American technology company Apple reported record quarterly sales and beat analyst expectations, but warned of declining profitability in the coming months. The main reasons were soaring memory chip prices and additional spending on artificial intelligence technology development. After the forecast was released, the company's shares fell.
This was reported by Financial Times on November 3, citing Apple's quarterly report and company executives' statements during an investor conference.
For the fourth quarter of fiscal 2026, which ended September 26, Apple's revenue grew 12% compared to the same period last year to $114.5 billion. Analysts had expected about $113.4 billion.
The company's net profit increased 12% to $30.7 billion, and earnings per share reached $2.10, exceeding the market forecast of $1.99.
iPhone sales remained the main source of growth. Revenue for this division increased 17% to $57.6 billion. Revenue from Apple services reached a record $31.6 billion, and sales in China grew about 21%.
For the entire fiscal 2026, Apple achieved record revenue of $479 billion. This was the company's first quarterly report under new CEO John Ternus, who took office in September.
Despite the strong results, investors were concerned about the gross margin forecast for October-December. Apple expects this figure to be 45-46% compared to 47.9% in the previous quarter. This forecast came in below analysts' expectations.
Gross margin shows how much of revenue remains after accounting for the cost of goods and services sold. Its decline means that even if sales grow, Apple will earn less gross profit per dollar of revenue.
Company management explained the worse forecast primarily by an unprecedented rise in prices for memory components used in smartphones, computers, and other devices.
John Ternus called the current situation in the memory market unprecedented. According to him, Apple's costs for purchasing these components will continue to rise not only until the end of 2026 but also beyond.
One of the reasons for the price increase is a sharp surge in demand for semiconductor memory from data center operators building infrastructure for artificial intelligence. Competition for production capacity is driving up prices and creating additional costs for consumer electronics manufacturers.
Development of Siri AI is adding pressure on Apple's financials. New artificial intelligence features require higher cloud computing costs. In addition, the company will recognize a portion of revenue from devices with built-in AI services over their lifetime, which will also affect reported figures.
Apple had already tried to offset component price increases by raising prices on some Mac and iPad models in June and on iPhones in September. Memory stockpiled at lower prices and cheaper other components partially helped contain cost growth.
However, the company warns that the positive effect of using old inventories will gradually diminish. Management has not yet announced new retail price increases.
Meanwhile, Apple expects further sales growth in the holiday quarter of 7-10% year over year. If the forecast holds, October-December will be a record revenue quarter in the company's history.
However, growth in the services business may slow to 8-9%, which also came in below market expectations. Limited production capacity and high demand for new devices remain additional factors of uncertainty.
After the investor conference on November 2, Apple shares lost about 3% in after-hours trading. Thus, even record sales results could not fully offset market concerns about the future profitability of the business.
Based on: Apple, Financial Times
