Apple Warns of Slower Holiday Growth Amid Rising Memory Costs
Apple Expects Slower Holiday Growth Amid Rising Memory Prices
Apple projects holiday-season growth to slow between 7 and 10 percent, with profit margins compressed by surging memory chip prices, the company announced on November 2, 2026. Despite posting a record July-September quarter driven by strong iPhone sales, the company’s stock fell more than 3 percent in electronic trading following Wall Street’s close.
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The Tech TL;DR:
- Apple forecasts holiday growth to slow to 7–10% due to soaring memory chip costs and supply constraints.
- Gross margins are expected to drop to 45–46% compared to 48.2% a year earlier.
- The company plans to monetize advanced server-based Siri AI features with paid tiered access.
Record July-September Quarter Driven by iPhone Demand
For the fiscal fourth quarter ending in September, total revenue rose 12 percent year-over-year to a record 114,500,000,000 dollars. Net income reached 30,700,000,000 dollars, marking a 12 percent increase. iPhone sales spearheaded the performance, jumping 17 percent to 57,600,000,000 dollars. Chief Financial Officer Kevan Parekh noted that the upcoming holiday period would still mark the company’s largest quarter in history, though the target reflects an environment of constrained supply. Across the entire fiscal year ending in September, Apple reported a record revenue of 478,800,000,000 dollars, up 15 percent, with a net income of 132,200,000,000 dollars.
Server Compute Expenses Narrow Gross Profit Margins
The gross margin for the upcoming quarter is expected to slip to between 45 and 46 percent, down from 48.2 percent a year prior. This contraction stems primarily from component costs and, to a lesser extent, the deployment of the new Siri AI assistant. Built on models derived from Google’s Gemini, advanced Siri requests processed on external servers create substantial compute expenses. To offset these expenditures, Apple intends to cap free usage of server-backed features and introduce a paid subscription tier for expanded access, as confirmed by John Ternus.
Global memory shortages, exacerbated by aggressive data center construction across the artificial intelligence sector, continue to strain supply chains. In response to mounting expenses, Apple increased prices on Mac computers, iPads, and accessories by 30 to 300 dollars in late June, followed by a 100-dollar price hike on the iPhone 18 Pro launched on September 18. Ternus warned that purchasing pressures for memory will persist beyond December as pre-secured inventory buffers expire. Meanwhile, capital expenditures remain modest compared to industry peers, with Apple spending approximately 2,200,000,000 dollars during the quarter, contrasted with Alphabet’s 51,400,000,000 dollars and Microsoft’s 45,200,000,000 dollars.
Hardware Launches and Segment Performance
The latest financial reports incorporate only nine days of sales for the iPhone 18 Pro and none for the iPhone Duo, Apple’s first foldable smartphone released on October 23 starting at 1,999 dollars. John Ternus described the foldable device as the most transformative iPhone since the original release. However, Chief Operating Officer Sabih Khan noted that production remains constrained, with no immediate timeline for supply to meet demand. Apple also addressed a known screen defect on select devices, offering component replacements.
The services division, which includes the App Store, iCloud, and Apple Music, grew by 10 percent in the final quarter, down from 12 percent in the spring, with holiday forecasts projecting an 8 to 9 percent rise. Parekh attributed the slowdown to foreign exchange fluctuations, declining mobile gaming activity, App Store regulatory adjustments in specific regions, and a recent United States court ruling. Market research firm Counterpoint observed that global retail smartphone prices surged 20 percent in 2026, causing a corresponding drop in shipment volumes, though Apple captured a record 22 percent market share during the autumn period.