Apple Flags Holiday Margin Drop as Memory Pricing Turns Unprecedented

Apple used Monday’s earnings call to warn that holiday profits will get thinner even after record September quarter revenue under new CEO John Ternus.

CFO Kevan Parekh said sales in the December quarter should grow between 7 and 10 per cent from a year ago, and that it should still be Apple’s biggest sales quarter ever.

How much profit Apple keeps on each sale is another story. Parekh put that figure, known as gross margin, at between 45 and 46 per cent for the holidays, down from 47.9 per cent in the September quarter.

He blamed higher memory chip costs first, plus some extra costs as Siri AI rolls out more widely.

September’s 47.9 per cent already had a boost of about one percentage point from tariff refunds. Take those refunds out of the June and September results, Parekh said, and profit on each sale was already down about a point from one quarter to the next, “primarily driven by higher memory costs.”

“What we’re seeing with memory pricing right now is unprecedented,” Ternus said on the call.

September already cost Apple more for memory than June did, he said, though leftover cheaper stock and lower prices on some other parts helped a bit. December will bring “even higher memory costs,” only partly offset by the product price hikes Apple already made, more leftover stock, and savings elsewhere.

Looking past the holidays, Ternus said Apple still expects the price it pays for memory to keep rising. The help from older, cheaper chips sitting in inventory should also fade “over time.”

That matches what IIC has been reporting for weeks, from Apple losing leverage with memory suppliers to warnings that the shortage could last toward 2030. Micron has also said the RAM crunch could get worse through 2028.

Apple already raised prices on Mac and iPad at the end of June and on iPhone in September. Ternus cast those moves as only a partial fix. Parekh said it is still too early to know how buyers are reacting, since Mac and iPad were short on supply after the changes and the iPhone hike is new.

To lock in more chips and parts, Apple’s firm orders to manufacturers jumped by $33 billion US between June and September, Ternus said. That total will show up in Apple’s yearly filing.

Services, which includes the App Store and iCloud, should grow between 8 and 9 per cent in December, Parekh said. Some pressure there will come from outside licensing deals and currency swings. Apple also plans to spend between $20.4 billion and $20.8 billion running the business in the quarter.

In short, Apple thinks holiday sales can still set a company record while memory costs keep eating into how much it makes on each iPhone, Mac, and iPad. Canadians who have watched those prices climb now have Apple saying the same squeeze will show up in its holiday profits.

Will another memory-driven price hike hit Canadian shelves before spring, or can Apple get through the holidays on older chip stock without raising list prices again?