Apple forecast for its September quarter fell short of Wall Street's expectations, overshadowing strong iPhone and Mac sales that the company reported for its June period.
The company said sales growth in the September quarter would come in between 9% and 11%, below analyst estimates of roughly 12%. Gross profit margins will also fall just short of estimates. Apple shares fell 7% in after-hours trading.
The disappointing forecast is partly due to supply constraints that have plagued the company for the past few quarters, which have made it difficult for the company to meet demand for iPhones, Macs and iPads, and which are expected to get worse in the September quarter. It is selling the devices at a record clip, but it could be selling even more.
The difficulty remains securing enough logic chips, the brain inside Apple's devices, that are made by Taiwan Semiconductor Manufacturing.
"We've seen extraordinary demand this cycle. And the supply chain just hasn't had the same level of flexibility for us to be able to flex up to meet this higher-than-expected demand we're seeing," said Kevan Parekh, Apple's chief financial officer, in an interview.
Meantime, the soaring price of memory chips is expected to weigh more on profits.
In the June quarter, iPhone sales grew 21%, continuing a hot streak for the iPhone 17. Meantime Mac sales jumped nearly 30%, thanks in part to Apple's popular, new entry-level MacBook Neo.
The company's gross profits jumped in the June quarter, but only temporarily, thanks to a tariff refund of around $2 billion.
One disappointment in June was Apple's services unit, which includes App store fees, iCloud subscriptions and other revenue. It has been among the most reliable profit engines at the company in recent years. Foreign exchange rates weighed on the segment, but so did "softness" in App Store gaming revenue, the company said.
Apple shares had been on a tear the past month, surging at a time when other big technology companies have been under siege due to concerns about the AI race.
Investors have come to see Apple as a safer name in the technology sector, given the company's modest capital-spending investments relative to most of its peers in the industry.
There is additional excitement that, finally, Apple appears to have a modern chatbot to compete with ChatGPT, Claude and others. The new Siri AI, to be released this fall, isn't expected to be as impressive as those rivals, technologically speaking. Yet Siri will have the advantage of being built into the device everyone is already carrying, a chatbot layer engineered to work with the personal data they already carry around in their pocket.
Tim Cook, handling his last Apple earnings report, confronted one of the biggest threats to the sparkling, asset-light business model he built.
In the age of AI hyperscalers, suddenly Apple finds itself waiting in line for key device components, memory and storage chips, the prices of which have quadrupled over the past year and are expected to go higher, as well as logic chips.
It is a position the iPhone-maker hasn't found itself in since Cook harnessed the company's purchasing power to squeeze rock-bottom costs from suppliers and shift expensive assets from Apple's balance sheet to theirs. That model multiplied the company's valuation 14 times on Cook's watch, to nearly $5 trillion from roughly $350 billion the day he took over for Steve Jobs.
To protect its profit margins, Apple has already raised prices on Macs and iPads by as much as 25% for some models. And prices for new iPhone models are expected to rise substantially when they are released in September. A new leasing program for last year's iPhone 17 implies prices for those devices won't be reduced when successor models are released, unlike in years past.
Wall Street had seemed sanguine about the price increases, which in theory could reduce sales by discouraging customers from upgrading. That is perhaps because iPhone buyers aren't as price sensitive, especially when higher costs are spread out over the many months of a smartphone installment plan.