Apple's Record Quarter Overshadowed by AI-Driven Supply Constraints and Rising Memory Costs

Tim Cook sees Apple's hybrid AI strategy as a 'competitive weapon'

Apple CEO Tim Cook had a lot to talk about on his last earnings call as CEO, as his company's stock price trended lower on concerns about supply constraints. Regardless of the selloff, he told investors that Apple has "enormous opportunities" in artificial intelligence. Cook, who will be assuming the role of executive chairman on Sept. 1, said Apple's hybrid approach to AI, where some workloads can be run on iPhones and Macs is an advantage as his large tech peers rely on their massive clouds. It's an important signal to Wall Street about the company's ability to run AI apps as Apple gears up for the launch of an updated Siri this fall. "The ability to run some percentage of requests on device is also very strategic and sort of a competitive weapon," Cook said. Apple has bucked its hyperscaler peers by spending significantly less on capital expenditures as it tries to be a player in AI. Most of the spending across the industry is going towards Nvidia-based data centers to run advanced AI models from companies like OpenAI and Anthropic. Alphabet, Amazon, Meta and Microsoft have each committed to shelling out well over $100 billion in capex this year. In the June quarter, Apple's capex amounted to $2.46 billion, lower than a StreetAccount estimate of $3.44 billion. Cook noted that operating expenses are going up. "We have been growing our opex and spending more in AI in general," Cook said. Instead of spending heavily on data centers, Apple emphasizes that much of its AI suite -- Apple Intelligence -- can be run on the devices themselves, using the full power of Apple's chips and not radioing to the cloud. Apple says it can do more in AI, potentially saving money for businesses that are spending heavily on AI software. He gave the example of Disney, where "creative teams are increasingly turning to Mac for on-device AI workflows that reduce overall cloud token costs and keep their IP secure," Cook said. Apple's hybrid strategy will be tested when Siri AI is finally released to the public. The highly anticipated launch of Apple's personal assistant will depend on the iPhone's processor to decipher queries and use the appropriate on-device AI model. However, there are tradeoffs in terms of what the local models can do. So for complicated AI tasks, Apple will use Google Cloud to serve those answers with infrastructure based on Nvidia's graphics processing units and Intel's central processors. Those tasks include things like image generation, Apple said in June, when it revealed the software. Apple signaled at the time that it would cap users on its cloud models and that they might be able to increase their limits through iCloud. That would offer Apple a new way to monetize AI. Cook said on Thursday that Apple didn't have a "complete plan" for charging users, but that it aims to use AI as a selling point for iCloud subscriptions. "We do believe there will be people that want to use it a lot, and so we will have some kind of upgrade possibilities on on iCloud+," Cook said.

The AI boom is making Apple pricey to buy and to run. Its answer to both is a subscription.

