Apple Posts a Record $114.5 Billion Quarter in John Ternus’ First Report, but ‘Unprecedented’ Memory Costs Hit the Stock

Tech
Written by Methodical Millions
Illustration of a glowing emerald memory chip on a dark navy circuit board, with a rising green revenue line and a dipping margin line above it

Apple beat Wall Street on revenue, iPhone and Mac in its first quarter under its new CEO. But a memory-chip crunch driven by the AI buildout is squeezing margins, and the stock is sliding.

By Methodical Jon | November 3, 2026

Apple (NASDAQ: AAPL) reported record September-quarter revenue of $114.5 billion USD on Monday, November 2nd 2026, up 12% from a year earlier, in John Ternus' first earnings report as CEO, according to Apple's press release and CNBC. Investors cared more about something else. Ternus called memory-chip pricing "unprecedented," Apple guided holiday-quarter margins lower, and the shares fell about 4% in premarket trading on Tuesday, Reuters reported.

What happened

For the fiscal fourth quarter ended September 26th, Apple earned $2.10 USD per share, up 14% year over year. That beat the $1.99 USD analysts expected, per LSEG data cited by CNBC. Apple said tariff refunds added $0.05 USD to EPS and about 1 percentage point to gross margin, which came in at 47.9%.

Here's how the main product lines did, according to CNBC and Reuters:

  • iPhone: $57.58 billion USD, up about 17%, vs. $56.54 billion USD expected. That's a September-quarter record, and it included only about a week of iPhone 18 Pro sales and no iPhone Duo.
  • Mac: $10.79 billion USD, up about 24%, well ahead of estimates.
  • Services: about $31.6 billion USD, up roughly 10% to an all-time high, though CNBC notes it was the slowest services growth since 2022.
  • iPad: $6.23 billion USD, down about 10%, below estimates.
  • Wearables, Home and Accessories: $8.3 billion USD, down about 8%, below estimates.

Greater China revenue rose 21% to $17.53 billion USD, per CNBC. For the full fiscal year, Apple said revenue hit a record $479 billion USD, and it returned $28 billion USD to shareholders in the quarter.

The memory problem

The bigger story is the cost side. "What we're seeing with memory pricing right now is unprecedented," Ternus told analysts on the call, The Guardian and TechCrunch reported. He said Apple expects even higher memory costs in the December quarter and sees memory prices "continuing to increase" after that.

The cause: AI data centers are competing with Apple for the same memory supply, as The Guardian notes.

Apple is fighting back in three ways:

  • Stockpiling. Inventory jumped to $14.54 billion USD, up about 154% from a year earlier, according to TechCrunch. Ternus also said manufacturing purchase obligations rose by $33 billion USD from June to September, which MacRumors and TechCrunch both noted.
  • Raising prices. Apple raised Mac and iPad prices in June and iPhone prices in September. Ternus said Apple did it "reluctantly," per CNBC.
  • Using cheaper inventory. Memory Apple bought at lower prices has cushioned the blow, but Ternus warned that benefit will shrink over time.

The guidance that moved the stock

For the December quarter, Apple expects revenue to grow 7% to 10%, ahead of the 6.1% analysts expected, and called it likely the best revenue quarter in its history. The catch is profit. Apple guided gross margin to 45% to 46%, below the roughly 46.3% Wall Street wanted, per CNBC. Apple said most of that decline comes from memory, with costs from ramping up Siri AI adding pressure. It also guided services growth to 8% to 9%, short of the 10.7% analysts expected, Reuters reported.

Supply is still tight too. Ternus told Reuters the foldable iPhone Duo is "constrained as of today," and Apple expects Mac and iPad constraints this quarter, mainly because of memory.

Why it matters

Apple has been the AI trade's safe harbor because it isn't spending hundreds of billions on data centers like its megacap peers. Monday's report shows it still can't escape the AI boom: every hyperscaler buying memory for AI servers raises what Apple pays for the chips in your next iPhone. As AJ Bell's Dan Coatsworth told Reuters, the comments imply Apple products are "going to become even more expensive."

It's also a first test for Ternus, who succeeded Tim Cook on September 1st. Revenue was strong, but investors are judging him on margins.

The money lesson

1. Your costs can be someone else's boom. Apple doesn't run AI data centers, but AI demand still raised its memory bill. Know who else is competing for your inputs.

2. Pricing power is a moat, but use it sparingly. Apple raised prices and still set an iPhone record, but Ternus' "reluctantly" is a reminder that every increase spends some customer goodwill.

3. Buy ahead when you can see the storm coming. A 154% jump in inventory is Apple locking in supply before prices climb. Small businesses do the same when they pre-buy materials or lock in a supplier rate.

4. Guidance beats results. Apple beat on nearly every headline number and the stock still fell, because markets price the next quarter, not the last one.

For more on how rising costs flow through to consumers, listen to Episode 61 - Inflation and the Economy. It's our episode on inflation, and Apple's memory-driven price increases are a real-time example of how higher input costs reach your wallet. The chip side of this story goes back to Episode 65 - Semiconductor Shortage, our look at the last global chip crunch and how fast a component shortage can ripple through an industry.

What to watch next

Apple's annual 10-K filing with the full purchase-obligation details, whether Apple raises prices again, how quickly iPhone Duo supply improves, and what memory makers say about pricing into 2027.

At the time of writing, Apple shares were down about 4% in premarket trading on Tuesday, November 3rd, per Reuters. This article is for informational purposes only and is not financial advice.

Sources:

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This article may be AI-assisted and is subject to errors and omissions.

Methodical Millions https://methodicalmillions.com
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