The numbers were among the best of Tim Cook’s tenure. Apple Inc. reported record revenue and profit for its June quarter Thursday, with iPhone sales up 22% and Mac sales up 29%, and called the period its strongest June quarter ever. The market’s answer came after the close: shares fell more than 7%, wiping out roughly $350 billion of market value.
The disconnect was guidance. Apple told investors to expect revenue growth of 9% to 11% in the current quarter, below the roughly 12% analysts expected and far short of the 16% growth the company has delivered on average in recent quarters. For a company whose stock trades at premium multiples, a guide that lands two to three points below consensus is enough to move the market, and Thursday’s move showed just how much.
Cook, presiding over his final earnings call before stepping down as chief executive, blamed the components. Memory chips, he said, are in the middle of a price surge of a kind not seen in a century, squeezing costs across the product line. Apple has doubled its inventory of components to $11.1 billion from $5.7 billion to ride out the supply constraints, and has reluctantly raised prices on Macs and iPads.
The language was careful, but the economics were blunt. The memory shortage that began with DRAM and high-bandwidth memory has spread through the supply chain, and Apple, the largest buyer of consumer electronics components in the world, is paying prices it has not paid in decades. The company’s decision to double component inventory is a bet that the shortage will last long enough to make hoarding rational, a strategy Apple used during the 2021 chip crunch and has rarely repeated since.
Analysts said iPhone price increases are likely within the year, a step Apple has long avoided on the device that still generates more than half its revenue. The company has absorbed rising costs on its most important product before, but the scale of this surge, combined with the timing of the transition to a new chief executive, makes another round of absorption less likely. Customers, analysts said, will feel the difference in the fall, when the next iPhone generation typically arrives.
The quarter itself was strong by almost any measure. The 22% jump in iPhone sales points to a healthy upgrade cycle, driven by customers trading in older devices for models with new AI features. The 29% gain in Macs came even as the company pushed prices higher, a sign that demand for its computers remains robust. Services revenue, the high-margin business Apple leans on to offset hardware swings, grew as well, according to the company’s release.
The problem is cost, not demand. Memory chips, the same components that squeezed margins across the industry in the 2021 shortage, are again driving up the bill of materials for every device Apple sells. The company has absorbed part of the increase; the price hikes on Macs and iPads show the limits of that patience. Suppliers including SK hynix and Samsung have signaled that memory supply will stay tight into 2027, and Apple’s inventory build suggests management sees no quick relief.
Wall Street’s reaction was blunt. A drop of the size Apple suffered Thursday erases roughly $350 billion of market value in a single session, a loss larger than the entire market capitalization of most companies in the S&P 500. The move reflected the gap between a strong quarter and a guidance number that suggests the growth story is slowing at the worst possible moment for the company’s valuation.
For Cook’s successor, the supply chain is the first test. The incoming chief executive inherits a company with record sales, a doubling of component inventory, and a pricing problem that will not be solved by negotiation alone. Memory suppliers hold most of the cards: capacity for the AI boom is being diverted to the highest bidder, and consumer electronics buyers are competing with data center operators for the same wafers.
The wider industry is watching the same dynamic. Apple’s scale once let it command favorable terms from suppliers and pass on costs slowly, quarter by quarter. This time, the shortage is deep enough that even the largest buyer in consumer electronics is paying up, and analysts expect the increases to reach iPhones before the year is out. The company that built its brand on premium pricing is being forced into the uncomfortable position of raising prices on the product that defines it.
The question for investors is what the next year looks like. Apple’s valuation rests on steady growth and dependable margins, and both are now under pressure from a component market the company does not control. The quarter proved demand is intact; iPhone and Mac growth of the sort reported Thursday does not happen in a weak market. Whether margins survive the memory surge, and who ultimately pays for it, will be the defining questions of Cook’s final months and his successor’s first ones.
