Apple shares came under pressure after the technology giant warned that higher memory costs were likely to affect its profitability, raising concerns among investors about supply-chain pressures and increasing spending on artificial intelligence.
The warning came as John Ternus delivered his first earnings report as Apple’s chief executive on Monday, describing the current memory-pricing environment as “unprecedented”.
Ternus indicated that memory costs were expected to continue rising beyond the quarter ending in December.
Memory Costs Pressure Margins
Apple has benefited from purchasing memory components at lower prices in previous periods. However, that advantage is expected to fade as the company makes more purchases at higher market prices.
The company’s gross margin, which measures the share of revenue remaining after production costs, stood at 47.9% for the September quarter. This was lower than the June-quarter level, even after accounting for the impact of tariff refunds.
Apple expects its gross margin to fall to between 45% and 46% in the December quarter.
The forecast also includes expenses associated with upgrading and expanding its artificial intelligence-powered Siri assistant.
Concerns Over Higher Prices
The rising cost of memory components has raised questions about whether Apple may eventually pass some of the additional expenses on to consumers.
Dan Coatsworth, head of markets at AJ Bell, said the company’s comments suggested that Apple products could become more expensive at a time when consumers were already facing pressure from the rising cost of living.
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iPhone Sales Beat Expectations
Despite the concerns over costs, Apple reported record iPhone revenue for the September quarter, demonstrating continued demand for its flagship products despite price increases and a staggered launch schedule.
Fourth-quarter iPhone sales reached $57.58 billion, exceeding analysts’ estimates of $56.54 billion, according to data compiled by LSEG.
The results included sales of the iPhone 18 Pro models but did not include the Duo model.
William Kerwin, a senior equity analyst at Morningstar, described the flagship iPhone as central to Apple’s wider ecosystem, helping the company maintain pricing power, customer loyalty and competitive advantages.
Market Value at Risk
Apple’s market valuation stood at approximately $4.94 trillion. If the premarket losses continued, the company could lose more than $170 billion in market value.
The stock was trading at nearly 35 times its expected earnings over the next 12 months.
By comparison, Alphabet’s price-to-earnings ratio stood at 18.23, while Microsoft’s was 23.43.
The figures highlight the high expectations built into Apple’s valuation, leaving its shares vulnerable to concerns over rising production costs, investment in artificial intelligence and future profitability.
