Apple Shares Fall as Holiday Margin Outlook Disappoints

Direct answer

Apple reported stronger results than expected for its fiscal fourth quarter, yet its shares fell during its earnings call on November 2, 2026. Investors focused less on the quarter that had just ended and more on the outlook for the holiday quarter. Apple said rising memory chip costs would squeeze its gross margin, and it forecast slower growth in its services business than analysts had expected.

What happened

Reuters reported that Apple warned the cost of memory chips would keep rising, pressuring gross margin for the crucial holiday quarter. Apple expects gross margin of 45 percent to 46 percent in the quarter ending in December, down from 47.9 percent in the fiscal fourth quarter. It forecast services revenue growth of 8 percent to 9 percent, below analysts expectations of 10.7 percent.

Shares, which were little changed in after hours trading after the results beat expectations, fell 4 percent during the conference call as executives outlined the weaker outlook, before paring losses to a 2 percent decline. A separate report put the after hours fall at about 3 percent. The exact size of the move varied by the time of the report, but the direction was the same: down, after a beat.

The results themselves were strong. Apple reported fiscal fourth quarter revenue of $114.48 billion, above analyst estimates of $113.39 billion, according to LSEG data. Profit was $2.10 per share, above estimates of $1.99, even when excluding 5 cents from tariff refunds. IPhone revenue rose to $57.58 billion, above expectations of $56.54 billion, helped by early demand for the iPhone 18 Pro lineup and higher prices. Gross margin in the quarter just ended was 47.9 percent, above estimates of 47.5 percent.

The problem was the next quarter. Chief Financial Officer Kevan Parekh said on the investor call that Apple expects memory costs to keep rising into next year. Chief Executive John Ternus said the company had taken steps to lock in supplies, and that higher memory costs in the September quarter had been partly offset by inventory bought earlier and lower costs on certain non memory components. Apple has also raised prices on selected iPhone 17 models and some MacBooks, which softens the blow, but does not remove it.

Why it matters for beginners

Gross margin is the share of sales left after paying the direct cost of making and shipping a product. If a company sells a phone for $1,000 and the direct costs are $520, its gross margin is 48 percent. A fall from 47.9 percent to 45 percent or 46 percent may sound small, but for a company of Apple’s size, each percentage point is worth billions of dollars in profit.

Memory chips have become more expensive because artificial intelligence data centres are absorbing more of the world’s supply. That means phone and computer makers are now competing with data centre operators for the same components. Apple usually sells the most iPhones and accessories in the December quarter, so a margin squeeze in that quarter matters more than in a quieter period.

Services also matter. Services include subscriptions such as iCloud and other recurring revenue, and that business usually carries a higher margin than hardware. Slower services growth therefore gives Apple less high margin revenue to offset higher hardware costs.

This is not a signal to buy or sell Apple shares. A share price fall after strong results shows that markets react to expectations for the future, not only to the past quarter.

What to watch next

Watch whether memory chip prices keep rising into next year, as Parekh warned they could, or whether supply eases. Watch Apple’s December quarter results for the actual gross margin, and whether it lands inside the 45 percent to 46 percent range. Watch services growth against the 8 percent to 9 percent forecast. Watch also whether other phone and computer makers give similar warnings about memory costs, which would show this is an industry wide squeeze rather than an Apple only problem.

FAQ

Why did Apple shares fall if revenue and profit beat expectations?

Because the market shifted its attention from the quarter that ended to the outlook for the holiday quarter. Apple forecast a lower gross margin of 45 percent to 46 percent, down from 47.9 percent, and services growth of 8 percent to 9 percent, below the 10.7 percent analysts expected.

What is gross margin in simple terms?

It is the percentage of sales revenue left after direct production costs. A lower gross margin means the company keeps less from each sale before paying operating costs such as staff and stores.

Why are memory chips more expensive?

Demand from artificial intelligence data centres has tightened supply, pushing up prices for memory components used in phones, computers and servers.

Does this mean Apple is in trouble?

No, on these figures alone. Apple beat revenue and profit expectations and reported record quarterly revenue in its related results. The concern is about profit margins, not about demand collapsing.