Can Apple Stock’s Premium Survive The Memory Squeeze On Its Margin?

Apple (AAPL) is selling iPhones and Macs faster than it can build them, but the number a holder should fear most is the gross margin underneath those sales. Leaving out tariff refunds, that margin fell in the June quarter and is guided lower again for the September quarter. Management puts both steps down to rising memory prices, while the stock’s price-to-earnings multiple sits near the top of its 10-year range.

Excluding Tariff Refunds, Apple’s Margin Slips As iPhone And Mac Set June-Quarter Records

Demand is not the worry. iPhone revenue rose 22% from a year earlier in the June quarter and Mac revenue rose 29%, both June-quarter records. Management says the brake on sales is supply of the advanced nodes its chips are made on.

Reported gross margin was 50.1% in the June quarter, but tariff refunds supplied about two points of it. Without them, the margin fell 120 basis points from 49.3% in the March quarter, and the September-quarter guide takes off another 160 basis points at its midpoint. On $466.8 billion of revenue over the past year, each point of gross margin is worth about $4.7 billion of gross profit.

And Management Says Memory Prices Explain All Of That Slide

Higher memory costs, by management’s account, more than explain both the June-quarter drop and the guided September-quarter step, with currency a smaller factor. Management likens memory pricing to a once-in-a-century flood.

Apple paid more for memory in the March quarter than in the December quarter, much more in the June quarter, and expects to pay even more in the September quarter. Offsets such as carry-in inventory, cheaper non-memory components and a favorable product mix only partly soften the blow.

Apple Warns The Squeeze Could Grow After September

The inventory cushion is set too thin. Beyond the September quarter, management expects less help from carry-in inventory and sees market prices for memory still rising, which could have an increasing impact on the business. The tariff refund benefit shrinks too, to about one point in the September-quarter guide.

Apple’s levers are imperfect. It has already raised prices on Mac and iPad, a step management called reluctant, and said it was too early to judge how buyers would respond. Memory supply is also concentrated, with three main suppliers in the DRAM market.

At 37 Times Earnings, Apple Has Little Room For A Miss

Apple trades at 37.1 times trailing earnings, close to the 39.3 top of its 10-year range, and its price-to-sales multiple sits above its 10-year high. A valuation like that likely assumes margins hold, and the September-quarter guide already points lower.

So how worried should a holder be? Enough to question the premium, though not enough to expect a collapse, because demand is still outrunning supply and gross margin is still guided at 47% to 48%, including about one point of tariff refunds. Even so, management expects supply constraints to hit September-quarter sales significantly harder. The next tests are whether Mac and iPad buyers keep coming after the price increases, and whether the September-quarter margin lands inside that guide. Apple’s options already price an unusually large move, with implied volatility in the 73rd percentile of its one-year range.

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