Apple warns memory chip costs will squeeze profits

Apple CEO John Ternus told investors on Monday that a sharp rise in memory chip prices is set to reduce the company's profit margins. He described the cost increase as "unprecedented" and warned that expenses for the fourth quarter of 2026 would be higher than those in the preceding three months. The comment cast a shadow over a quarterly report that topped analyst forecasts, sending Apple shares down 2.75% in after-hours trading on Wall Street.

The pressure on costs stems from growing demand for memory chips by artificial intelligence datacentres. This competition for supplies has created an industry squeeze that observers have dubbed "RAMageddon." To counter the rising expenses, Apple has already raised prices on several of its products. Ternus noted that price increases for iPads and MacBooks in June, followed by higher iPhone prices in September, have "provided some offset" against the mounting costs.

For the period ending in September, Apple reported earnings of $30.71 billion, a 12% increase from $27.47 billion in the same period last year. Earnings per share rose to $2.10 from $1.85, a figure that included five cents from tariff refunds. Total revenue grew 12% to $114.5 billion, up from $102.5 billion in the prior year. Analysts surveyed by FactSet had projected earnings of $1.99 per share and revenue of $113.4 billion.

Ben Barringer, head of technology research at Quilter Cheviot, described the results as "OK, if on the disappointing side." He attributed the revenue growth primarily to iPhone sales and strong demand for the Mac Mini, which buyers are using to run agentic AI applications. While growth in China remained strong, Barringer said that sales of iPads and wearables fell short of expectations. Services revenue grew by 10%, which lagged behind the company's overall growth rate.

Barringer also pointed to early interest in the iPhone Duo, a product that has not yet reached full release. He said investors are hoping the device will support the next phase of Apple's product innovation, though he emphasized that it is still early in the process. The results stood out against disappointing quarterly figures from other technology firms, including Alphabet, Amazon, and Intel.

Jacob Bourne, an analyst at Emarketer, said the record iPhone revenue and strong performance in China demonstrated the resilience of Apple's business. He noted that Apple's restrained approach to spending on AI infrastructure has helped protect its cash flow while investors question the large investments made by its rivals. Bourne added that partnerships with companies like Alphabet could strengthen Apple's AI capabilities without exposing the company to the same financial risks as its peers.