures during production.
Elevated trading multiples make the stock vulnerable if planned price increases end up da…: Elevated trading multiples make the stock vulnerable if planned price increases end up dampening consumer hardware demand.
Sources checked by our analysis pipeline: 1
Nov 3 : Apple shares tumbled about 4 per cent on Tuesday as its first results under new CEO John Ternus showed that rising memory chip costs were denting the iPhone maker's envied margins, the latest sign of the AI boom's toll on the technology industry.
Sales of smartphones, PCs and other electronics have already suffered this year from price hikes driven by soaring memory chip costs as the AI industry's data-center race absorbs supply.
That even Apple, long known for its supply-chain prowess, is feeling the squeeze shows virtually no firm is spared. The warning follows Intel's bleak forecast last week on collapsing PC chip demand.
"What we’re seeing with memory pricing right now is unprecedented," Ternus said on his first earnings call as CEO.
"For the December quarter, we expect even higher memory costs. And looking beyond the December quarter, we see the pricing for memory purchases continuing to increase."
Gross margin, the share of revenue Apple keeps after production costs, slipped to 47.9 per cent in the September quarter from the June quarter, even with the boost…
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