Apple guides December-quarter gross margin to 45% to 46% on memory costs

A record quarter that beat the Street

Apple reported fiscal fourth-quarter revenue of $114.48 billion. That was above the $113.39 billion analysts expected, according to LSEG data cited by Business Standard. Profit was $2.10 per share against an estimate of $1.99, even after excluding 5 cents per share from tariff refunds.

The guidance matters more than the beat. Apple told investors that December-quarter gross margin would land at 45% to 46%. That is below the 47.9% it just reported. The roughly 20% price rises already applied to nearly all its hardware look likely to stick. Apple has not said how much of the memory increase it will absorb. It has also not said how much it will pass to buyers.

iPhone revenue reached $57.58 billion. That beat the $56.54 billion estimate and rose 17% year on year. Early demand for the iPhone 18 Pro line-up, plus price increases, helped offset the memory costs, the company said. The BBC reported that total sales climbed from $102 billion to $114 billion. It also reported that pre-tax profit rose from $32.8 billion to $36.1 billion. Mac sales rose 27% to a record $10.7 billion. iPad sales fell 10%, and wearables fell 7%. China posted the biggest regional increase, according to Nikkei Asia. Apple is also spacing out its iPhone launches this year, Business Standard reported. Pro and Duo models are shipping now, and other models are due next year.

The quarter did not include iPhone Duo sales, which began at the end of October. It was John Ternus's first earnings report as chief executive. He took over from Tim Cook in September.

The memory bill arrives

CEO John Ternus called the memory-pricing environment "unprecedented". He said costs would keep rising beyond the quarter ending in December. Gross margin was 47.9% in the September quarter. That was down from June-quarter levels, even after including tariff refunds.

Ternus tied the pressure to the AI build-out. Memory costs are climbing as the industry invests billions of dollars in data centres, he said. Apple has benefited from memory bought at lower prices. That advantage is expected to diminish, leaving more of its purchases exposed to higher prices. Tim Cook had earlier described a sudden jump in data-centre costs as a "thousand year flood". Sunil Krishnan of Aviva Investors told the BBC's Today programme that Apple posted "a reasonably solid set of results". He flagged concerns over margin guidance and memory chip costs.

Chips, not just memory

Memory is only part of the supply problem. Chief operating officer Sabih Khan said most Apple devices were still short of components. Part of the problem was difficulty getting enough microprocessors built on advanced nodes. Most of those chips come from TSMC, which is in Taiwan. Khan said the constraint should continue into next year, hitting iPads and Macs hardest. Apple has repeatedly blamed "unexpected demand" for making things worse.

The iPhone Duo sold out just over a week after launch. It carried a price of nearly $2,000. Apple said it did not know when it would get more stock ahead of Christmas. Khan said the company was working to get the Duo into customers' hands as quickly as possible.

What the December quarter has to show

Apple forecast services revenue growth of 8% to 9%, below the 10.7% analysts expected. The 45% to 46% margin range also reflects expenses tied to the ramp-up of Apple's AI-powered Siri. Shares fell about 4% in premarket trading on Tuesday. The drop followed the margin warning. Handelsblatt reported that the outlook offset the profit beat and pushed the share price into negative territory. The Guardian reported Apple's warning of an "unprecedented" rise in memory chip prices.

For buyers, the question is whether those price rises hold through the holiday quarter. For investors, the December quarter is the test. A gross margin inside the 45% to 46% range would confirm the memory story. A figure below it would not. Apple's next set of numbers, for the quarter ending in December, will show whether the guide holds.