Apple shares fell nearly 10% on Friday following the company's disappointing forecast that showed the iPhone maker struggling to secure enough components as the AI-driven data center boom strains global supply chains. The stock had previously plunged 9.44% to $301.95 on Friday, marking the company's steepest one-day fall since the pandemic-driven selloff of March 2020 and putting nearly $500 billion in market value at risk. The latest decline came after CEO Tim Cook warned of 'very significant' supply constraints and limited options to address them. As per The Economic Times, Cook called the shortages 'very significant' and said Apple had limited options to address them, while the company was 'evaluating all options' for alternative suppliers of memory chips. Cook spoke on his final earnings call as CEO before handing the reins to John Ternus in September and becoming executive chairman.
Despite the market decline, Apple delivered impressive June-quarter results that beat analyst expectations. The company reported June-quarter revenue of $109.42 billion, above the $108.65 billion consensus, with earnings per share reaching $2.02, well above the $1.89 estimate. The full results showed revenue up 16% year over year, a June-quarter record. iPhone revenue climbed 22% to $54.25 billion, marking Apple's best-ever iPhone sales for a third quarter when phone sales typically begin to slow as customers anticipate fall models. However, Services revenue of $30.74 billion and Greater China sales of $18.82 billion both missed forecasts. The outlook did the real damage, with CFO Kevan Parekh guiding September-quarter revenue growth of 9%–11%, below the roughly 12% analysts expected. He cited supply constraints, currency headwinds, and a memory cost squeeze driven by AI demand for DRAM and NAND chips as key factors.
The weaker September quarter guidance reflects Apple's ongoing struggle with industry shortage of advanced chipmaking technology used to produce Apple silicon chips, particularly affecting the Mac lineup. As per The Economic Times, Big Tech has been scooping up advanced chip-making capacity and memory chips to power its AI data centers, sparking shortages and price increases that are expected to shrink both the personal computer and smartphone markets this year. Cook explained that 'we're having an incredibly strong product cycle beyond our expectations, and the (advanced chipmaking) supply chain just fundamentally has less flexibility in it to meet the high levels of demand'. The supply constraints are 'very significant' with limited flexibility in the supply chain to remedy it. Apple is 'evaluating all options' for alternative suppliers of memory chips to address these challenges. The company expects iPhone revenue to grow at a mid-teens rate, compared with Wall Street's target of 17.6%, and forecasts gross profit margins between 47% and 48%.
Despite supply chain challenges, Apple's core products delivered impressive results during the quarter. The iPhone, Apple's biggest moneymaker, generated revenue of $54.3 billion, rising 22% and topping estimates of $53.86 billion. The strong performance suggests continued solid demand for the iPhone 17 series, launched last September, with the company also rolling out a new low-end 17e model in March. Mac revenue reached $10.4 billion, growing 29% from a year earlier, marking another highlight and beating Wall Street expectations of $8.74 billion. The company launched new Macs in March, including the MacBook Neo, M5 versions of the MacBook Pro and a fresh MacBook Air. The iPad brought in sales of $6.19 billion, missing estimates of $6.92 billion, despite Apple launching a new iPad Air in March and an updated iPad Pro last October. Apple's wearables, home and accessories category generated $7.88 billion in revenue, up 6.5% from a year earlier, matching estimates of $7.87 billion.
Apple's second-biggest revenue area, the services business, rose 12.1% to $30.74 billion, missing estimates of $31.22 billion. As per The Economic Times, App Store revenue from mobile games was under pressure due to regulatory changes including the European Union requiring Apple to open iPhones to alternative app stores and a U.S. battle with Fortnite maker Epic Games allowing users to pay outside Apple's in-app system. Greater China revenue rose 22.4% to $18.82 billion but missed the $19.67 billion target of six analysts polled by Visible Alpha. Gross margins were 50.1%, with tariff refunds contributing two points, while excluding them, margins were 48.1%, near the midpoint of guidance and above estimates of 47.92%. Morgan Stanley analysts noted that Apple's leverage over the supply chain appears to be in question and questioned whether AI is serving as a measurable tailwind to products or services.