The AI boom is squeezing Apple twice over: its memory chips cost more, and its AI costs more to run. Apple's answer to both is the same, rent the hardware and meter the software. Apple's most popular laptop has become oddly hard to buy. Order a MacBook Air today and it will not arrive until the end of August, with some memory and colour options slipping into September. Retail staff told Bloomberg's Mark Gurman that stock is more constrained than they can ever recall. It also costs more than it did in spring. Apple launched the M5 MacBook Air at $1,099 in March, then lifted it to $1,299 in June. Buyers now pay $200 extra and still wait weeks. The same crunch has raised prices on gear from Roku players to Google's Pixel 11. The cause is a memory shortage some call "Ramageddon." AI data centres are buying up the world's memory chips. It hit Apple's niche machines, the Mac mini and Mac Studio, first, and, as TechCrunch noted, has now reached the mainstream Air. Tim Cook called it a "hundred-year flood." Apple's first move is to sell you something else. It is steering shoppers to the pricier entry MacBook Pro, a step Gurman says it has rarely taken. It added a "subject to availability" warning to the Air, delayed its back-to-school promotion, and is chasing Chinese memory for its China devices. Even the upgrades are shrinking The squeeze is reshaping what an upgrade even means. Apple's next budget iPhone, the 18e, is tipped to ship with an odd 9GB of memory, built from six 1.5GB dies rather than a round number. That is one gigabyte more than the 17e, and the bare minimum needed to run Apple Intelligence. The reason is cost. Apple's better on-device AI reportedly needs 12GB, so the 18e and even the standard iPhone 18 may miss its best features. In a normal year, a cheap phone would jump to 12GB. In this one, it gains a single, awkward gigabyte, and probably a higher price. The fix Apple wants is a subscription The bigger answer arrived last week. Apple Upgrade lets you lease an iPhone or Mac in monthly instalments, financed by Klarna. Apple pitches a flagship as about a dollar a day. The idea is not new, but the timing is. Rising prices make a monthly fee an easier sell than a bigger sticker, with a foldable iPhone expected above $2,000. The catch is ownership. Lease and re-lease, and you may never own the device, though you can pay off the balance to keep it. Miss payments and, by one account, three strikes ends the lease. Cook keeps steering buyers toward Apple's strong resale values, which happen to favour Apple. The software is going the same way, for a different reason. Running AI is expensive, and on his final earnings call, Cook suggested a heavy Siri AI user might have to move up an iCloud+ tier. Some AI camera features already require a $9.99 plan. The sticker price is becoming a monthly line item. The Siri gamble All of this funds a bet on AI. When Siri AI arrives this autumn in iOS 27, it becomes the most widely distributed chatbot on Earth overnight, preinstalled on hundreds of millions of iPhones back to the 15 Pro. Reach, for once, is Apple's advantage. Winning is another matter. Bloomberg's testing found Siri AI strong at reading your screen and personal data, but behind ChatGPT on conversation, productivity and third-party apps. Apple is also suing OpenAI over trade secrets, even as both race to put an assistant in your home. The next thing on the plan is your body Apple wants more of your life on the subscription, too. A job listing seeks a leader to "define the future of health, well-being and fitness experiences" across its vision products. The plan is to make its coming smart glasses a fitness device, like the Apple Watch and AirPods before them. It has done this before. AirPods gained heart-rate tracking and hearing-aid features, and camera versions are next. A fitness purpose also gives the glasses a friendlier face than filming strangers, the "creep" problem Apple is wary of. Do not expect it on the first pair, likely due late in 2027. AI is straining Apple from the other side, too The boom is even clogging Apple's security desk. The Financial Times reports Apple has capped how many bug reports researchers can file, with a 30-day cool-off, after a flood of AI-generated submissions. One firm found 50 possible macOS flaws in three weeks. A genuine $200,000 bug reportedly went unread beneath the slop. Put it all together and the picture is consistent. The memory crisis will pass, though suppliers expect it to worsen first. The habits it is accelerating will not. Apple is nudging you to buy less and rent more, to pay by the month and by the feature, and to stop counting on ever owning the thing at all.

Apple Posts Record June Quarter, Warns Supply Constraints Are Coming

On Thursday, Apple reported earnings showing a record June quarter across products and geographies. But Apple executives are wary going forward and are warning that supply constraints might make landfall on its financials. Apple executives are expecting revenue growth in the current quarter ending in September to come in less than analyst expectations, driven largely by supply constraints for Macs, iPads and iPhones. The supply constraint is mostly impacting Apple's access to advanced chips, something that the Cupertino giant has been warning about for months. But soaring memory prices are also painting a concerning picture for both Apple and its consumers. CEO Tim Cook said in the company's earnings call that Apple is paying increasingly more for memory with each passing quarter. Some of that price increase they were able to partially offset by carrying over inventory. Cook thinks Apple will be able to use that strategy in the September quarter, but benefits will decrease beyond that. "If you look beyond September, we see the market pricing for memory continuing to increase, which could drive an increasing impact on our business," Cook said. The AI boom and the unprecedented data center buildout have led to soaring demand for high-bandwidth memory chips. With finite chipmaking capacity, the top chipmakers have had to shift focus to addressing the AI industry's supply needs at the expense of consumer electronics manufacturers that use these memory chips to produce computers and smartphones. As a result, consumer-level memory supply has dragged, causing delays and price hikes that are gradually getting passed on to consumers as the crisis continues with no end in sight. Experts foresee it getting worse into next year and possibly continuing into the next decade. The crisis is bad enough that global smartphone shipments fell to their lowest level since 2013 this past quarter, according to estimates from Counterpoint Research, becoming "the single biggest drag on the smartphone industry." Apple has largely been able to avoid price hikes for its iPhones, though market watchers expect that to change soon with the upcoming iPhone 18. But other product categories haven't been as lucky, with Apple raising iPad and MacBook prices last month. Cook himself also seems pessimistic about the trajectory of the memory chip shortage, telling the Wall Street Journal that price hikes for Apple products were becoming "unavoidable." He reiterated that sentiment on Thursday's call. "We reluctantly raised prices," Cook said. "I would say we did it because we're in what I would characterize as a 100-year flood on memory pricing, with exponential increases in memory prices." Thursday's earnings call was Cook's last one as CEO, as he will be passing the torch to incoming CEO John Ternus in September. Ternus was on the call and gave vague answers when questioned by investors, only saying that "there is so much opportunity" for Apple in the AI space. Apple is getting ready to unveil a long-awaited AI-infused Siri later this year. Ternus didn't tease any details about it, but according to Cook's comments on the call, the Siri AI could come with a paid tier of sorts. On Thursday, Cook said that early user reviews of the recently released beta version of Siri AI had been "phenomenal" and developer feedback is "overwhelmingly positive." "We do believe there will be people that want to use it a lot, and so we will have some kind of upgrade possibilities on iCloud Plus, where people can buy up the stack on iCloud Plus, and we'll see how the pickup for that is," Cook said.

