Apple shares fall as memory chip costs threaten margins after record quarter
Apple posted record June-quarter revenue, but its shares dropped as the company warned that soaring memory chip costs and fading tariff refunds will pressure margins in the coming quarters.
Apple posted record June-quarter revenue of $109.42bn, driven by a 22% jump in iPhone sales, but its shares dropped as investors fixated on a disappointing current-quarter forecast. The tech giant projected revenue growth of just 9% to 11% for the current period, falling short of the roughly 12% analysts had anticipated.
The cautious guidance highlights a growing vulnerability for even the most resilient hardware makers amid the artificial intelligence boom. Apple is navigating severe shortages of advanced chipmaking capacity and a historic surge in memory-chip prices. Cook described the spike in memory costs as a "100-year flood" and warned they will continue to rise this quarter.
These component costs threaten to squeeze profit margins precisely when a one-time boost from tariff refunds expires. Tariff refunds contributed $0.11 per share to Apple's latest earnings of $2.02 per share, a tailwind that will vanish in the coming months.
To defend its profitability, Apple is leveraging its pricing power. The company raised prices on select Mac and iPad models last month, and analysts widely expect it to apply similar increases to the iPhone later this year. The September iPhone launch will reveal whether consumers will absorb these higher costs.
Investors remain focused on Apple's ability to generate cash relative to its Big Tech peers. The company continues to produce robust free cash flow without the massive capital expenditures on AI infrastructure currently weighing on rivals. "As the market grows more worried about free cash flow trajectories elsewhere in Big Tech, Apple keeps standing out as the safe haven in the storm," said Thomas Monteiro, an analyst at Investing.com.
Monteiro did caution that rising memory expenses could challenge Apple in the coming quarters, testing that safe-haven status. The results arrive as Apple recently regained its position as the world's most valuable listed company from Nvidia.
The report also marked a historic leadership transition. It was Cook's final earnings call before he steps down on September 1 after 15 years as chief executive. Hardware engineering head John Ternus will inherit these supply chain constraints and pricing strategies. "I couldn't be more confident in his leadership, in the executive team and the extraordinary people at Apple," Cook said.
