Why Apple Stock Is Falling: 'Unprecedented' Memory Costs Hit Margins — WSJ

What happened

Apple shares are dipping more than 4% premarket after executives projected falling margins on an earnings call. Third-quarter sales beat expectations, but margins narrowed, and new CEO John Ternus blamed what he called unprecedented memory-chip pricing.

Confirmed

Global impact / market context

Memory chips are a key part for iPhones, so paying more for them raises Apple's costs. If Apple cannot fully offset this with higher product prices, profit per sale shrinks and cash available for spending on new products or buybacks may come under pressure.

Analyst inference

Apple partly shielded third-quarter margins using a stockpile of cheaper components bought earlier, but those stocks are dwindling. Investors are reacting to guidance for even higher memory costs ahead, which shifts attention from sales growth to whether price increases can protect profitability.

Analyst inference

What to watch

1. Apple has already raised prices on some products in June and September to help offset higher memory costs. Watch whether further price increases follow as the cheap component stockpile runs down. Confirmed
2. Watch how much of the higher memory costs Apple passes to customers versus absorbing itself, since absorbing them would pressure margins and profit per sale. Proposed
3. Watch whether the memory-chip crunch eases or worsens in coming quarters. Apple expects even higher memory costs, so any relief would reduce the need for price increases or margin sacrifice. Analyst inference

Evidence

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