Apple warns of lower holiday-quarter margins as memory costs rise
A revenue and earnings beat gives way to a tougher outlook for gross margin and services growth.
Apple's stronger-than-expected September-quarter sales were overshadowed by its outlook for the holiday season. The company forecast gross margin of 45% to 46% for the December quarter, below the 47.9% it reported for the quarter just ended.
Management said higher memory costs would put pressure on margins. It also forecast services revenue growth of 8% to 9%, below the 10.7% analysts expected, according to LSEG estimates cited by Reuters.
The outlook came alongside quarterly revenue of $114.5 billion, up 12% from a year earlier, and diluted earnings of $2.10 a share. Revenue exceeded the $113.39 billion analysts expected, while earnings topped the $1.99 consensus. The reported earnings included a 5-cent benefit from tariff refunds.
Sales growth and profit pressure
Apple expects December-quarter revenue to rise 7% to 10% from a year earlier. That means its forecast is not for falling sales: the pressure is on how much of that revenue becomes gross profit as component costs increase.
The shares fell in Monday's extended trading after the outlook. That reaction followed the conference call and is separate from Tuesday's regular-session price. For investors, the next test is whether strong hardware demand can offset the cost squeeze without a larger slowdown in services growth.
