Apple delivered a strong set of numbers. Revenue of USD 114.5 billion was up 12 per cent year on year. Net profit of USD 30.7 billion was also up 12 per cent. iPhone revenue reached USD 57.58 billion, up 17.5 per cent. Revenue and profit were both records, and it was the first earnings report under chief executive John Ternus.
The market was unimpressed. The shares fell nearly 3 per cent in after-hours trading.
The reason was not the top line. It was the cost line ahead. Apple guided gross margin for the current quarter to 45 to 46 per cent, below the 47.9 per cent it just reported. Management described the current level of memory prices as unprecedented.
A company whose reputation rests on supply chain management is now openly worried about memory. That is not only a problem for one company.
The iPhone still works
Double-digit growth at Apple’s scale says something about the durability of the base business. iPhone did the heavy lifting at USD 57.58 billion, up 17.5 per cent, in a global smartphone market that is not growing easily.
Greater China revenue was USD 17.539 billion, up 21 per cent, an improvement that still came in below some market expectations. Japan fell 1.4 per cent. Regional performance is uneven, and the China rebound should not be read as a full recovery.
The iPhone Duo ramp gives Apple a way to find growth in a mature smartphone market. The more interesting question is no longer how many phones Apple can sell but how much profit survives each sale.
USD 33 billion of extra commitment
The detail that matters most in this report is memory. On the earnings call Ternus said memory prices are at unprecedented levels and that procurement costs will face further upward pressure for some time.
Apple also disclosed that its manufacturing purchase obligations rose by USD 33 billion between June and September 2026. That is not USD 33 billion of additional memory spending. It is an increase in commitments to buy, and it still carries a signal: Apple is locking down supply more aggressively than usual.
The reason runs back to AI. For several years the AI story has been GPUs, Nvidia and compute campuses. But AI data centres need enormous volumes of high-bandwidth memory and server DRAM alongside the accelerators. As training and inference demand grows, memory has become core AI infrastructure rather than a component.
Memory makers do not have unlimited capacity or unlimited capital spending. As more of both shifts towards high-value AI memory products, the supply available to conventional servers, PCs and consumer electronics gets squeezed.
That produces the current arrangement: AI companies compete for compute, device makers compete for memory, and consumers eventually pay for both.
Apple has advantages. Long-standing supplier relationships, advance purchasing, inventory management and sheer volume all buffer the cost. None of them creates capacity.
The part worth watching is that this cycle is changing the cost structure of consumer electronics. Performance and product innovation used to dominate the discussion. Now the supply and price of basic components can determine whether a company makes a margin at all.
Who absorbs it
The market’s reaction makes sense once the horizon is longer than one quarter. This quarter’s 47.9 per cent gross margin was helped by tariff refunds and other one-off items. Strip those out and the underlying cost pressure is worse than the headline.
Apple has three options. Absorb the cost and accept a lower margin. Raise prices and pass some of it to buyers. Or keep optimising the supply chain through scale purchasing and product mix. Each has a price. Raising prices may cost volume. Not raising them costs margin. A premium brand has more tolerance to work with than most, but not unlimited tolerance.
The problem is not Apple’s alone. PC makers, Android handset vendors and tablet manufacturers face the same pressure, and those with weaker brand premium and less bargaining power face more of it. Apple can absorb part of the increase through brand and scale. Others may not be able to.
Read that way, the report is a warning to the whole consumer electronics industry. The industrial change AI is driving is no longer a story about compute companies. It is transmitting down the supply chain into the bill of materials for ordinary devices.
None of this suggests Apple is in trouble. iPhone growth, profit scale and product capability all show a resilient business. What it shows is a new reality: the rapid expansion of AI is reallocating resources across the global semiconductor supply chain, and memory, one of the least glamorous components in the stack, has become a variable that moves a technology giant’s margin.
AI companies compete for compute, memory makers race to add capacity, device makers pay more for memory, and a share of the cost lands with the buyer. If Apple is now worrying about memory, the next phone is unlikely to get cheaper.
Editor’s note: This is an adapted translation of the original 36Kr report. It has been trimmed and restructured for readability for an international business audience. The full original (in Chinese) is at https://36kr.com/p/4060397511464833.