Apple forecasts margin drop in holiday quarter as rising memory costs bite

Apple forecasted lower gross margins and reduced services revenue growth in its fiscal fourth quarter, citing rising memory-chip costs and falling short of Wall Street expectations. Shares of the iPhone manufacturer fell 4% after executives presented the weaker outlook during a conference call. The quarter was initially boosted by early demand for the iPhone 18 Pro lineup and higher prices, with Apple expecting a gross margin of 45% to 46% and services revenue growth of 8% to 9%, below the expected 10.7%.

The strategy change comes as Apple experiments with firsts under new CEO John Ternus, who took over in September. Apple's new iPhone 18 Pro and Duo models were launched this year, with other iPhone models expected next year. Apple's fourth-quarter sales were $114.48 billion, above estimates of $113.39 billion, and profit was $2.10 per share, above the estimated $1.99 per share.