Shares in Apple fell 4.5% in Tuesday’s premarket trading, declining to $323.48 following a drop of nearly 2% on Monday, KuCoin reported based on a MarketWatch article. The downward pressure followed fourth-quarter financial results that beat Wall Street consensus on revenue and earnings per share but failed to reassure investors regarding future profitability and services growth.
Apple posted fourth-quarter revenue of $114.5 billion and earnings per share of $2.10. However, traders were unsettled by gross margins for the three-month period ended September, which came in at 47.9%—lower than the previous quarter—due to an unprecedented surge in memory chip costs. For the upcoming quarter, the company projected gross margins between 45% and 46%, falling short of Wall Street projections of 47%.
Memory Costs and Siri AI Investments Weigh on Margins
Management attributed the margin pressure to two primary factors: prolonged high memory chip prices and ongoing costs associated with ramping up the Siri artificial-intelligence assistant. Analysts at Evercore ISI, led by Amit Daryanani, wrote in a Monday note that they expect Apple to navigate a choppy gross margin environment until memory prices stabilize and clear evidence emerges that Siri AI can be successfully monetized.
While Goldman Sachs analysts, led by Michael Ng, reported increased confidence in the iPhone refresh cycle, they also highlighted a deceleration in the company’s services unit. Apple projected current-quarter services revenue growth between 8% and 9%, trailing analyst estimates of 12%. Although services revenue reached an all-time high of $31.57 billion in the fourth quarter, this represented growth of just 9.8%, down from 12.1% in the prior quarter.
Broader Segment Slowdown and Market Outlook
In addition to services, Apple pointed to lower-than-hoped-for revenue within its wearables, home, and accessories segment. Morgan Stanley analysts, led by Erik Woodring, noted that while the company possesses multiple potential tailwinds to ease pressures in its services segment, the current slowdown could extend into the March quarter.
Market analysts emphasize that tech sector investors will closely monitor component pricing trends and AI feature adoption rates to determine when profit margins might recover. Until memory chip pricing pressures abate, the company’s near-term valuation is expected to remain sensitive to quarterly margin guidance updates.