Apple warns memory chip costs are rising as margins face pressure

Apple has warned of what its new chief executive, John Ternus, called an unprecedented rise in memory chip prices, as the company competes with datacentres to secure supplies. On a Monday conference call, Ternus predicted that memory costs in the fourth quarter of this year would be even higher than in the previous three months. Apple's shares fell in after-hours trading after it told investors the higher prices will eat into its profit margins. The shares were down 2.75% in after-hours trading on Wall Street.

Apple raised prices on iPad and MacBook in June, then on iPhone in September. Ternus said those decisions had provided some offset for the company against the higher memory costs. The warning comes amid what the report describes as months of "RAMageddon", with demand for memory chips from AI datacentres pushing prices up.

Apple reported stronger-than-expected revenue for the fiscal third quarter, giving Ternus an upbeat start to a tenure that began in September. Earnings were $30.71bn, or $2.10 a share, in the July-September period, up 12% from $27.47bn, or $1.85 a share, a year earlier. Apple said five cents a share came from tariff refunds. Revenue rose 12% to $114.5bn from $102.5bn. Analysts polled by FactSet had expected $1.99 a share on revenue of $113.4bn.

Ben Barringer, head of technology research at Quilter Cheviot, said Apple's results were OK, if on the disappointing side. He noted revenue was up 12%, driven mainly by iPhone sales and strong Mac Mini sales, which users can use to apply agentic AI. China growth was robust, while iPad and wearables disappointed. Services grew but below the group average at 10%. On the iPhone Duo, he said there appears to be a lot of interest, but it is early days with the product not yet on full release.

Jacob Bourne, an Emarketer analyst, said record iPhone revenue and strong growth in China demonstrated the resilience of Apple's business. He said Apple's tepid approach to AI infrastructure spending had helped preserve its cashflow, while partnerships with companies such as Alphabet could help strengthen its AI capabilities without taking on the same financial risks as its peers. The results came as Alphabet, Amazon and Intel posted disappointing quarterly results.