Apple Faces Margin Pressure Amid Memory Crunch

Despite Apple’s record-breaking fourth quarter and fiscal year, the company’s share price was down more than 3 percent on Tuesday morning, as investors were spooked by growing margin pressure. While revenue is still expected to grow between 7 and 10 percent in the December quarter, the impact of the global memory chip shortage is starting to bite, squeezing Apple’s profit margin – despite the latest price increases.

Apple expects gross margin to be in the range of 45 to 46 percent in the holiday quarter, down from 50.1 and 47.9 percent in the June and September quarters, respectively. Even excluding one-time effects of tariff refunds, which boosted gross margin by two percentage points in the June quarter and one percentage point in the latest quarter, that would be a significant contraction which could cost Apple $2 to $5 billion in gross profit in the current quarter alone.

According to CEO John Ternus, Apple has so far been able to limit the impact of the “unprecedented” memory price surge through a combination of carry-in inventory, price increases and lower costs on non-memory components. Now that prices have been hiked across the board and the benefit of carry-in inventory will decrease over time, the impact of the memory crunch will likely become more and more visible in the company’s bottom line. The roll-out of Siri AI is expected to further add to margin headwinds, as related cloud costs will be recognized as services cost of sales and a portion of compatible hardware sales will be deferred and recognized over the device’s lifespan.

As our chart shows, Apple's margins are currently forecast to fall to levels last seen three years ago. Over the past decade, the company gradually improved its gross margin from less than 40 percent to 48.8 percent in fiscal 2026, mainly thanks to the continued growth of its high-margin services business.