Apple Posts Record Quarterly Results but Forecasts Slower Growth Amid Margin Pressures
Despite delivering record-breaking quarterly results, Apple is anticipating a slowdown in its growth trajectory toward the end of the year. The tech giant projects revenue growth of 7% to 10% during the holiday season, a notable deceleration from the 16% increase seen in the spring and the 12% rise during the summer. These cautious outlooks triggered a drop of over 3% in Apple’s stock price following the close of trading on Wall Street.
Strong Financial Performance
Nevertheless, Apple’s financial performance remains robust. For the fourth quarter of its fiscal year (July to September), the company reported revenue of $114.5 billion, up 12% year-over-year. This growth was primarily driven by the iPhone, which saw revenues surge 17% to $57.6 billion. Net income reached $30.7 billion, also up 12%.
For the full fiscal year, Apple totaled $478.8 billion in revenue, a 15% increase, and generated $132.2 billion in net profit, up 18%. The iPhone now accounts for 53% of the company’s total business.
Investor Concerns Over Margins and AI Costs
However, these strong results have not allayed investor concerns, particularly regarding the evolution of profit margins. Gross margins are expected to settle between 45% and 46%, down from 48.2% a year earlier. The primary driver of this compression is a shortage of memory chips, driven by exploding demand from the proliferation of data centers dedicated to artificial intelligence.
In response to rising costs, Apple has already implemented price increases, raising prices by up to $300 for Macs, iPads, and accessories, and by $100 for the iPhone 18 Pro. John Ternus, who presented the earnings for the first time since succeeding Tim Cook, warned that the cost burden related to memory supply is expected to increase further after December.
Compounding this pressure are the significant expenses associated with AI development. The deployment of Siri AI, which relies on models derived from Gemini, requires substantial computing power when queries are processed on Apple’s servers. To manage these costs, the company is considering limiting the use of certain features and charging for additional capacity.
Services Growth Slows
Meanwhile, Apple’s services segment is showing signs of fatigue. Growth in this area slowed to 10% in the last quarter, down from 12% in the spring, and is projected to reach only 8% to 9% during the holiday season. CFO Kevan Parekh cited several factors for this slowdown, including foreign exchange fluctuations, a decline in mobile gaming, changes to the App Store, and the impact of a recent U.S. court decision.
Commercial Highlights and Strategic Differences
On the commercial front, the iPhone Duo, Apple’s first foldable smartphone, launched on October 23 at a starting price of $1,999, has generated significant interest. However, production has struggled to keep up with demand, and some units have been reported to have screen issues.
Finally, Apple stands out for the relative modesty of its capital expenditures. The company invests approximately $2.2 billion per quarter, compared to $51.4 billion for Alphabet and $45.2 billion for Microsoft. This stark contrast highlights the differing strategic approaches among tech giants in the race to build AI infrastructure.
