Apple Posts Record Quarterly Revenue as Memory Costs Squeeze Outlook

Apple's fiscal fourth quarter ended in September with record revenue of $114.5 billion, up 12 percent from a year earlier. iPhone and Mac sales rose, while Services reached an all-time high, according to GSMArena.com.

The results marked John Ternus's first earnings report as CEO. But the immediate test was not sales: Apple issued a gross margin forecast that disappointed Wall Street, CNBC reported.

On November 2, Apple used its earnings call to forecast holiday quarter gross margins of 45 to 46 percent, compared with 47.9 percent in the September quarter. Rising memory chip prices were behind the expected decline, according to The Next Web.

Reports on November 3 showed that the sales outlook remained stronger than the margin outlook. Apple predicted holiday revenue growth of 7 to 10 percent, but higher memory costs and expenses related to the new Siri AI digital assistant weighed on the forecast, Bloomberg Technology reported.

Supply was another constraint. Ternus said demand for the iPhone Duo exceeded Apple's production capacity, according to Isena Code. Separately, CNET News Tech reported that memory price increases and shortages were expected to continue into 2027.

On November 4, Bloomberg Technology reported that Apple was reducing employee AI usage budgets as part of a cost-cutting effort, even as it sought to put AI at the center of its operations.

By November 5, reports detailed the limits. Apple had cut some engineering teams' daily AI spending caps from $300 to $200 in October, with some limits expected to fall to $100. A daily cap as low as $25 for staff outside engineering was also under consideration, according to TechCrunch.

Apple is entering the holiday quarter with expected revenue growth but a smaller share of sales left after direct costs. That distinction explains why record revenue did not settle investor concerns: shares fell after the weak margin outlook, according to Technology.

The reported AI budget cuts concern employee use of tools, rather than an announced withdrawal from AI development. Apple is urging teams to use cheaper models or on-device AI, according to MacRumors.

The next earnings report will test whether Apple delivers its forecast holiday revenue growth while keeping gross margins within the projected 45 to 46 percent range. Memory costs remain a risk beyond the holiday period, given the warning reported by CNET News Tech that shortages and price increases will continue into 2027.

The scope of further employee AI limits also remains unsettled. The lower caps described by TechCrunch include expected reductions and options still under consideration, not a single spending limit already applied across Apple.