Apple’s latest earnings show the cost of computer memory biting into one of tech’s most profitable companies. In its fiscal fourth-quarter report on Monday, November 2, Apple said memory pricing is unprecedented, forecast a lower gross margin for the December quarter, and showed inventory up 154% from a year earlier, according to TechCrunch. MacRumors and CNBC also covered the results.
The inventory numbers. TechCrunch reports that Apple’s inventory rose 31.1% from the previous quarter, from $11.09 billion to $14.54 billion. Compared with the same quarter a year earlier, it grew 154.3% from $5.72 billion. Apple tied manufacturing purchase obligations, which rose by $33 billion from June to the September quarter, to improving supply, according to the article.
The margin warning. Apple reported a 47.9% gross margin for the September quarter. It forecast 45% to 46% for the December quarter, a drop it largely attributes to higher memory costs, according to TechCrunch. Other coverage notes that the September figure included about one percentage point from tariff refunds, and that the forecast also covers costs tied to the ramp of Siri AI. The reports agree on the 45% to 46% range.
What Apple said about memory. Apple CEO John Ternus called memory pricing unprecedented and said Apple expects even higher memory costs in the December quarter. Price increases on some devices are meant to offset part of the cost, with Mac and iPad prices raised in late June and iPhone prices in September. Beyond December, Apple expects memory costs to keep rising, and the benefit from memory it bought earlier will fade over time. Chief operating officer Sabih Khan, who oversees supply chain and manufacturing, did not rule out further price increases for devices.
iPad stumbles. iPad revenue was about $6.2 billion, below analyst expectations of about $6.7 billion and down 10% from a year earlier, according to TechCrunch. Apple blamed supply constraints. It was the only major product category that did not grow, while iPhone and Mac sales beat estimates. Other coverage says Apple expects constraints on Mac and iPad in the December quarter too, driven mainly by memory because demand has been higher than expected.
The wider picture. MacRumors reports Apple earned $30.7 billion in profit on $114.5 billion in revenue, and Apple expects services revenue growth of 8% to 9% in the December quarter. Other reports said Apple’s shares fell after hours on the margin outlook. Apple also said it expects the December quarter to be its best for revenue in company history, according to one summary of the call.
Why it matters. Memory is used in almost every device, so higher prices can raise costs for phones, laptops and tablets across the industry, not just at Apple. For shoppers in the US and UK, the signal is that device prices may keep rising or that supply of some models may stay tight. Apple’s remarks suggest that price rises already made are unlikely to be the last.
What to watch. Look for Apple’s December-quarter results, any new price changes on iPads and Macs, and whether other makers such as Samsung and Dell report similar memory pressure.
Sources: TechCrunch, with additional detail from MacRumors and CNBC. Figures are as reported by Apple and those outlets. This is not investment advice.
Computer memory modules (representative image), Wikimedia Commons, CC BY-SA 4.0
