Apple faces rising memory costs and supply constraints as it prepares for leadership transition

Apple’s latest earnings reveal record revenue but highlight escalating memory costs and supply issues as the company transitions leadership and intensifies AI efforts, signalling a challenging near-term outlook.

Apple’s latest earnings call drew a line under an era as Tim Cook presided over what is expected to be his final quarterly update as chief executive before John Ternus takes over on September 1. The company posted record June-quarter revenue of $109.4 billion, with earnings per share of $2.02, helped by tariff refunds and broad-based growth across its product lines, even as the market reacted coolly and Apple’s shares fell in after-hours trading. According to reports from Axios and Tom’s Guide, the quarter was Apple’s strongest June performance on record, but investors focused on what comes next rather than the headline beat.

What stood out most on the call was Apple’s warning that memory costs are rising sharply. Tim Cook described the pressure as a “hundred-year flood”, and company executives said the problem is likely to worsen in the September quarter. Tom’s Hardware reported that memory expenses accounted for the full sequential drop in Apple’s adjusted gross margin, while inventory swelled to $11.09 billion by June 27, up 94% over nine months, as the company built stock ahead of further cost increases. That buffer may soften the blow only briefly, with CFO Kevan Parekh saying relief from carried inventory will be limited going forward.

The rising cost backdrop is being compounded by supply constraints. Apple said it is dealing with tight availability of the chips that power iPhones, Macs and iPads, and it now expects revenue growth of 9% to 11% in the current quarter, according to Axios. Tom’s Guide reported that Cook and Parekh pointed to unexpectedly strong demand, especially for Macs and iPhones, alongside an inflexible supply chain. Apple has already raised prices on much of its hardware, though not the iPhone, and further increases may follow if memory markets remain strained.

The earnings update also fits into a broader transition inside Apple. John Ternus is set to become chief executive after Cook’s long run, and the company is already preparing for a more difficult operating environment as it heads into the next product cycle. Alongside the cost pressures, Apple is continuing to push on artificial intelligence, with Tom’s Guide reporting that the company is working with Google to strengthen Siri through Gemini models. That may matter as much to Apple’s next phase as the price of memory chips, especially if the company wants to keep premium hardware demand intact while margins come under strain.