Apple Earnings Show a Record Quarter and a Memory Cost Problem

Apple just posted the best September quarter in its history, and the most important number in the report was not revenue. It was 45%.

That is the low end of the gross margin Apple expects for the December quarter, down from 47.9% in the quarter it just closed. In the Apple earnings release for its fiscal fourth quarter, published November 2, the company reported revenue of $114.5 billion, up 12% from a year earlier, and diluted earnings per share of $2.10, up 14%. Those are records. But on the call with analysts, CEO John Ternus spent a lot of time on a cost Apple does not control: the price of memory chips.

Our read is simple. Demand for Apple hardware is strong right now, but memory costs have become the main force shaping Apple's next few quarters, and buyers are likely to feel it through prices before investors feel it through profits.

A record quarter, built mostly on the iPhone

Start with what went right, because a lot did. According to Apple's press release, the quarter set September records for total revenue, iPhone revenue and earnings per share, and Services hit an all time high. CFO Kevan Parekh said fiscal 2026 ended with record annual revenue of $479 billion and double digit EPS growth.

9to5Mac broke the $114.48 billion total down by product line:

• iPhone: $57.58 billion, about half of everything Apple sold
• Services: $31.57 billion, a new high
• Mac: $10.79 billion
• Wearables, Home and Accessories: $8.30 billion
• iPad: $6.23 billion

Net income came in at $30.71 billion, up from $27.47 billion a year earlier, per the same 9to5Mac tally. Apple generated $28 billion in operating cash flow and returned $28 billion to shareholders, and the board declared a dividend of $0.27 per share, payable November 16 to holders of record on November 12.

Ternus framed the quarter as a launch pad. In the release he called the iPhone Duo "the most transformational iPhone since the original" and pointed to the new Siri AI as part of the holiday lineup. If you followed our coverage of Apple's on device AI plans, such as the storage Apple Intelligence will need on iOS 27, you know how much of this year's pitch rests on that software.

Inside the margin guide: memory is the story

Here is where the tone changed. TechCrunch reported that Apple guided to a gross margin of 45% to 46% for the December quarter and tied the drop largely to higher memory costs.

"What we're seeing with memory pricing right now is unprecedented," Ternus told analysts, according to TechCrunch. He said Apple expects even higher memory costs in the December quarter and that costs are continuing to increase beyond that.

Two other figures show how seriously Apple is taking this:

1. Inventory jumped. Apple held $14.54 billion of inventory at the end of the quarter, up from $11.09 billion three months earlier and up 154% from $5.72 billion a year ago, per TechCrunch.
2. Purchase commitments grew. Ternus said Apple's manufacturing purchase obligations rose by $33 billion from June to the September quarter.

Put those together and a pattern appears. Apple appears to be buying and holding parts earlier, locking in supply while it can. That protected the September quarter. Ternus also warned that the benefit from this "carry-in inventory on memory" will decrease over time, which is why the margin guide steps down.

It is worth noting that the 47.9% margin Apple just reported included roughly one percentage point from tariff refunds, according to the release. Strip that out and the gap between the quarter just ended and the December guide is narrower, but the direction is the same.

Who pays for pricier chips

Apple has already started passing costs along. TechCrunch reported that Ternus said higher memory costs would be partly offset by price increases Apple put through on some devices, with Mac and iPad prices rising at the end of June and iPhones in September. COO Sabih Khan, who runs the supply chain, did not rule out further price increases when asked.

That matters for anyone shopping this season. Apple's highest storage and RAM configurations are where higher memory prices are most likely to show up first. We saw a preview of that with the 512GB Mac Studio pricing, and the same math applies to MacBooks. If you are weighing a high spec machine, our comparison of the touchscreen MacBook Pro and the M6 MacBook Pro is a useful place to decide how much memory you actually need.

For phone buyers, one practical move is to recover value from what you already own. Our guide to selling an old iPhone compares the payouts.

The weak spot hiding in the totals

The iPad was the clear miss. TechCrunch reported iPad revenue of $6.2 billion, down 10% from a year earlier and below the $6.7 billion analysts expected. Apple blamed supply constraints.

That explanation fits the memory thesis rather than contradicting it. When parts are scarce and expensive, a company with Apple's margins will steer them toward the products that earn the most per unit. The iPhone, with a new flagship design to ship, is the obvious priority. A tablet line that already raised prices in June is an easier place to run short.

The iPhone Duo is the one to watch here. Ternus called it the most transformational iPhone since the original, and the launch of a brand new design can run short of stock early. Strong demand and tight supply can coexist for months, and in a quarter where memory is the constraint, they probably will.

The case against worrying

There is a fair counterargument, and it is a strong one.

Apple is not a typical hardware maker. Services, at $31.57 billion a quarter, carry much higher margins than devices and do not depend on memory prices at all. Every iPhone sold this fall adds to the base that pays for iCloud, Apple Music and App Store purchases for years. A one or two point dip in gross margin on a $114 billion quarter still leaves Apple among the most profitable companies in the world.

Apple's scale also gives it leverage that smaller rivals lack. A company willing to commit an extra $33 billion to suppliers in a single quarter can secure parts that others cannot. If memory prices stay high, Apple may give up some margin while smaller phone and PC brands struggle to get parts at all. Chip costs tend to hurt most at companies without pricing power, a theme that also showed up in Intel's weak quarterly outlook.

And memory cycles do turn. Memory has long been a boom and bust market, and prices have eased before once new factory capacity came online. If that happens in 2027, the inventory Apple is building now could look expensive in hindsight, but its margins would recover quickly.

Signals to track into early 2027

A few things will tell us whether memory is a speed bump or a longer drag:

• The actual December quarter gross margin, and whether it lands at 45% or 46%
• Any new price changes on Mac, iPad or iPhone configurations before or after the holidays
• Whether iPad supply recovers, or whether Apple keeps prioritizing the iPhone
• The size of purchase obligations in Apple's annual filing, which Ternus said would reflect the $33 billion increase

The next earnings report, covering the holiday quarter, arrives early next year. If the margin holds near the top of the range while iPhone Duo supply improves, the memory squeeze will look manageable. If Apple guides lower again, expect the price of your next Apple device to tell you why. For more on Big Tech results and the companies behind them, see our tech coverage.