Tim Cook's last earnings call comes at momentous time for Apple with stock at record

But Apple faces plenty of hurdles and investor questions to answer as Cook gets set to hand over the reins to John Ternus. Tim Cook's final earnings call as Apple CEO takes place the same week the iPhone maker touched a $5 trillion market cap and surpassed Nvidia as the world's most valuable company. But there's no time to celebrate. Even with the stock trading at a record price and up 25% this year, topping its megacap peers, Apple is reckoning with a memory crunch and a rush for chip manufacturing capacity that's forcing the company to lift prices on devices. Meanwhile, Apple has still yet to launch a redesigned Siri to the public, the most glaring example of how far behind the company has fallen in artificial intelligence. With Cook set to step down on Sept. 1, and assume the role of executive chairman, the emerging challenges will land in the lap of John Ternus, a 25-year Apple veteran and its head of hardware. Ternus said little on the prior earnings call in April, which came shortly after the CEO transition was announced. Investors are likely to ask more of Ternus on Thursday, after the company reports fiscal third-quarter results. He'll become just the second CEO since Steve Jobs stepped down a few months before he died in 2011. Cook's 15-year run at the top has been highlighted by a fourteen-fold increase in the company's valuation despite its inability to launch a major hardware platform after the iPhone and its struggle to find a big market for its high-priced Vision Pro virtual reality headset released in 2024. "Tim Cook, he's a really talented supply chain operations guy, and I think he's just he's done just a remarkable job of navigating the environment," said Melissa Otto, head of Visible Alpha research at S&P Global, in an interview. "We'll get some visibility or some commentary at least around the current environment and how they're navigating it." Last month, Apple, citing the global memory shortage, raised starting iPad and Mac prices by at least $100, with some models increasing by more than $1,000. Analysts expect iPhone price hikes this year. In the meantime, Apple announced a program on Tuesday with Klarna, a provider of buy now, pay later loans, that will allow customers in the U.S. to lease an iPhone for up to two years at a price starting at $17.99 per month. The price increases of up to 20% on some devices were announced just before the end of the quarter, so their impact won't be felt until the current period. For the quarter ended in June, analysts expect to see a total revenue increase of about 16%, with that growth number slipping to 12% in the current period. More important to investors is what higher prices will do to demand in the December quarter, Apple's biggest of the year. Counterpoint Research sees total smartphone shipments falling nearly 14% this year, the steepest decline since 2013. The part of the market at greatest risk is the lower end, where manufacturers have less room to pass on skyrocketing memory costs. That largely means Android phones. Apple could signal "market share gains given pricing increases at competitors," wrote Goldman Sachs analysts, who have a buy rating on the stock, in a note this week. Apple has yet to raise prices or change iPhone forecasts even after its June warning, though some analysts are altering their models. The hikes could actually boost earnings, some analysts say, due to the company's renowned brand. "We continue to believe that Apple fundamentals are very strong, with myriad price hikes likely to drive upside to revenue and EPS over the next 6-18 months," analysts at Morgan Stanley wrote in a note last week. The firm recommends buying the stock, but they slashed their Mac forecast for the September quarter by 8% because of supply challenges. The memory shortage is the biggest near-term challenge facing Apple, but the more significant risk to its business over the longer term likely has to do with its AI strategy. Instead of spending heavily on AI infrastructure to build or serve advanced models, Apple is licensing much of its AI technology from Google as well as using its cloud. While the hyperscalers are all shelling out well over $100 billion in capital expenditures this year, and some are likely to exceed $200 billion, analysts expect Apple to spend just more than $11 billion, with $3.4 billion coming in the latest quarter, according to FactSet. "While Apple was initially bruised by many investors for not joining the LLM investment cycle, investors are coming around to Apple's industry-leading" free cash flow, analysts at Baird wrote this month. They recommend buying the stock. Before Google, Apple's main AI partner was OpenAI, whose ChatGPT was integrated into Siri and other parts of the operating system. That partnership has nearly fallen apart, and Apple sued OpenAI on July 10, alleging trade secret theft. OpenAI refuted the claim. Apple needs its redesigned Siri, which was released in beta in June and is expected to launch this fall alongside new iPhones, to catch on with the public. It then needs to follow that release up with more AI features to keep pace in an industry that's moving at warp speed. With Ternus taking over, the company may be gearing up for more aggressive AI investing. Under Cook, the company threw off so much cash that it bought back more than $1 trillion in stock during his tenure. In its last earnings report, Apple made a slight change to its stated policy of how it handles cash. Rather than sticking to a goal it's had since 2018 of being "net cash neutral," or getting its cash on hand equal to total debt, Apple said it will assess its cash and debt independently, which could free up funds for AI. "We invest in the business first and foremost and then look to kind of return excess cash to shareholders," Apple CFO Kevan Parekh said on the April call. Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.

