Apple: Memory Is the Biggest Cost Pressure and May Continue to Weigh on Gross Margin Growth Next Quarter

Apple announced financial results for its fiscal 2026 fourth quarter ended September 26, 2026. The company's quarterly revenue reached $114.5 billion, up 12% year over year; gross margin was 47.9%, including a benefit of about 1 percentage point from tariff refunds; diluted earnings per share were $2.10, up 14% year over year, including a $0.05 benefit from tariff refunds.

According to Apple CFO Kevan Parekh, excluding tariff rebates from the June and September fiscal quarters, both company and product gross margins declined by about 1 percentage point quarter over quarter, driven primarily by rising memory cost.

Apple CEO John Ternus explicitly stated on the earnings call that current memory pricing is unprecedented. Memory cost rose compared with the previous quarter in the current fiscal quarter, but this was partly offset by lower inventory carrying costs and lower costs for non-memory components.

To cope with memory price increases and shortages, Apple has raised prices for some iPhone models, MacBooks, and iPads to hedge against costs. At the same time, Apple has worked closely with memory suppliers and increased purchase commitments by $33 billion this quarter, but did not directly confirm whether it had signed long-term agreements.

Looking ahead to the next fiscal quarter, the company expects memory costs to continue rising, but it will still benefit from carryover inventory and lower costs for certain non-memory components, although the benefit from memory carryover inventory will diminish over time. Based on this, Apple issued gross margin guidance of 45% to 46% for the next fiscal quarter, below analyst expectation, with the decline mainly due to rising memory cost and investments related to Siri AI. In addition, demand for Mac and iPad has consistently exceeded the company's expectation, but there may be some supply constraints in the next fiscal quarter due to tight memory supply.