Apple said it is facing severe supply constraints that will affect sales of iPhones and Macs in the months ahead, underscoring the challenges looming over the company as Tim Cook prepares to hand over the CEO reins.
In his final earnings call as CEO, Cook said he has never been more optimistic about the opportunities ahead for Apple. “I am beyond excited,” said Cook, who has led the company for 15 years and will pass the CEO baton to John Ternus in September. But Cook’s confidence in the future stood in contrast to the picture that he and other executives painted of the current business conditions.
“We’re seeing some very significant constraints currently, with limited flexibility in the supply chain,” Cook said. “There’s a quarter where we’re going to be scrambling on the supply side,” he acknowledged at another point.
The supply crunch is making it more difficult for Apple to obtain the advanced processors it needs for its phones and computers. And that translates into lower revenue.
Sales of the iPhone, which accounts for roughly half of Apple’s business, will grow at a “mid-teens” percentage rate in the current quarter, Apple said, forecasting a significant deceleration from the 22% growth the iPhone business posted in the recently ended quarter. Total revenue in the current quarter will grow between 9% and 10% year-over-year, which was below the 12% rate expected by analysts.
Gross profit margins, which came in at 48% of revenue (excluding the benefit of tariff refunds) in the most recent quarter, will come under pressure in the current quarter, Apple said.
Shares of Apple fell as much as 8% in after hours trading on Thursday following the earnings results, before regaining some ground, with the stock later trading down roughly 6% from its closing price of $333.85.
Apple, the world’s most valuable company (market cap $4.9 trillion!), has been one of the best performers among Big Tech stocks this year, with its shares up 23% in 2026. While Apple has been late to the AI game and struggled to develop its own AI models, investors have come to appreciate that the company is not locked in the AI infrastructure arms race that has swelled capital expenditures at Meta, Google, Microsoft, and Amazon.
Last week, Google-parent company Alphabet’s stock plunged 7% after it raised its capex forecast for the year to above $200 billion and reported its first ever negative free cash flow. Meta’s stock took a similar drubbing this week.
While Apple is not spending hundreds of billions in capex, its business is still feeling the effects of the AI arms race, specifically when it comes to memory chips. The demand for memory chips in the data centers being built to power AI is causing a shortage and sending prices skyrocketing.
