Apple shares dropped sharply in after-hours trading on Thursday after the company forecast slower fiscal fourth-quarter revenue growth of 9% to 11%. Outgoing CEO Tim Cook warned of escalating component shortages and exponential memory price increases, overshadowing record June quarter revenue of $109.4 billion.
Record June Quarter Results Overshadowed by Soft Guidance
Apple Inc. shares fell roughly 4% in extended trading on Thursday, tumbling by the most in 16 months. The market reaction followed a weaker-than-anticipated sales forecast for the current fiscal quarter ending in September, during which revenue is expected to climb between 9% and 11%. Wall Street had previously modeled growth exceeding 12% for the period, which is likely to be the debut quarter for the next iPhone models.
The conservative outlook arrived alongside Tim Cook’s final earnings report as chief executive. Cook is scheduled to step down on September 1 after 15 years at the helm, handing over the CEO role to hardware chief John Ternus while transitioning to executive chairman.
Despite the cautious forecast, Apple posted a strong fiscal third-quarter financial performance. Total quarterly revenue rose 16.4% to $109.42 billion, topping the $108.65 billion consensus estimate compiled by LSEG. Diluted earnings per share increased to $2.02, beating analyst expectations of $1.89. Net income climbed to $29.8 billion from $23.4 billion in the same period last year.
Component Shortages and the Memory Pricing Crisis
The primary driver behind the softer guidance is an intensifying industrywide crunch in component availability. Executive leadership pointed to supply constraints affecting advanced chipmaking technology used to manufacture Apple Silicon processors. Furthermore, soaring memory costs have created severe margin pressures across the consumer electronics sector.
“We paid more for memory in the March quarter than the December quarter. We expected to pay significantly more in the June quarter than the March quarter, and that is what happened.”
Apple's Tim Cook warns of rising memory costs
Tim Cook, CEO, Apple
Cook described the current market conditions for memory components as a 100-year flood characterized by exponential price surges. While Apple partially cushioned the blow by utilizing existing inventory purchased at lower rates, executives warned that this buffer will diminish beyond the September quarter as market pricing continues to escalate.
When questioned by analysts regarding potential impacts on product pricing, Cook did not confirm whether hardware price hikes would extend to the iPhone lineup. He noted that the DRAM memory market remains dominated by three major suppliers, observing that additional market participants would help improve availability and pricing flexibility. Apple has already raised prices on several items including the MacBook Neo, MacBook Air, MacBook Pro, iPad Pro, iPad Air, HomePod, HomePod mini, and Apple TV while holding iPhone pricing steady.
Sales performance varied across Apple’s hardware divisions during the June quarter. iPhone revenue jumped nearly 22% to a record $54.25 billion, outperforming the $53.86 billion expected by Wall Street. Mac revenue increased 28.7% to $10.35 billion, comfortably beating analyst projections of $8.74 billion, fueled by strong demand for entry-level and professional portable computers.
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Conversely, iPad revenue declined nearly 6% to $6.19 billion, falling short of the $6.92 billion consensus estimate. Wearables, Home, and Accessories revenue rose approximately 6% to $7.9 billion, while Services revenue climbed 12% to a record $30.7 billion, missing estimates.
Apple reported a gross margin of 50.1% for the quarter. US government tariff refunds added approximately two percentage points to the gross margin and contributed $0.11 to per-share earnings. Excluding those refunds, the underlying gross margin stood at 48.1%, which remained above LSEG estimates of 47.92%.
Leadership Transition and Market Valuation Stakes
The financial results mark the closing chapter of Tim Cook’s tenure as CEO, a period in which Apple recently reclaimed its position as the world’s most valuable company. Consumer adoption of revamped AI-driven features in Siri, developed in partnership with Alphabet’s Google, has driven hardware upgrades as users seek local processing capabilities for artificial intelligence tasks.
