The Apple sales forecast for the September quarter came in below Wall Street’s expectations, and Apple shares fell 5.5% in after-hours trading on July 30, even though the company had just reported a strong third quarter. Executives blamed supply, not demand: Apple cannot get enough of the advanced chips and memory it needs, Reuters reported.
“We’re seeing some very significant (supply) constraints currently with limited flexibility in the supply chain to remedy it,” chief executive Tim Cook said on the earnings call.
The forecast
Chief financial officer Kevan Parekh said Apple expects revenue to grow 9% to 11% in the September quarter compared with a year earlier. Analysts had expected about 12%, according to LSEG data. He forecast iPhone revenue growth at a mid-teens rate, against Wall Street’s 17.6%, and gross margins of 47% to 48%.
Cook told Reuters that the main constraint was an industry-wide shortage of advanced chipmaking capacity used to produce Apple silicon, the processors Apple designs for its own devices. “We’re having an incredibly strong product cycle beyond our expectations, and the (advanced chipmaking) supply chain just fundamentally has less flexibility in it to meet the high levels of demand,” he said. Apple is also “evaluating all options” for alternative suppliers of memory chips.
A strong third quarter
The results for the quarter ended June 27 were good. Revenue rose 16.4% to $109.42 billion, ahead of the 15.5% growth analysts expected. Earnings were $2.02 per share, including 11 cents from US government tariff refunds; without the refunds, profit still beat the $1.89 estimate.
- iPhone: sales rose 21.7% to $54.25 billion, Apple’s best third quarter ever for the iPhone.
- Mac: up 28.7% to $10.35 billion, helped by the entry-level MacBook Neo and the high-end MacBook Pro, despite price increases.
- iPad: down 5.9% to $6.19 billion, which Cook put down to a “tough compare” with last year’s launch of a budget iPad.
- Greater China: up 22.4% to $18.82 billion, but below analysts’ targets.
- Services: up 12.1% to $30.74 billion, short of the $31.22 billion expected.
Gross margin was 50.1%. Tariff refunds added two percentage points; without them, margin was 48.1%, near the middle of Apple’s guidance despite higher memory costs.
Buying ahead of price rises
Part of the strength came from customers buying early. A global memory chip shortage has already pushed Apple to raise prices of Macs and iPads, and analysts increasingly expect an iPhone price increase around the September launch. That gave buyers a reason to act now. The shortage is driven by AI data centers absorbing memory supply, a squeeze that Samsung expects to last into 2028.
“The big question is, what’s going to happen on Macs in this quarter, when the new prices are fully there?” said Bob O’Donnell, chief analyst at TECHnalysis Research. Investors worry that some of the quarter’s sales were pulled forward and will not repeat.
Services slowing
Services, Apple’s second-largest business and one of its most profitable, grew more slowly than expected. Parekh said App Store revenue from mobile games was under pressure, and pointed to changes in the App Store business model in some countries. The European Union requires Apple to allow alternative app stores, and a US court ruling in the case brought by Epic Games lets developers send users to pay outside Apple’s system.
“Investors are concerned that if services are decelerating while iPhone is growing more than 20%, it may slow down even more as iPhone sales come back down to earth,” said D.A. Davidson analyst Gil Luria.
Apple is looking for new sources of revenue. Cook said heavy users of the revamped Siri, developed with help from Google, may be able to pay more through iCloud Plus upgrades.
Why it matters for businesses
Apple is one of the largest buyers of chips in the world. If it cannot get enough advanced processors and memory, smaller companies will find it even harder. Businesses planning to buy laptops and phones this year should expect higher prices and possibly longer delivery times, particularly for Macs.
Our take
This is a rare situation for Apple: demand is not the problem, supply is. That is a better problem to have than weak sales, which is why the share drop was modest compared with the strength of the quarter. But it also shows how much the AI boom is changing the economics of consumer electronics. As long as data centers outbid everyone else for chips and memory, even Apple has to ration products and raise prices. The services slowdown is the more lasting concern, because regulators, not suppliers, are behind it.