Apple Stock Dips Despite Record Profits as Chip Costs Soar

Apple CEO Tim Cook presented robust financial figures in his final earnings report before his departure, showcasing a 16% year-over-year revenue increase to $109 billion and a record gross margin of 50%.

The company saw growth across all product categories and regions, including a strong performance in China and the crucial iPhone division. Net profit rose by 27% to $29.8 billion. Cook, who has led Apple since Steve Jobs' death in 2011, expressed immense optimism for the company's future, stating it is stronger and more innovative than ever.

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I have never been so optimistic.

However, the positive results were overshadowed by a concerning outlook for the next quarter. Apple anticipates only a 9-11% revenue increase and a drop in gross margin to 45.5-46.5%. This forecast is largely attributed to what Cook described as a "once-in-a-century flood" of rising costs for DRAM and SSD flash memory.

These escalating component prices have already forced Apple to increase prices for Macs and iPads. While Cook did not directly confirm potential iPhone price hikes, he indicated that the company is exploring ways to mitigate the impact through other component savings and existing inventory. Analysts, however, predict significant price increases for upcoming iPhone models, potentially impacting sales and leading to supply shortages as memory manufacturers prioritize high-margin AI chips.

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I believe this dynamic will also be true in 2027 too.