Apple shares fall 4% premarket as memory costs threaten margins
Key Facts
Apple shares fell about 4% in premarket trading on November 3 after the company warned that rising memory costs would pressure its gross margin. John Ternus said the memory pricing environment was "unprecedented," adding that costs were likely to rise after the quarter ending in December. Concerns centered on the company’s ability to protect margins as its memory purchases gradually shift to higher price levels. The gross margin was 47.9% in the September quarter, while Apple expects it to fall to a range of 45% to 46% in the quarter ending in December. The margin outlook also includes expenses to accelerate Siri, which is powered by artificial intelligence.
The warning came after Apple benefited from using memory inventory purchased at lower prices, but that advantage is expected to fade over time. As the inventory effect diminishes, a larger share of the company’s purchases will be exposed to higher prices, according to Reuters. That means cost pressure is likely to become more apparent in coming periods, even as demand for its devices continues. The company posted a gross margin of 47.9% in the September quarter, down from June-quarter levels even after accounting for the impact of tariff refunds. Apple estimated a lower margin range for the December quarter, signaling that cost pressures would coincide with expenses tied to accelerating Siri.
Quarterly results, meanwhile, showed growth in revenue and earnings. Apple reported revenue of $114.5 billion in its fiscal fourth quarter, which ended on September 26, up 12% year over year. Diluted earnings per share were $2.10, up 14% from the same period, while gross margin was 47.9%. The company said tariff refunds contributed about one percentage point to the margin during the quarter. It also said iPhone revenue reached a September-quarter record and services revenue hit an all-time high.
iPhone sales totaled $57.58 billion in the September quarter, exceeding LSEG estimates of $56.54 billion. Sales included iPhone 18 Pro models and excluded Duo, according to data compiled by LSEG and cited by Reuters. The performance underscores continued strength in demand for the phone in a quarter when the company recorded a sales high. For fiscal 2026, Apple said revenue reached a record $479 billion. It added that it returned $28 billion to shareholders in the September quarter, supported by operating cash flow of the same amount during the quarter.
The shares moved on the warning after an earlier decline in the session. Apple closed at $338.32 in regular trading on November 2, down 1.8%, then fell 2.6% to $329.60 during the earnings call, according to the Associated Press. In premarket trading the following day, the stock was down about 4%, Reuters reported. Reuters estimated that market capitalization could fall by more than $170 billion from a valuation of $4.94 trillion if losses continued; that estimate was conditional on the decline continuing. The stock was trading at about 35 times expected earnings for the next twelve months, compared with 18.23 times for Alphabet and 23.43 times for Microsoft.
Looking ahead, Apple forecast December-quarter revenue growth of 7% to 10% year over year. The company said the range reflected its best estimate amid supply constraints. The forecast comes alongside an expected gross margin of 45% to 46% and expectations that memory costs will continue rising after the December quarter. The board declared a cash dividend of $0.27 a share, payable on November 16, 2026, to shareholders of record as of the close of trading on November 12. These indicators put revenue growth and iPhone demand alongside costs and margins among the key details of the company’s results and outlook.