On Thursday, Apple reported earnings showing a record June quarter across products and geographies. But Apple executives are wary going forward and are warning that supply constraints might make landfall on its financials.
Apple executives are expecting revenue growth in the current quarter ending in September to come in less than analyst expectations, driven largely by supply constraints for Macs, iPads and iPhones. The supply constraint is mostly impacting Apple’s access to advanced chips, something that the Cupertino giant has been warning about for months. But soaring memory prices are also painting a concerning picture for both Apple and its consumers.
CEO Tim Cook said in the company’s earnings call that Apple is paying increasingly more for memory with each passing quarter. Some of that price increase they were able to partially offset by carrying over inventory. Cook thinks Apple will be able to use that strategy in the September quarter, but benefits will decrease beyond that.
“If you look beyond September, we see the market pricing for memory continuing to increase, which could drive an increasing impact on our business,” Cook said.
The AI boom and the unprecedented data center buildout have led to soaring demand for high-bandwidth memory chips. With finite chipmaking capacity, the top chipmakers have had to shift focus to addressing the AI industry’s supply needs at the expense of consumer electronics manufacturers that use these memory chips to produce computers and smartphones. As a result, consumer-level memory supply has dragged, causing delays and price hikes that are gradually getting passed on to consumers as the crisis continues with no end in sight. Experts foresee it getting worse into next year and possibly continuing into the next decade.
The crisis is bad enough that global smartphone shipments fell to their lowest level since 2013 this past quarter, according to estimates from Counterpoint Research, becoming “the single biggest drag on the smartphone industry.”
Apple has largely been able to avoid price hikes for its iPhones, though market watchers expect that to change soon with the upcoming iPhone 18. But other product categories haven’t been as lucky, with Apple raising iPad and MacBook prices last month.
Cook himself also seems pessimistic about the trajectory of the memory chip shortage, telling the Wall Street Journal that price hikes for Apple products were becoming “unavoidable.” He reiterated that sentiment on Thursday’s call.
“We reluctantly raised prices,” Cook said. “I would say we did it because we’re in what I would characterize as a 100-year flood on memory pricing, with exponential increases in memory prices.”
Thursday’s earnings call was Cook’s last one as CEO, as he will be passing the torch to incoming CEO John Ternus in September. Ternus was on the call and gave vague answers when questioned by investors, only saying that “there is so much opportunity” for Apple in the AI space.
Apple is getting ready to unveil a long-awaited AI-infused Siri later this year. Ternus didn’t tease any details about it, but according to Cook’s comments on the call, the Siri AI could come with a paid tier of sorts.
On Thursday, Cook said that early user reviews of the recently released beta version of Siri AI had been “phenomenal” and developer feedback is “overwhelmingly positive.”
“We do believe there will be people that want to use it a lot, and so we will have some kind of upgrade possibilities on iCloud Plus, where people can buy up the stack on iCloud Plus, and we’ll see how the pickup for that is,” Cook said.
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