Apple's stock slides on supply snags despite record iPhone sales

Apple posted its best-ever June quarter for iPhone revenue, yet shares fell more than 7% as supply constraints and rising chip and memory costs clouded its outlook. Apple delivered its best-ever June quarter for iPhone sales and watched its shares fall anyway, as a warning about supply constraints and rising costs unnerved investors. The stock dropped more than 7% before Friday's open, wiping out something in the region of $360bn in market value, days after Tim Cook had already warned that a memory-chip shortage could push prices up. The headline numbers were strong. iPhone revenue hit $54.25bn in the quarter, up almost 22% and a record for the period, comfortably ahead of Wall Street's expectations of around $53.86bn. The problem was the guidance, not the quarter. Apple forecast revenue growth of 9% to 11% for the current quarter, short of the roughly 12% analysts had penciled in, and projected only mid-teens growth for the iPhone. Cook was clear about the cause. The softer outlook reflected "supply constraints, rather than weak demand," he said, an unusual position for a company more used to worrying about whether people will buy its products. The constraint is the AI boom itself. A global scramble for advanced chips and memory, driven by data-centre build-outs, has tightened supply and driven up costs across the industry, and Apple is not immune. Those shortages now reach Apple's core products. The company said limited access to advanced chipmaking capacity was constraining supplies of the iPhone, Mac, and iPad, the three pillars of its hardware business. Memory is the sharpest squeeze. Prices for the chips that go into phones and computers have surged as AI servers soak up capacity, turning a component Apple once took for granted into a strategic worry. The pain is being felt well beyond Apple. The same memory crunch has pushed up prices on everything from streaming boxes to Macs, as consumer electronics compete with AI data centres for the same scarce chips. The company has been hunting for supply. Apple has been lobbying Washington to let it buy memory from China's CXMT as prices climb, a sign of how far it will go to keep its production lines fed. Analysts framed the quarter as a collision. "Demand robustness is running into a wall of supply and cost challenges," JP Morgan wrote, capturing the paradox of a company selling all it can make but unable to make enough. There is a pricing lever, if Apple chooses to pull it. TD Cowen argued the company could raise iPhone prices without denting demand much, a tempting option if costs keep climbing into the holiday season. The timing is delicate for another reason. The results land during a leadership handover, with Cook due to step down in September and hardware chief John Ternus taking over as chief executive. Ternus inherits a good problem and a hard one. He takes over a company with record momentum and a looming CEO transition, but also one whose growth is now gated by forces outside Cupertino's control. The market reaction fits a wider pattern. Strong results have repeatedly been met with falling share prices this year, as investors fret about the cost of the AI boom, much as they did when TSMC posted record revenue and its stock fell. For Apple, the supply story cuts both ways. Constraints that cap sales today also point to demand it cannot yet satisfy, which is a more comfortable place to sit than the reverse. The bigger question is margins. If memory and chip costs keep rising and Apple holds prices, its industry-leading margins take the hit; if it raises prices, it tests how much that loyalty is really worth. Cook's parting quarters have set a high bar. Record iPhone sales are a strong note to leave on, but the outlook he hands Ternus is shaped less by what customers want than by what the supply chain can deliver.

