Apple Forecasts Thinner Margin as Memory Costs Climb

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Apple forecasts a gross margin of 45% to 46% for the December quarter, largely because of higher memory costs. Gross margin is the share of revenue left after the cost of making products, and the September quarter came in at 47.9%.

Purchase commitments for memory

Apple's manufacturing purchase obligations grew by $33 billion between June and the September quarter. The annual filing is due to show it. CEO John Ternus said the company is increasing its purchases of memory as it works to improve supply.

COO Sabih Khan, who oversees supply chain and manufacturing, joined the call to take memory questions. He repeated the higher purchase commitments. He did not rule out further price increases on Apple devices.

Higher memory costs ahead

Ternus told analysts on the call: "What we're seeing with memory pricing right now is unprecedented." Memory cost more in the September quarter than in the June quarter. Carrying older inventory and lower costs on certain non-memory components softened the blow.

That cushion will shrink over time, Ternus said. The company expects "even higher memory costs" in the December quarter, partly offset by earlier price rises, with Mac and iPad getting them at the end of June and iPhones in September. Beyond December, Apple expects memory costs to keep rising.

Inventory climbs

Inventory reached $14.54 billion at the end of the quarter, up 31.1% from $11.09 billion in the previous quarter. Against the fourth quarter of 2025, when it stood at $5.72 billion, the rise is 154.3%. The build-up is particularly in computer memory.

An iPad that fell behind

The iPad was among the few product lines that did not grow. Its revenue was $6.2 billion, below the $6.7 billion analysts expected and 10% lower than a year earlier. Apple blamed supply constraints. iPhone and Mac sales beat estimates.

Our view

Apple has now put memory costs into a numeric margin forecast and into its purchasing commitments. What remains unclear is how far it will lean on device price increases instead of its own margin. Khan's refusal to rule out further increases leaves that open, and the next quarter's pricing decisions will show which way Apple goes.

Source: TechCrunch