Apple shares fell in after-hours trading after the company beat Wall Street's third-quarter estimates but issued weak revenue guidance, citing supply constraints tied to a global memory chip shortage. It was Tim Cook's last earnings call before CEO John Ternus takes over on September 1.
Apple posted fiscal third-quarter revenue of $109.42 billion, above the $108.65 billion analysts polled by LSEG had expected, with earnings per share of $2.02, though that figure isn't comparable to analyst estimates of $1.89. Yet the stock slid 8% in extended trading as investors focused on a soft outlook for the current quarter.
Weak guidance overshadows the beat
Chief Financial Officer Kevan Parekh told analysts Apple expects revenue growth of 9% to 11% in the fiscal fourth quarter, short of the 12% Wall Street had penciled in. Parekh said foreign-exchange headwinds should cut fourth-quarter growth by 2.5 percentage points, and the company guided gross margin to between 47% and 48% for the period.
Apple's shares had already been under pressure heading into the report, closing down 1.4% at $333.43. The stock had touched a $5 trillion market cap for the first time two days earlier.
iPhone and Mac carry the quarter
iPhone revenue rose nearly 22% to $54.25 billion, beating the $53.86 billion analysts expected. Mac revenue climbed nearly 29% to $10.35 billion, which Cook attributed to strong demand for the MacBook Neo and MacBook Pro. iPad revenue, however, declined 6% to $6.19 billion, while services revenue rose 12% to $30.74 billion but missed the $31.22 billion estimate.
Memory shortage forces price hikes
Cook said Apple now expects to pay even higher prices for memory chips: "We expect to pay even higher memory costs". Apple has already raised prices on Macs and iPads to offset the crunch but has not yet done so for iPhones in most markets. The Financial Times reported memory chip prices have risen about 300% in the second quarter alone, according to the International Data Corporation, as AI data-center demand absorbs supply. By holding iPhone prices steady, the Financial Times reported Apple grew its market share to 20% in the quarter, up from 17% a year earlier, even as global smartphone shipments fell 11%.
Tariff rebates lift margin to a record
Tariff refunds added 11 cents per share to earnings and two percentage points to gross margin, pushing the total margin to a record 50.1%. Net income climbed to $29.79 billion, or $2.02 per share, from $23.43 billion, or $1.57 per share, a year earlier. Greater China revenue rose 22% to $18.82 billion, while Europe revenue increased to $29.4 billion from $24 billion a year earlier, Crypto Briefing reported.
Cook hands over to Ternus
Incoming CEO John Ternus did not speak on the call. Cook called the transition seamless and said Ternus will lead future earnings calls. Ternus takes over as chief executive on September 1, with Cook moving into the role of executive chairman.
Sources: CNBC, Financial Times, Crypto Briefing
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