Apple ends day as world's most valuable company, passing Nvidia

Apple emerges as megacap hedge against the AI spending binge Apple passed Nvidia on Monday for the title of world's most valuable company, with the iPhone maker topping the artificial intelligence chip firm at market close for the first time since April 2025. Shares of Nvidia fell 5% on Monday, giving the chipmaker a valuation of $4.77 trillion, as AI chip stocks in general declined as investors fret about large costs related to the AI buildout. Meanwhile, Apple shares rose 1%, giving it a market cap of $4.95 trillion, ahead of the company's highly-anticipated earnings on Thursday. Nvidia had held the top spot as the most valuable company since June 2025, when it took the crown from Microsoft, and it briefly held a $5 trillion capitalization in October. So far in 2026, Nvidia's shares have only climbed 4% while Apple's are up 24%. Apple has outperformed the market as investors have rewarded its reluctance to spend heavily on capital expenditures for AI, preferring to rent capacity instead of building its own. While Nvidia's sales are now in the third year of massive AI-driven growth, many investors have switched their focus from AI chips called graphics processing units to memory chips and other data center infrastructure that benefit from the AI boom, such as Micron Technology, SK Hynix, and Sandisk. Apple will report fiscal third-quarter earnings on Thursday, in which the iPhone maker is expected to reveal for the first time some of the financial impacts from the AI-driven global memory chip shortage, which forced the company to raise Mac and iPad prices in June.

Apple hits $5tn by sitting out the AI spending race

Apple briefly touched a $5tn valuation on Tuesday, the second company ever to do so. It got there by sitting out the AI spending race that is draining its rivals, as investors flee the capex bonfire. The catch: the same restraint that made it the winner is why it is still behind on AI, a problem it hands to a new chief executive on Thursday. Apple has become the second company in history worth $5tn. It got there by being the one big-tech giant that refused to bet its balance sheet on AI. The iPhone maker briefly touched a $5.04tn market value on Tuesday. Shares hit a session high of $342.89 before easing to close at $340.08, just under the mark, CNBC reported. Only Nvidia has been there before, when it crossed $5tn last October. Apple passed Nvidia a day earlier to reclaim the title of world's most valuable company. The chipmaker had held that spot since June 2025. Rewarded for sitting it out The remarkable part is why. For two years, investors punished Apple for missing the AI boom. Its Siri overhaul slipped, and its in-house models stalled. That same restraint is now the reason it is winning. Alphabet, Amazon, Meta and Microsoft pour hundreds of billions into data centres. Apple leans on Google's technology for its AI features and keeps its own spending low. Analysts expect it to spend about $11bn this year, against the $100bn-plus each hyperscaler is laying out. Apple stock is up around 25% in 2026, the best in the Magnificent Seven. Tesla, Microsoft and Meta are all down for the year. As Business Insider noted, the rally owes little to anything Apple did. It reflects a rotation out of the crowded AI trade and into a consumer name that is not burning cash. The capex bonfire next door The trigger was the bill coming due elsewhere. Google spooked the market last week by lifting its capital-spending guidance to as much as $205bn. It also reported its first-ever negative free cash flow, burning $5.9bn in a single quarter, the Guardian reported. Investors are increasingly nervous about the circular financing that props up the AI build-out. The same companies often help fund one another's compute. That nervousness has turned into a rout. The Nasdaq 100 has fallen more than 10% from its June high, the technical definition of a correction. Chip stocks have been hit hardest. The main semiconductor ETF is down 14% in a month, and a popular memory fund has lost 29%. In Asia, SK Hynix and Samsung each dropped more than 10%. The fall followed a report that China had begun mass-producing its own chipmaking tools, and weeks of jitters over cheaper Chinese AI models. Money leaving those trades has to go somewhere, and much of it has gone to Apple. The catch The problem is that the thing keeping Apple cheap to run is also what keeps it behind. Its redesigned Siri is still in beta, and not due to launch properly until the autumn alongside new iPhones. Its partnership with OpenAI has all but collapsed, and Apple sued the company this month alleging trade-secret theft. Renting intelligence from Google is efficient today. It also leaves Apple dependent on a direct rival for the technology reshaping its industry. There are signs the restraint may not last. In its last report, Apple quietly dropped a long-standing goal of holding equal cash and debt. The change could free up money to spend. Whether that spending comes may fall to someone else. Thursday's earnings call is Tim Cook's last as chief executive, before John Ternus takes over on 1 September. Analysts expect revenue up about 16% on the year. Cook leaves at the very top. He hands his successor a $5tn company. The harder question is how long it can keep winning by not playing.

