Apple beats estimates with record India sales; memory chip costs threaten holiday profits

This was the company's first earnings report under new CEO John Ternus, who took over from Tim Cook in September. While sales remained strong across several markets, higher costs of memory chips have become a growing concern for the company. Apple expects these costs to rise further, which could affect its profit margins in the coming months. The company's gross margin fell to 47.9% from 50.1% in the previous quarter.

Its product gross margin also dropped to 37.2% from 40.1%. Even with this decline, Apple's overall gross margin was slightly higher than the 47.5% expected by analysts, according to LSEG data cited by Reuters. "We grew in the vast majority of markets we tracked, setting September quarter records in the Americas, Europe, Greater China, and the rest of Asia-Pacific. We also set September quarter revenue records in both developed and emerging markets, in addition to an all-time record in India," he said during its Q4 FY2026 earnings call.

Apple's iPhone revenue stood at $57.6 billion in the September quarter, marking a 17% increase from the same period last year. Apple CFO Kevan Parekh also spoke about the growth in the company's iPhone user base and the number of customers upgrading to newer models. "The iPhone active installed base grew to an all-time high, and iPhone had a record year for upgraders globally and in several markets, including the US, China Mainland, India and Japan.

According to a recent survey from World Panel, iPhone was a top-selling model in the US, urban China, India, the UK, Germany, Australia, and Japan," Parekh said during Apple's Q4 FY2026 earnings call. Apple reported its highest-ever services revenue in most of the markets it tracks, including India and Latin America. Rising memory costs put pressure on Apple's margins Despite strong sales, Apple's profit margins showed a decline during the September quarter.

Chief Financial Officer Kevan Parekh said refunds related to tariffs helped the company manage some of the additional costs. However, the relief was not enough to fully cover the increase in memory prices. Parekh said that without these tariff refunds, both the company's overall and product gross margins would have fallen by around one percentage point compared with the June quarter. He added that higher memory costs were the main reason behind the decline.

He also warned that the pressure could increase in the next quarter. "We expect gross margin to be between 45 percent and 46 percent," Parekh said. He attributed the expected fall mainly to higher memory costs, along with some expenses linked to the rollout of Siri AI. The new guidance is lower than the 47% to 48% gross margin range Apple had expected for the September quarter. Ternus calls memory price rise 'unprecedented' Ternus described the current rise in memory prices as "unprecedented".

He said Apple expects the cost of memory components to increase further even after the December quarter. He also warned that the benefit Apple currently gets from using memory purchased at lower prices will gradually reduce. The company has already started taking steps to secure enough supplies. Apple's Chief Operating Officer Sabih Khan said its manufacturing purchase obligations increased by $33 billion between June and September.

Apple has also increased the prices of some of its products to deal with rising costs. The company raised the prices of iPhone 17 models by $100 and increased the prices of some MacBook models as it launched the iPhone 18 Pro lineup. 475 trillion estimate explained "These price increases provided some offset," Ternus told Reuters. This means the higher prices have helped Apple recover some of the additional costs, although they have not completely protected its profit margins.

Despite the pressure on margins, Apple expects its business to grow during the holiday quarter. Apple also expects its services business to grow by 8% to 9%. However, Reuters reported that this forecast was well below Wall Street expectations. Apple shares fell after the company released its earnings report, as investors weighed the strong sales outlook against the warning about rising costs.