Apple warns of potential price increases amid rising component costs

New Apple CEO John Ternus described the rise in memory chip prices as “unprecedented” during a conference call with analysts, adding that costs are expected to continue increasing. Apple is attempting to offset these costs by seeking more favorable pricing on other components.

Despite the challenges, Apple’s production order volume has increased by $33 billion over three months. The company projects a gross margin of 45 to 46 percent for the holiday quarter, which is below analysts’ expectations, compared to over 50 percent in the spring. Revenue is forecast to increase by 7 to 10 percent, exceeding market expectations. However, Apple shares fell by approximately 3 percent in after-hours U.S. trading.

Apple has not ruled out further price increases for its products. While the company carefully considers the long-term economic viability of such decisions, weighing potential customer losses against increased profit margins, it has so far absorbed some of the cost pressures itself. The timing and scope of any future price adjustments, and which products might be affected, remain uncertain. Rising expenses related to artificial intelligence and cloud services are also contributing to the cost burden.

Apple’s iPhone business significantly boosted revenue last quarter, with smartphone sales increasing by 17.5 percent to $57.56 billion (approximately €51.4 billion). This exceeded analyst estimates by roughly $1 billion.

The iPhone remains Apple’s most important product. The company did not provide a specific revenue forecast for the iPhone business during the holiday quarter.

Traditionally, Apple unveils new iPhone models in September to meet holiday shopping demand. This year, the company is focused on two high-priced model lines: the iPhone 18 Pro and the iPhone Duo, the latter being Apple’s first foldable smartphone. More affordable new iPhone models are reportedly slated for release next year.

Demand for the iPhone Duo continues to outstrip supply, leading to extended delivery times since its October launch, with some orders pushed back to January. Apple’s operating chief, Sabih Khan, stated that it is difficult to predict when supply and demand will rebalance.

Ternus reaffirmed the strategic focus on developing high-quality, high-performance, and durable products. He emphasized that technology should contribute to improving the world and that the iPhone will remain central to Apple’s business, serving as a key interface for accessing AI applications and digital services.

Overall, Apple increased quarterly revenue by 12 percent to $114.5 billion, with net income also rising 12 percent to $30.7 billion. This growth was partially fueled by refunds of U.S. import tariffs following a U.S. Supreme Court decision overturning some tariffs imposed by former U.S. President Donald Trump.

The services business underperformed, with revenue growth in China failing to meet analyst expectations, partly due to reduced commissions in the App Store.

For the current holiday quarter, the development of memory chip prices remains a key factor. While Apple expects continued revenue increases, it must also manage higher production costs and ongoing supply constraints for the iPhone Duo. Further price increases for consumers could become more likely if costs continue to rise.