"A once-in-a-century flood": The surge in memory prices threatening Apple
Tech giant Apple is preparing for a leadership change, as John Ternus will take over as CEO on September 1st, replacing Tim Cook. However, Ternus is arriving at the company during a particularly complex period. Despite strong performance, Apple is facing an unusual rise in iPhone production costs, which is forcing it to raise prices for consumers. The main reason for this is a severe global shortage of memory components, stemming from the massive demand from data centers processing information for artificial intelligence.
Tech giant Apple is preparing for a leadership change, as John Ternus will take over as CEO on September 1st, replacing Tim Cook. However, Ternus is arriving at the company during a particularly complex period. Despite strong performance, Apple is facing an unusual rise in iPhone production costs, which is forcing it to raise prices for consumers. The main reason for this is a severe global shortage of memory components, stemming from the massive demand from data centers processing information for artificial intelligence.
"A once-in-a-century flood"
Outgoing CEO Tim Cook described the situation as a "once-in-a-century flood" regarding memory prices, and admitted that it is an unexpected event that was not taken into account in the preliminary planning. This extreme rise in prices has already begun to affect the company's financial reports, and estimates are that costs will continue to rise in the current quarter as well. Those benefiting from the situation are memory manufacturers such as SanDisk, Micron, and SK Hynix, whose stocks are enjoying record demand.
"A once-in-a-century flood," Tim Cook stated regarding the memory price situation.
The impact on Apple's profitability is already being felt. In the third quarter of 2026, the company's gross margin stood at 50.1%, but this figure included a temporary benefit of two percent from a customs refund. CFO Kavan Park clarified that the change in memory prices explains the entire decline in profitability without that temporary benefit. In the fourth quarter, the company expects a further decline in gross margin to a level of 47% to 48%.
Should investors be worried?
Despite the pressure on profit margins, Apple's sales figures remain strong. iPhone sales grew by 22% in the third quarter compared to last year, a growth rate similar to that recorded in the last three quarters. However, in the fourth quarter, the company expects a slowdown in the growth rate to around 15%, mainly due to supply constraints and not because of a decrease in demand. To deal with the situation, Apple signed a long-term agreement with Broadcom to secure component supplies.
Bottom line, although investors should prepare for pressure on profitability in the coming quarters, there is no reason for long-term concern. Apple holds immense bargaining power with its suppliers and uses various tools to stabilize its profit margins. Its dominant position in the market ensures that it will remain a technological leader even after it gets through the current wave of price increases.
