Apple Is Paying the Price for AI’s Memory Boom

AI has swept through the smartphone industry, and its impact is now being felt in the cost of making devices. DRAM contract prices were expected to rise by 90–95% in the first quarter of 2026, driven largely by demand from AI and data centres, and they have kept climbing since.

John Ternus, on his first earnings call as Apple’s CEO, acknowledged the pressure: “What we’re seeing with memory pricing right now is unprecedented.” Apple’s latest results are another example of AI’s impact on the wider technology industry.

The company closed its best fiscal year ever, with $114.5 billion in revenue, and posted a record September quarter. But rising component costs are putting pressure on Apple’s margins. The iPhone and Mac, though, performed strongly, beating analysts’ expectations, while the iPad continued to struggle.

Tim Cook's Final Earnings Call: Apple Prices Won't DropGrowing AI demand for memory chips continues to put pressure on Apple’s pricing and supply chain.

Revenue and profits are up, but margins are under pressure

Revenue for the September quarter grew 12% to $114.48 billion, ahead of Apple’s own forecast. The increase was driven primarily by strong hardware demand, led by the iPhone and Mac, alongside growth in Services. China was a bright spot, with revenue up 21% to a quarterly record.

Net income rose 12% to $30.71 billion. Earnings per share came in at $2.10, beating analysts’ estimate of $1.99. About $0.05 of that came from a one-time tariff refund, which also added roughly one percentage point to Apple’s gross margin. Meanwhile, Services reached an all-time high of $31.57 billion, up 9.8%.

However, Apple’s gross margin was 47.9%, down 2.2 percentage points sequentially. The company expects it to fall further, to between 45% and 46% in the December quarter, mainly because of higher memory costs. That’s despite forecasting revenue growth of 7% to 10%, which Apple expects to make it the company’s biggest quarter ever.

How Apple plans to protect its margins

Apple is paying more for the memory chips that go into its iPhones, iPads and Macs. Demand from AI companies and data centre operators is putting pressure on memory supply, pushing prices higher across the industry.

“When you remove the tariff refunds from both the June and September quarters, both company and product gross margins would be down about one point sequentially, primarily driven by higher memory costs,” said CFO Kevan Parekh.

Apple has already raised prices on some of its products. Mac and iPad prices went up in June, followed by iPhone prices in September. Ternus said these increases had “provided some offset”.

The company is also leaning on more expensive products, including the iPhone Duo at $1,999, which Ternus says is still selling faster than Apple can make it, and a touchscreen MacBook Pro starting at $2,899. Services is another important source of growth.

But the memory problem isn’t going away. Apple expects memory costs to keep rising beyond December, and its manufacturing purchase obligations increased by $33 billion between the June and September quarters as it works to secure supply.

Apple also has an advantage over some of its major technology rivals. Rather than spending on AI infrastructure at the same scale as companies such as Microsoft and Amazon, Apple has pursued partnerships, including its agreement with Google to support its AI capabilities. That cautious approach has helped preserve its cash flow.

iPad sales are still falling

We may have reached a point where we need to have a conversation about the iPad.