The Fruity Cargo Cult, Apple celebrated its supposedly glorious financial year while warning that its crucial Christmas quarter would deliver weaker margins.
Apple chief executive John Ternus proclaimed “our best fiscal year ever”, a conveniently backwards-looking assessment as rising costs began to spoil the next quarter’s arithmetic.
Wall Street’s cocaine nose jobs were unimpressed. Shares fell approximately four per cent during the results call before recovering some ground to trade around two per cent lower.
Investors had spotted the awkward bit beneath the corporate confetti. Job’s Mob expects December-quarter gross margin of 45 to 46 per cent, down from 47.9 per cent in the September quarter.
Even that September figure benefited from tariff refunds, which added about one percentage point to gross margin and five cents (€0.045) to earnings per share.
Apple still beat earnings expectations without the refund. However, presenting the quarter’s profitability without examining that temporary benefit gives the accounts a polish worthy of an Apple product photograph.
Quarterly revenue reached $114.5 billion (€102.09 billion), up 12 per cent, with net income of $30.7 billion (€27.37 billion). The problem for investors was what Apple said would happen next.
Memory costs are expected to keep rising into next year, according to Apple chief financial officer Kevan Parekh. Suppliers appear distressingly eager to keep the profits for themselves.
Chief operating officer Sabih Khan said purchasing commitments increased by $33 billion (€29.42 billion) during the quarter. Apple is evidently no longer exempt from unpleasant conversations with its purchasing department.
The dependable services business offered limited reassurance. Apple forecast growth of eight to nine per cent for the December quarter, below analysts’ expectations of 10.7 per cent.
There were weaknesses in the reported quarter too. iPad revenue fell 10.4 per cent to $6.2 billion (€5.53 billion), while Wearables, Home and Accessories declined 7.9 per cent to $8.3 billion (€7.40 billion).
Ternus nevertheless described the product range as “our most ambitious lineup yet”. Ambition is helpfully absent from the expense column, unlike the memory chips needed to manufacture it.
Apple plans to raise iCloud+ subscription prices to offset AI costs, although it has not announced specific charges. Customers can therefore look forward to helping finance the next round of executive superlatives.
