Squeezed by high memory pricing and investments in its Siri AI ramp, Apple projects December quarter gross margins will fall to between 45% and 46%, marking three consecutive periods of decline. To safeguard inventory against aggressive buying by AI server providers, the company expanded its purchase obligations by $33 billion over the summer. While component constraints will limit device availability through the holidays, leadership remains confident that its supply chain scale will help capture market share from Windows and Android rivals.
Key points
Intense competition for premium memory chips from AI hyperscalers is actively eroding pro…: Intense competition for premium memory chips from AI hyperscalers is actively eroding profit margins across consumer hardware makers.
Apple expects product shortages for both iPhones and Macs to persist through the crucial…: Apple expects product shortages for both iPhones and Macs to persist through the crucial year-end holiday shopping season.
Strong balance sheet reserves may enable the company to absorb component inflation better…: Strong balance sheet reserves may enable the company to absorb component inflation better than Android and Windows PC rivals.
Sources checked by our analysis pipeline: 1
John Ternus' first earnings report as Apple CEO was going fine until it was time to issue a forecast for the company's gross margin, one of the key metrics followed by investors.
Apple reported better-than-expected earnings and revenue on Monday, including in the company's core iPhone unit, and even projected sales in the current period that topped estimates. But just before Ternus opened the earnings call up to analysts' questions, CFO Kevan Parekh came forward with the first real piece of bad news.
Parekh said that for the December quarter, which goes through the holiday season, Apple's gross margin will be between 45% and 46%, trailing the 46.3% average analyst estimate, according to LSEG.
"This includes primarily the impact of higher memory costs, as well as some costs related to the ramp of Siri AI," Parekh said.
Apple shares slid about 3% in extended trading, following a drop of almost 2% during regular market hours on Monday.
It's part of an ongoing trend for Apple, which is absorbing some of the soaring costs from the global memory shortage. A margin…
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