Apple's Ability To Remain Largely Burden Free From Data Center Expenses And Maintain Cash Generation Is Impressive But Offsetting DRAM Costs Requires A New AI Roadmap

One of Apple's unique traits in the AI and DRAM shortage saga is that, unlike hyperscalers, the Cupertino firm doesn't need to rely on proprietary data center infrastructure or keep up with expansion and upgrades with billions of mandatory investments. With little capital expenditure burdens on its shoulders and the ability to generate billions in its Q3 2026 earnings, one analyst is thoroughly impressed, but believes a new AI roadmap will quell rising memory costs. Siri AI integrations to drive both hardware replacement cycles and recurring subscriptions Apple's 9-month record for capital expenditure fell 28 percent to $6.8 billion, according to KIWOOM Securities analyst Seung-hyuk Kim. The California-based titan is able to maintain these low costs through a hybrid AI infrastructure model that uses its own servers and external cloud partners like Google, taking an entirely different approach from the raging investments hyperscalers are making out of fear of failing in the AI race. However, Seung-hyuk Kim notes that Apple's supply constraints and memory costs have begun to mount, with examples such as the MacBook Neo, which was supposed to ship in droves, reported to have its tally drop by 40 percent in 2026 due to a lack of A18 Pro chips. The same problem will branch out to the upcoming iPhone 18 Pro and iPhone 18 Pro Max, with Apple finding out that, irrespective of how much liquid cash you're sitting on, it matters little when you can't pay for it. With demand almost certainly set to drop due to rising memory costs, Seung-hyuk Kim believes the solution is to develop an AI roadmap that enables recurring service subscriptions while encouraging hardware upgrades. Despite Apple's Services arm missing analyst expectations, the division still brought in $30.74 billion in revenue, slightly lower than the $31 billion reported in Q2 2026, ending a 14-quarter growth streak. While Apple's Services momentum doesn't necessarily look broken, a slowdown is a negative sign, which is why Seung-hyuk Kim recommends Siri AI integrations become paramount going forward. These services can be bundled with iCloud+, giving subscribers more options while also putting up pricing tiers depending on the kind of computing users require. With the DRAM crisis expected to persist until 2028, Apple has already adapted to the market changes, such as introducing a new leasing program where you can save $547 off $1,099 when upgrading to an iPhone 17 Pro for 12 months. After the time expires, users can send it back to Apple to start a new lease on an iPhone 18 Pro. News Source: KIWOOM Securities Follow Wccftech on Google to get more of our news coverage in your feeds.

