Tim Cook used his final earnings call as Apple's chief executive to warn that memory chip costs have hit the company with what he called a "100-year flood." Apple already raised Mac and iPad prices, and its stock fell sharply after the July 30 call despite a stronger-than-expected quarter.
In his last earnings call as Apple's chief executive, Tim Cook delivered a warning: memory chip costs have hit the company with what he called a "100-year flood," language he said he has never used in more than 40 years in the consumer electronics industry. Apple has already raised prices on Macs and iPads, and warned that supply constraints will hit iPhone, Mac, and iPad sales in September.
Cook hands off to Ternus with a warning attached
Cook delivered the message on July 30, at the end of what he confirmed would be his final call as CEO. John Ternus takes over as chief executive on Sept. 1, with Cook moving into the role of executive chairman. Apple's Q3 2026 results beat expectations, with revenue reaching $109.4 billion versus an estimated $108.8 billion and earnings per share at $2.02 against a $1.89 consensus. Even so, the memory issue dominated the call.
Memory costs eat into Apple's margins
CFO Kevan Parekh said gross margins would have been materially stronger without rising memory costs, and memory alone accounted for more than the entire sequential decline in adjusted gross margin between the March and June quarters. Cook confirmed Apple has paid rising memory costs for three consecutive quarters and expects even higher memory costs in the September quarter, only partly offset by cheaper non-memory components and inventory bought before prices surged.
Why memory got this expensive
The surge traces to AI data-center demand: Nvidia, Microsoft, Amazon, and Meta have been buying high-bandwidth memory at a pace that has outstripped supply. SK Hynix, Samsung, and Micron control the DRAM market and have largely sold out their premium AI memory capacity through much of 2026; a federal antitrust lawsuit filed in California in June 2026 accuses the three of coordinating a supply restriction that drove conventional DRAM prices up approximately 700% over four years, though those claims are unproven.
Apple's own component costs show the same jump: the DRAM package in an iPhone 18 Pro will cost approximately $145, compared with roughly $39 for the same package in the iPhone 17 Pro — a 272% increase. Cook called for more competition in the supply chain, noting it currently has just three suppliers.
Stock reaction and what comes next for the iPhone 18
Cook did not confirm whether Apple will raise iPhone prices when the iPhone 18 Pro and the company's first foldable device arrive in September, though multiple analysts believe prices will rise. Apple's stock fell sharply after the earnings call as investors weighed the supply warnings against a below-consensus Q4 outlook. The shares had been up 23% in 2026 heading into the print.
Services offered only a partial cushion: Apple has 1.5 billion paid subscriptions, yet Q3 services revenue reached $30.7 billion, slightly below the $31.3 billion analysts expected. SK Hynix's own July 2026 forecast points to 2027 as the worst year for supply shortages in semiconductor history.
Source: TheStreet
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