Apple warned on Monday that the cost of memory chips would continue to rise, pressuring gross margin for the crucial holiday quarter, but said it had taken steps to lock in supplies.
Shares, little changed in after-hours trading after results for the fourth quarter of Apple’s financial year beat expectations, fell 4% during a conference call after executives outlined the weaker outlook, but later pared losses to a 2% decline. Early demand for the iPhone 18 Pro line-up and higher prices boosted the quarter.
Apple said it expects gross margin of 45-46% in the quarter ending in December, down from 47.9% in the fourth quarter. It forecast services revenue growth of 8-9%, below analysts’ expectations of 10.7%.
The results come as Apple experiments with a string of firsts under CEO John Ternus, who took over in September. After nearly two decades of launching most new iPhones each September, Apple is spacing them out this year, with iPhone Pro and Duo models shipping now and other models expected next year.
Duo is constrained as of today. The ramp is going well… but at this point, we’re not able to predict when supply and demand will be in balance.
Apple CEO John Ternus
Apple also released a string of new non-iPhone products this quarter, including its first touchscreen laptops and its first smart home hub. Analysts said the steady drumbeat of releases is meant to smooth out Apple’s yearly revenue cycle, which for decades showed a huge holiday-quarter boom that petered out by August.
In recent weeks, Apple has grappled with customer reports of cracked screens on the iPhone Duo, its first foldable phone, which sold out within hours online and drew queues at stores last month.
Fourth-quarter sales were US$114.48-billion, above analysts’ estimates of $113.39-billion, according to LSEG data. Profit was $2.10/share, above estimates of $1.99, even when excluding 5c from tariff refunds.
iPhone Duo supply constraints
In an interview, Ternus said “a very small percentage” of iPhone Duo units had been returned for display problems and that Apple was replacing them. He said the company was unable to meet demand overall, and gave no timeline for catching up.
“Duo is constrained as of today,” Ternus said. “The ramp is going well… but at this point, we’re not able to predict when supply and demand will be in balance.”
Fourth-quarter iPhone sales, which included the iPhone 18 Pro models but not the Duo, were $57.58-billion, above estimates of $56.54-billion, according to LSEG data.
The staggered launch strategy comes as Apple faces an AI-driven spike in memory chip prices, which has been a windfall for chip makers such as Samsung. It could erode the margin boost Apple gets from selling storage upgrades.
“The big question for Apple moving forward will be how well they can weather the significant component price increases that have slowed their PC and smartphone competitors,” said Bob O’Donnell, chief analyst at Technalysis Research. “The new iPhone Duo looks to be a big hit, but the company has to solve the screen glitches and ramp up its manufacturing output.”
When it launched the iPhone 18 Pro, Apple also raised iPhone 17 prices by $100 and increased some MacBook prices, softening the blow of rising memory costs.
“We did see higher memory costs as compared to the June quarter, which was partially offset by the benefit of carrying inventory and lower costs on certain non-memory components,” Ternus said. “These price increases provided some offset.”
Fourth-quarter gross margin was 47.9%, above estimates of 47.5%, according to LSEG data.
On the investor call, chief financial officer Kevan Parekh said Apple expects memory costs to keep rising into next year. Asked whether Apple had signed a long-term supply agreement, chief operating officer Sabih Khan did not directly confirm a deal, but said Apple was working closely with memory suppliers and that its purchasing commitments had increased by $33-billion during the quarter.
There are going to be some usage limits on features that rely on server-side models, which include Siri AI and intelligent photo editing
John Ternus
Shares of memory chip maker Micron rose more than 1% in after-hours trading on Monday, and shares of chip-manufacturing equipment makers KLA and Applied Materials also rose.
Apple also pointed to Siri AI, which runs partly in Google’s cloud, as a factor affecting margins. The company plans to charge more for iCloud+ subscriptions to offset AI costs, though it has not announced pricing.
“There are going to be some usage limits on features that rely on server-side models, which include Siri AI and intelligent photo editing,” Ternus said during the call.
Mac sales were $10.79-billion, above estimates of $9.61-billion. Services revenue was $31.57-billion, in line with estimates of $31.58-billion. iPad and wearables sales were $6.23-billion and $8.30-billion, both below estimates. Sales in China were $17.54-billion, below the $18.58-billion analysts expected, according to Visible Alpha data. — (c) 2026 Reuters
