CUPERTINO, Calif. — Apple warned investors that intensifying supply chain constraints driven by the global artificial intelligence boom are expected to weigh on revenue growth and profitability in the coming months, even as the technology giant posted stronger-than-expected quarterly earnings and prepared for a major leadership transition.
The company projected revenue growth of between 9% and 11% for the quarter ending in September, falling short of Wall Street expectations of roughly 12%. Executives also cautioned that profit margins would narrow as shortages of critical memory components continue to ripple through the technology industry, reflecting the growing competition for semiconductor capacity between consumer electronics manufacturers and companies investing heavily in AI infrastructure.
Apple shares fell more than 6% in after-hours trading after Chief Executive Tim Cook warned that supply chain limitations were likely to become significantly more severe later this year.
“We expect the impact from less flexibility in the supply chain to increase significantly,” Cook told investors during the company’s quarterly earnings conference call.
The warning underscores how the rapid expansion of artificial intelligence has reshaped the semiconductor market. Technology companies building massive AI data centers have dramatically increased demand for advanced chips and high-bandwidth memory, pushing prices sharply higher and reducing supplies available to manufacturers of smartphones, laptops and other consumer devices.
Unlike many competitors, Apple has largely weathered the broader slowdown in the global smartphone market over the past year. Strong demand for premium iPhones and Mac computers, combined with the company’s pricing strategy and loyal customer base, helped offset rising production costs even as other electronics makers struggled with weakening consumer spending.
However, Apple executives acknowledged that industry-wide shortages are becoming increasingly difficult to avoid.
Chief Financial Officer Kevan Parekh said higher-than-expected demand for Apple’s products had already strained manufacturing capacity during the June quarter, while shortages of memory chips are expected to place additional pressure on production during the second half of the year.
Cook said memory prices have risen enough to become a meaningful concern for Apple’s operations and could increasingly affect the company’s financial performance through the remainder of the year.
The company relies heavily on three major suppliers for advanced DRAM memory chips—Micron, SK Hynix and Samsung—and Cook reiterated Apple’s desire to diversify its supplier base to reduce future supply risks.
Apple has reportedly sought assurances from the Trump administration that it will eventually be permitted to source advanced memory products from Chinese manufacturer CXMT, a proposal that has drawn criticism from some U.S. lawmakers concerned about national security and America’s technology competition with China.
Despite its cautious outlook, Apple delivered another quarter of solid financial results.
Revenue reached $109.4 billion during the three months ending in June, an increase of 16% from a year earlier and slightly above analysts’ expectations. Net income climbed to $29.8 billion, comfortably exceeding market forecasts.
The iPhone remained Apple’s largest source of revenue. Sales reached $54.3 billion, representing nearly 22% year-over-year growth and outperforming analysts’ projections despite ongoing weakness across the broader smartphone industry.
Mac computers also posted robust results. Revenue from the Mac business totaled $10.4 billion, well ahead of market expectations, reflecting continued demand for Apple’s latest generation of processors and laptops.
Not every segment performed equally well, however. Revenue from Apple’s services division—including subscriptions, cloud offerings and digital content—came in below analyst estimates. Sales in Greater China also missed expectations, although regional revenue still increased 22% compared with the previous year, suggesting continued recovery after an extended period of softer demand.
Apple’s resilience has stood out among major consumer electronics manufacturers as rivals have increasingly raised prices to offset higher component costs. By largely maintaining iPhone pricing, the company expanded its global smartphone market share to approximately 20% during the quarter, up from 17% a year earlier, even as worldwide smartphone shipments declined by an estimated 11%.
Industry analysts have attributed much of Apple’s competitive strength to its decision to absorb rising manufacturing costs rather than immediately passing them on to consumers.
The pressure on component prices, however, continues to intensify. According to industry data, prices for advanced memory chips surged roughly 300% during the second quarter alone as cloud providers and AI developers aggressively secured supplies needed to expand data center capacity.
Apple has already begun adapting its business strategy to manage those higher costs. Earlier this year, the company implemented a rare price increase of roughly 20% for certain MacBook and iPad models, citing higher component expenses.
The company is also expected to introduce higher prices for future iPhone models later this year while adjusting its product launch schedule to ease manufacturing pressure. Industry observers expect Apple to stagger the release of its entry-level iPhone 18 and the next-generation iPhone Air, allowing suppliers additional time to meet production targets.
To help offset the impact of higher device prices on consumers, Apple recently announced a partnership with financial technology company Klarna that will allow U.S. customers to lease new iPhones through monthly installment payments starting at $17.99.
Apple also forecast weaker profitability in the current quarter. Gross margin reached 50% during the June period, supported in part by refunds related to emergency tariffs imposed during President Donald Trump’s administration that were later invalidated by the U.S. Supreme Court.
Excluding that temporary benefit, executives expect gross margins to decline to roughly 46.5% during the September quarter as component costs continue rising.
The earnings announcement also comes during a pivotal moment for Apple’s leadership. Tim Cook, who has led the company since 2011 and transformed it into one of the world’s most valuable businesses, is preparing to step down as chief executive in September.
Hardware chief John Ternus is expected to succeed Cook, inheriting responsibility for one of the world’s most sophisticated manufacturing and logistics networks at a time when global semiconductor supplies remain under unprecedented strain.
Although Apple has recently regained its position as the world’s most valuable publicly traded company and briefly surpassed a $5 trillion market valuation, the company’s next leadership team will face mounting challenges as AI-driven demand reshapes global technology supply chains, intensifies competition for critical components and tests Apple’s ability to sustain its growth while protecting profitability.
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