Apple warned on Monday (Nov 2) that the cost of memory chips would continue to rise, pressuring gross margin for the crucial holiday quarter, but said it had taken steps to lock in supplies.

According to a Reuters report on November 2, company shares, little changed in after-hours trading after fiscal fourth-quarter results beat expectations, fell 4 percent Nov. 2 during a conference call after executives outlined the weaker outlook, but later pared losses to a 2 percent decline.

Early demand for the iPhone 18 Pro lineup and higher prices boosted the quarter. Apple said it expects gross margin of 45 percent to 46 percent in the quarter ending in December, down from 47.9 percent in the fourth quarter.

It forecast services revenue growth of 8 percent to 9 percent, below analysts’ expectations of 10.7 percent.

The results come as Apple experiments with a string of firsts under new CEO John Ternus, who took over in September.

After nearly two decades of launching most new iPhones each autumn, Apple this year is spacing them out, with iPhone Pro and Duo models shipping this year and other models expected next year.

Apple also released a bevy of new non-iPhone products this quarter, including its first touchscreen laptops and first smart-home hub.

The steady drumbeat of releases, analysts said, is meant to smooth out Apple’s yearly revenue cycle, which for decades showed a huge holiday-quarter boom that petered out by late summer.

Fiscal fourth-quarter sales were $114.48 billion, above analyst estimates of $113.39 billion, according to LSEG data.

In an interview with Reuters, Ternus said “a very small percentage” of iPhone Duo units had been returned for display issues and that Apple is replacing them.

Fourth-quarter iPhone sales, which included iPhone 18 Pro models but not Duo, were $57.58 billion, above estimates of $56.54 billion, according to LSEG data.

The staggered launch strategy comes as Apple faces headwinds from an AI-driven memory-chip price spike that could dampen the margin boost Apple derives from storage upgrades.

As it launched the iPhone 18 Pro, Apple also raised iPhone 17 prices by $100 and increased some MacBook prices, softening the blow of rising memory costs.

“We did see higher memory costs as compared to the June quarter, which was partially offset by the benefit of carrying inventory and lower costs on certain non-memory components,” Ternus said.

Apple also pointed to Siri AI, which runs partially in Google’s cloud, as a factor impacting margins. The company plans to charge more for iCloud+ subscriptions to offset AI costs, though it has not rolled out specific pricing.

Mac sales were $10.79 billion, above estimates of $9.61 billion. Services revenue was $31.57 billion, in line with estimates of $31.58 billion. iPad and wearables sales were $6.23 billion and $8.30 billion, both below estimates.