Apple shares fell as much as 4% on Tuesday after the company’s first earnings report under CEO John Ternus guided gross margin for the December quarter to between 45% and 46%, down from 47.9% in the September quarter. At the midpoint of that range, it would be Apple’s lowest gross margin since the fourth quarter of fiscal 2023. If the losses hold, roughly $170 billion comes off a market value of $4.94 trillion.
Apple attributed the compression mainly to higher memory costs, with part of it coming from the cost of ramping Siri AI, CFO Kevan Parekh said on the call. Ternus called the memory market “unprecedented” and said Apple expects prices to keep rising beyond December. The September-quarter margin figure already included a boost from tariff refunds, and Apple has so far benefited from memory bought at older, lower prices, an advantage that shrinks as more of its purchasing rolls onto current contracts.
The top line gave investors little to argue with. Apple booked record iPhone revenue for the September quarter, even though only the 18 Pro models had launched by the end of its fiscal year and prices were higher. The reaction is about what the revenue costs to produce, and about a stock trading at nearly 35 times expected earnings over the next 12 months, against 18.23 for Alphabet and 23.43 for Microsoft.
Apple’s problem is the supply side of the AI buildout. Samsung said last week that its average DRAM selling price rose about 20% in the third quarter, and that AI-driven demand in 2027 will far exceed industry supply relative to 2026. TrendForce expects conventional DRAM contract prices to rise another 10-15% in the fourth quarter. The three companies that make nearly all of the world’s DRAM have been moving capacity toward high-bandwidth memory for AI accelerators, which leaves less for phones and laptops. Intel’s forecast last week of weaker PC chip demand was part of the same picture.
Apple has more room to absorb this than most hardware makers, helped by a services business that has pushed its gross margin well above the 38-39% range of the earlier Cook years. Its Mac pricing has already moved, though: the M5 MacBook Pro and MacBook Air lineup launched in March at $100 to $400 above their predecessors, a rise attributed to the RAM shortage. The 14-inch MacBook Pro with M6 starts at $1,999 with 16GB of memory, configurable to 32GB.
Apple’s next margin read comes with the December-quarter results, by which point TrendForce’s fourth-quarter contract price estimates will have played out.