Apple's Record Results Fail to Ease Growth Concerns | PYMNTS.com

But during the call Thursday evening, as the stock dropped 6%, analysts pressed management on Siri AI, subscription economics, cloud-computing costs, Services growth and the durability of Apple's hardware demand. The trading action, it seems, indicates that investors want to know how the tech giant's artificial intelligence strategy becomes a business, as supply constraints offer some near-term headwinds. Cook opened the call by emphasizing both demand and Apple's AI roadmap. He said Apple Intelligence, including the new Siri AI, is "profoundly capable, deeply personal, and integrated seamlessly across our platforms," adding that early developer and public-beta feedback has been "phenomenal." He argued Apple's focus on private, context-aware AI will "change how users find information and get things done with our products." The company tied that strategy directly to hardware. Apple continues to present AI as another capability that strengthens the appeal of the iPhone, Mac and the broader ecosystem. Analysts asked whether AI could become a meaningful driver of holiday iPhone demand and whether Apple ultimately expects AI users to generate additional subscription revenue. Cook stopped short of announcing a dedicated AI pricing model, but he acknowledged heavier users could migrate to higher service tiers. "We do believe there will be people that want to use it a lot, and so we will have some kind of upgrade possibilities on iCloud Plus where people can buy up the stack on iCloud+," Cook said. Apple has historically absorbed new software capabilities into its hardware ecosystem rather than charging separately for them. Cook's comments suggest Siri AI could instead expand the company's already-growing subscription business. Chief Financial Officer Kevan Parekh noted on the call that Services revenue increased 12% to $30.7 billion, while cloud services and payment services reached all-time highs. Apple has now surpassed 1.5 billion paid subscriptions, while both paid and transacting accounts reached record levels. Payments also continued to become a larger part of that ecosystem. During the quarter Apple introduced Apple Upgrade, a new hardware leasing program launched with Klarna, and said new Apple Cash capabilities, including bill splitting using Visual Intelligence, are planned for later this year. Management said that Apple Pay reached a record number of users in both developed and emerging markets despite foreign-exchange pressure, App Store changes and weaker mobile gaming activity. Supply Constraints, Pricing and the Transition to Ternus Apple guided to 9% to 11% revenue growth for the September quarter, a noticeable slowdown from the June quarter's 16% increase. Executives said the outlook reflects two issues rather than weaker customer demand: a roughly 2.5 percentage-point foreign exchange headwind and significantly tighter supply constraints affecting the iPhone, Mac and iPad. "During the June quarter, we did experience supply constraints ... driven by very high levels of demand," Cook said. Looking ahead, he added, "We continue to expect high levels of demand. However ... we expect the impact from the supply constraints to increase significantly." Component pricing, particularly memory, emerged as another recurring theme. Cook acknowledged that Apple has absorbed successive increases in memory costs for three consecutive quarters and expects those costs to rise again in September. The company has offset some of that pressure through inventory, lower costs for other components and supply-chain management, but he suggested those offsets may become more difficult over time. "We reluctantly raised prices," Cook noted during the call. "We did it because we're in what I would characterize as a hundred-year flood on the memory pricing with exponential increases in memory prices." Parekh later reinforced that point, saying memory inflation accounted for essentially all of the sequential gross-margin decline after adjusting for tariff refunds, while foreign exchange played only a limited role. The call also provided Apple's clearest comments yet on how AI could affect the company's cost structure. Analysts asked whether Siri AI would make Apple a more capital-intensive company as more AI requests move between on-device processing, Apple's own infrastructure and third-party cloud providers. Cook said Apple will continue using a hybrid approach while increasing AI spending across research, operating expenses and infrastructure.

