Investors are reacting negatively to Apple's weak earnings guidance, which stems from supply chain pressures, with the stock falling as much as 9.3% in early Friday trading.
Apple acknowledged that high memory prices and supply chain constraints are expected to weigh on its profit margins. The company projected a gross margin of 47% to 48% for the September quarter, down from approximately 50% in the June quarter, even when including a roughly one percentage point positive impact from tariff rebates.
Chief Executive Officer Tim Cook stated during the earnings call that the company is facing very significant constraints, with limited flexibility in the supply chain for remediation. Supply restrictions may also erode revenue opportunities for the iPhone, iPad, and particularly the Mac.
Apple's revenue outlook suggests a growth rate of 9% to 11% for the September quarter, falling short of the FactSet consensus expectation of over 12%. Analysts at Evercore ISI noted that investors may struggle to accept the company's profit margin trajectory in the second half of the year. They believe some of Apple's difficulties stem from its own success, as it underestimated demand, especially with strong Mac sales forcing it to procure advanced components ahead of time.
Bernstein analysts argued that while memory cost pressures are concerning, Apple's position remains unmatched. If the current decline holds through the close of trading, it would mark Apple's worst post-earnings performance since January 24, 2013, when shares dropped 12.4%, and its largest single-day drop since March 16, 2020, when they fell 12.9%.
This decline could result in the company losing approximately $460 billion in market value. Despite this drop, Apple's stock is still up about 11% year-to-date.
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