Apple beat its quarterly financial expectations in Chief Executive John Ternus’s first earnings report since taking over Tim Cook’s post in September, though the company continues to be pressured by a surge in memory chip costs.
The iPhone maker posted revenue of $114.5 billion in its fiscal fourth-quarter, up 12% year-over-year and above Wall Street targets of $113.4 billion. Its profit was $30.7 billion, or $2.10 per share.
Ternus extolled the company’s expanding lineup of products during a conference call with analysts, including the all-important iPhone business, which grew 17%, to $57.58 billion, in the three months ending on Sept. 26.
Apple said that it expects overall revenue to grow between 7% and 10% year-over-year in the current, holiday quarter, seasonally Apple’s strongest quarter of the year. The forecast suggests a range of $153.8 billion to $158.2 billion, compared to the $153.2 billion that analysts were expecting. But the outlook for profit margins seems to have left investors cold.
Shares of the $4.9 trillion company fell as much as 4% in after hours trading on Monday, before recovering some ground to trade down 2.7%.
Many investors have been watching the impact of rising memory chip prices on Apple and how it will weigh on profit margins. To help offset what Ternus described on Monday’s call as an “unprecedented” situation in the memory market, Apple has raised prices across its product line. Apple’s gross margin weighed in at 47.9% in the recently ended quarter, landing near the high end of its forecast range and above the 47.2% gross margin it posted in the year-ago period. But Apple’s chief financial officer, Kevan Parekh, said tariff refunds lifted the gross margin by roughly one percentage point; without them, it would have been lower.
For the current, holiday quarter, Apple said it expects gross margins to decline, ranging between 45% and 46% due to rising memory costs and some costs associated with ramping up its Siri AI service.
Ternus has marked his first couple of months at Apple with a slew of product releases that have helped the engineer savant show off Apple’s latest innovations and ease into the new job. That has included the September launch of the foldable iPhone Duo, followed by new home products, and last week’s unveiling of Apple’s first touch screen MacBook Pro.
Ternus said in a written statement that iPhone revenue reached a September quarter record and Services posted an all-time high, “capping off our best fiscal year ever.”
“We’re closing the year with our most ambitious lineup yet,” he said. “Together with the all-new Siri AI, it’s an incredible lineup to carry us into the holiday season.”
Apple’s Services revenue, which includes iCloud, the App Store, and other services, was $31.57 billion, up roughly 10% year-over-year. But sales in the company’s iPad business and its wearables business both declined.
Apple’s earnings followed financial reports from its Big Tech peers. Meta, Microsoft, Google, and Amazon all revealed their latest earnings in the last two weeks. While the companies generally had positive results, shares in the Nasdaq Composite have sunk in recent days as investors have weighed Big Tech’s positive growth, especially in cloud-computing demand for AI services, against the hundreds of billions Microsoft, Amazon, and others are spending in AI infrastructure.
This story was originally featured on Fortune.com