Apple stock sinks as global memory crisis hurts profits, giving Ternus his first big test
In John Ternus' first earnings report as CEO, Apple issued a gross margin forecast that disappointed Wall Street.
Key points
- Apple forecast December-quarter gross margin of 45% to 46%, below the 46.3% analyst average.
- CFO Kevan Parekh cited higher memory costs and Siri AI ramp costs for the weaker outlook.
- Apple shares fell 4% in premarket trading on Tuesday after the forecast.
Apple shares dropped 4% in premarket trading on Tuesday after the company forecast a December-quarter gross margin of 45% to 46%, below the 46.3% average analyst estimate tracked by LSEG. The forecast came during CEO John Ternus' first earnings report, after Apple posted better-than-expected earnings and revenue, including in its iPhone unit.
CFO Kevan Parekh said the outlook reflects higher memory costs and some costs tied to the ramp of Siri AI. At the midpoint, it would be Apple's lowest gross margin since the fiscal fourth quarter of 2023 and a third straight quarterly decline.
Memory costs and supply
Ternus said memory pricing is "unprecedented" and that Apple is paying more than earlier this year, with prices expected to keep rising beyond December. Apple said it expects supply constraints on iPhones and Macs in the holiday quarter, mainly due to memory.
COO Sabih Khan said Apple has sharply increased purchase obligations to secure supply, up $33 billion from the June quarter to the September period. He said the supply chain has "less flexibility" than normal and declined to say whether Apple signed long-term agreements with memory makers.
What we're seeing with memory pricing right now is unprecedented
— John Ternus
Price rises and market share
Apple raised prices across Macs, iPads and accessories, and in September increased iPhone prices by $100, which Ternus said the company did "reluctantly." The article links the global memory shortage to demand from AI servers and hyperscalers buying up RAM at a premium.
Citing IDC data, Ternus said Apple gained share globally for the quarter and the full fiscal year, and that it has never sold more Macs in a fiscal year.
