● Covered by 2 sources · 2 reportsMedium impact1 negative1 neutral
Apple Forecasts Lower Holiday Quarter Profit Margins Due to Memory Costs and Siri AI
Key points
- Q4 2026 gross margin fell to 47.9% from 50.1% in Q3.
- Product gross margin dropped to 37.2% from 40.1%.
- Q1 2027 gross margin forecast is 45-46%.
- Higher memory costs and Siri AI expenses are the primary drivers.
- Apple's Q1 2027 gross margin forecast of 45-46% is below the 46.3% analyst estimate.
- Apple shares dropped 2% after the gross margin forecast.
- The Q1 2027 margin drop would be the third consecutive decline for Apple.
Gross Margins Decline in Q4 2026
Apple's gross margin decreased to 47.9% in the fourth quarter of 2026, a reduction from 50.1% in the prior quarter. Product gross margin also saw a decline, falling to 37.2% from 40.1%. This represents a 2.2-percentage-point decrease in company-wide gross margin and a 2.9-percentage-point drop in product gross margin, occurring despite the company achieving record September quarter revenue of $114.5 billion.
Impact of Memory Costs and Tariff Refunds
Apple CFO Kevan Parekh stated that rising memory costs were a primary factor in the margin decline. Tariff refunds provided some relief, contributing approximately 1 percentage point to the September quarter's gross margin. Without these refunds, the sequential decline in both company and product gross margins would have been about one percentage point, driven mainly by increased memory expenses.
Q1 2027 Margin Forecast
Apple projects its gross margins for the first quarter of 2027 to be between 45% and 46%. This anticipated further decline is attributed to continued high memory costs and the financial impact of the ongoing Siri AI rollout.
Siri AI's Effect on Profitability
The Siri AI rollout is expected to affect Apple's margins in two ways. Firstly, operating the Siri AI service will increase cloud infrastructure costs. Secondly, Apple will adjust its revenue recognition for devices incorporating Siri AI, spreading some revenue over the device's lifetime rather than recognizing it entirely at the point of sale.
Updates
- Apple's Q1 2027 gross margin forecast of 45-46% is below the 46.3% analyst estimate.
- Apple shares dropped 2% after the gross margin forecast.
- The Q1 2027 margin drop would be the third consecutive decline for Apple.
✨ This summary was generated by AI from the outlets' reporting listed below. It is not independently verified and may contain errors — check the original sources. How BrevFeed works →
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How outlets covered it
Apple's CFO Kevan Parekh announced that the company's gross margin for the December quarter is projected to be between 45% and 46%, below the 46.3% analyst estimate. This decline is attributed primarily to increased memory costs and expenses related to the ramp-up of Siri AI, leading to a 2% drop in Apple's shares.
Apple reported a decline in gross margins to 47.9% in Q4 2026, down from 50.1% in the previous quarter, despite record revenue. The company forecasts further margin compression to 45-46% for Q1 2027, attributing this to rising memory costs and increased expenses related to the Siri AI rollout.