iPhone Duo Supply Easing Unconfirmed As Memory Costs Drag Profit

Apple reported fiscal fourth-quarter results on November 2, with revenue of $114.5 billion, up 12% from a year earlier, and net profit of $30.71 billion, 9to5Mac reports. 

Both are September-quarter records, while revenue and diluted earnings per share of $2.10 beat analysts’ expectations. 

The guidance for the holiday quarter is where the tension shows: record revenue, but less of each dollar kept. For a company that sells hardware, the memory chips inside it are now a visible line in its own forecast.

Apple Guides Record Revenue Even With Supply Held Back

CFO Kevan Parekh guided December-quarter revenue growth of 7% to 10%, a range he said “reflects our best view of constrained supply,” as 9to5Mac quotes. 

The report calculates that as roughly $153.8 billion to $158.1 billion, and quotes him calling it the best quarter for revenue in the company’s history. 

Supply was constrained for iPhone, Mac and iPad in the September quarter. Mac sales reached $10.79 billion against $9.61 billion expected, per Reuters, while iPad and Apple wearables sales were also below estimates.

The new iPhone Duo is the tightest product. Apple CEO John Ternus said “Duo is constrained as of today” and that Apple cannot predict when supply and demand will balance, the report says. 

A very small share of units was returned over the notorious display issues and is being replaced, according to the same report.

Memory Costs and Siri AI Pull the Gross Margin Down 

Gross margin is the clearest cost signal. Apple guided to 45% to 46% for the December quarter, against 47.9% in the September quarter, a drop of 1.9 to 2.9 points. 

On the revenue range above, our arithmetic puts gross profit at about $69 billion to $73 billion, against about $55 billion in the September quarter. 

Profit still grows, but more slowly than sales. Apple named two drivers: higher memory costs and some costs related to the ramp of the Siri AI, the revamped assistant for which heavy users have to pay. 

Parekh said memory costs will keep rising into next year as the squeeze is expected to worsen. Ternus said they were higher than in the June quarter, partly offset by inventory carried over and lower costs for other components. 

Reuters adds that Apple raised iPhone 17 prices by $100 and some MacBook prices, plans to charge more for iCloud+ to offset AI costs, and saw purchasing commitments rise by $33 billion in the quarter. 

Weaker Services Guide and a China Shortfall Under the Record

The headline strength hid several soft spots. Services guidance of 8% to 9% growth fell below analysts’ 10.7%, and 9to5Mac says Parekh pointed to third-party licensing and foreign exchange as the main headwinds. 

China revenue reportedly came in at $17.54 billion against $18.58 billion expected. iPad and wearables also missed. 

Apple’s outlook assumes current tariff rates and policies stay in force. However, shares fell 4% during the call and pared that to a 2% decline, per Reuters. 

Taken together, the quarter shows Apple growing revenue in a supply squeeze while paying more for memory. 

Whether price increases can cover that cost is the question the December guidance leaves open.

Source: Apple forecasts its biggest revenue quarter ever despite supply constraints