Apple CEO admits AI is driving up cost of Apple products

Tim Cook spent part of July 30 thanking Apple shareholders at the end of what he confirmed would be his last earnings call as CEO. John Ternus takes over Sept. 1, and Cook moves to executive chairman. The farewell was warm. The statement that followed was not. Cook described Apple's memory cost situation as a "100-year flood," language he said he has never used in more than 40 years in the consumer electronics industry. Apple has already raised prices on Macs and iPads. It expects memory costs to climb further in the current quarter. And it warned that supply constraints will affect iPhone, Mac, and iPad sales in September, Yahoo Finance reported. What Tim Cook said about memory prices on Apple's Q3 2026 earnings call Cook's exact words on the call: "On the pricing front, you know, we reluctantly raised prices. I would say we did it because we're in what I would characterize as a 100-year flood on memory pricing with exponential increases in memory prices, so that was the rationale for it." Apple's Q3 2026 numbers came in ahead of estimates. Earnings per share were $2.02 against a $1.89 consensus. Revenue was $109.4 billion versus the $108.8 billion estimate. iPhone revenue hit $54.2 billion, above the $53.5 billion projection. But the memory issue dominated the call. CFO Kevan Parekh said that without rising memory costs, Apple's gross margins would have been materially stronger. Memory accounted for more than the entire sequential decline in adjusted gross margin between the March and June quarters, Benzinga reported. Cook confirmed Apple has paid rising memory costs for three consecutive quarters. Why memory prices are driving Apple to raise prices on its products The memory cost surge is driven by AI data-center demand. Companies including Nvidia, Microsoft, Amazon, and Meta have been buying high-bandwidth memory and advanced DRAM at a pace that has overwhelmed supply. SK Hynix, Samsung, and Micron, the three companies that control the global DRAM market, have largely sold out their premium AI memory capacity through much of 2026. A federal class-action antitrust lawsuit filed in California in June 2026 accuses all three of coordinating a supply restriction that drove conventional DRAM prices up approximately 700% over four years, Rain Intelligence noted, though those claims have not been proven in court. The price impact on Apple's own products is specific and measurable. TechInsights estimates the DRAM package in an iPhone 18 Pro will cost Apple approximately $145, MacRumors reported, compared with roughly $39 for the equivalent package in the iPhone 17 Pro, a 272% increase for the same memory. Cook called for more competition in the memory supply chain. "Primarily the DRAM market has three suppliers," he said, and suggested the industry needs to expand beyond them. He added that Apple expects to pay "even higher memory costs" in the September quarter, only partially offset by lower prices on some non-memory components and existing inventory purchased before prices surged. What the memory flood means for the iPhone 18 and Apple stock Cook did not confirm whether Apple will raise iPhone prices when the iPhone 18 Pro and the company's first foldable device arrive in September. Multiple analysts believe prices will go up. SK Hynix's own July 2026 forecast identified 2027 as the worst year for supply shortages in semiconductor history, according to Silicon Analysts. Bloomberg Intelligence projects conditions may ease by 2028 as new capacity comes online, 24/7 Wall St noted, but that is a minority view and does not help Apple in the near term. Apple's stock fell sharply after the earnings call as investors processed the supply constraint warnings and the below-consensus Q4 outlook, Barron's reported. The company's shares had been up 23% in 2026 heading into the print, outperforming most large-cap tech peers that have been weighed down by AI capital spending concerns. The memory crisis changes part of that equation. What Cook's final earnings call means for Apple investors going forward Cook is handing off to Ternus at a complicated moment. The Q3 beat was real. The memory problem is also real. Apple paid higher memory costs for three straight quarters and expects to pay more in the fourth. The company's gross margins are under pressure in a way that is not explained by demand softness but by a structural supply crisis in a market controlled by three companies. Apple has 1.5 billion paid subscriptions across its services platform, and services revenue has been growing consistently. But services brought in $30.7 billion in Q3, slightly below the $31.3 billion the Street expected. The hardware business is carrying a cost burden that services growth alone cannot offset at current memory prices. The "100-year flood" language was deliberate. Cook has spent four decades in consumer electronics. He chose that phrase to make sure no one walked away thinking this resolves quickly. Whoever is running Apple's earnings calls in 2027 is almost certainly going to be talking about memory costs, too. The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc. This story was originally published August 1, 2026 at 1:07 PM.

Apple retakes Wall Street's crown from Nvidia

This handover above all highlights a shift in investor perceptions of artificial intelligence. Long penalized for its apparent lag in generative AI, Apple is now benefiting from a model that is far less capital-intensive than that of the hyperscalers. While Microsoft, Alphabet, Meta and Amazon are pouring hundreds of billions of dollars into data centers, to the point of consuming nearly all of their free cash flow and forcing them to raise capital in the markets, Apple is sticking with its asset-light approach, built on integrating external models, its massive installed base, and its ability to monetize AI through services and iPhone upgrades. At the same time, enthusiasm around AI infrastructure has cooled since early June. The Philadelphia Semiconductor Index has fallen more than 20% from its recent high, while Nvidia, still the leading beneficiary of hyperscaler capex, is down about 13% from its mid-May record. The crown remains fragile nonetheless, as Apple will report quarterly results on Thursday, July 30, with consensus expectations near $109bn in revenue. The market will primarily look to confirm that strength in iPhone and services supports a now record valuation, as higher component costs could start to weigh on margins. Attention will then shift to the traditional September keynote, which will carry particular weight this year as it comes a few days after John Ternus takes over as CEO on September 1, with Tim Cook becoming Executive Chairman. The event could offer clues about Apple's strategic priorities under the former head of hardware engineering. The group is expected in particular to unveil the iPhone 18 Pro and Pro Max, as well as its first foldable iPhone, a launch that could revive hardware innovation and support the device upgrade cycle.