Apple reported that its profits were squeezed by component price increases driven by the artificial intelligence boom, even as the company reached $114.48 billion in revenue for the three months through September. Profit rose nearly 12 percent to $30.71 billion, beating Wall Street expectations and setting a fiscal year record.
Memory Chip Shortages Drive up Component Prices
The company warned that memory chip prices are surging because massive amounts of storage and memory components are being diverted to supply AI chips for giant data centers. Other companies have also warned that the memory chip shortage is hurting their business. Last week, the chipmaker Intel said its core business selling chips for personal computers was suffering because component prices were skyrocketing, and Intel’s stock price dropped more than 29 percent a day later.
Apple also noted that China was impacted by the same supply constraint dynamics.
High-End Product Launches Lift iPhone Sales
The consumer electronics giant has also created a new high end for some of its products, including the iPhone Duo, a foldable smartphone that starts at $1,999, and the touch-screen MacBook Pro, which starts at $2,899.
When Apple introduced the iPhone 18 Pro in July, it also refreshed the smartphone with a more advanced chip and camera system, a longer battery life, and three new colors. These changes have helped to lift iPhone sales, which grew 17 percent from a year earlier to $57.58 billion. Apple’s business in China, the largest smartphone market in the world, was a disappointment, with sales there rising 21 percent to $17.54 billion, short of analyst expectations. According to Counterpoint Research, which tracks the smartphone market, the company’s iPhones still made up 19 percent of smartphone shipments to distributors in China in the quarter—more than all of its local rivals, except Huawei.
Mac Sales Rise While iPad Sales Fall
The company saw mixed results in other parts of its core business during the quarter. Sales of Macs rose more than 23 percent to $10.79 billion, while sales of iPads fell more than 10 percent to $6.23 billion.
Meanwhile, Apple’s services revenue grew nearly 10 percent to $31.57 billion, slightly less than analysts expected. The company has been quietly raising the prices for some of its services, including its streaming service, Apple TV, which in August cost $14.99 per month, up from $12.99.
Forecast Fails to Inspire Investors
Apple’s forecast for the current quarter did not inspire investors, as the company said overall revenue in the current period would grow between 7 percent and 10 percent, more than analysts expected. Parekh noted that this factor could be driving some of the differences between what analysts expected and what Apple reported.
Earlier coverage: Apple Sells Out iPhone Duo Amid Persistent Supply Constraints