Apple is heading into its typically lucrative holiday quarter with both stronger iPhone sales and mounting cost pressures. The company forecast revenue growth of 7% to 10%, above analyst expectations, but its outlook for gross margin fell short of forecasts. Apple shares dropped about 3% in after-hours trading following the results and outlook.
CEO John Ternus described the increase in memory-chip prices as unprecedented and ongoing during his first earnings call as chief executive. Apple is trying to offset some of the pressure by securing lower prices for other components. Even so, the value of its production orders rose by $33 billion over three months.
Apple expects a gross margin of 45% to 46% in the holiday quarter. Analysts had anticipated a slightly higher figure, while the margin was still above 50% in the spring.
The company’s iPhone business beat market expectations in the most recent quarter. Revenue from smartphones rose 17.5% year over year to $57.56 billion, around $1 billion more than analysts had expected. Apple did not provide a specific iPhone sales forecast for the holiday period.
This year’s new lineup includes two higher-priced ranges, the iPhone 18 Pro and iPhone Duo. Less expensive new models are expected next year, according to media reports. Supplies of the iPhone Duo remain constrained: after its October launch, delivery estimates for the device, which costs more than €2,000, quickly moved to January. Chief operating officer Sabih Khan said it was difficult to predict how quickly supply and demand would come into balance.
Ternus, who took over from longtime CEO Tim Cook during the quarter, said Apple sees the iPhone as a central device in the era of artificial intelligence. The company is counting on its devices to serve as a key way for people to access AI applications.
Apple’s total quarterly revenue increased 12% year over year to $114.5 billion, while net income rose 12% to $30.7 billion. The profit was also helped by repayments of US import tariffs owed to the company after the US Supreme Court struck down some measures introduced by President Donald Trump.
Apple’s services business and its operations in China grew but fell short of analysts’ higher expectations. Chief financial officer Kevan Parekh pointed to reductions in the fees Apple charges for App Store transactions in several markets.
Sources: t3n.