Apple will pay even more for memory in the September quarter than it did in the June quarter, CEO Tim Cook told analysts on the company's earnings call on July 30, after memory costs accounted for more than the entire sequential decline in Apple's adjusted gross margin. Cook, speaking from Cupertino on his final call before John Ternus takes over as CEO, called the market "a hundred-year flood on the memory pricing." Apple's consolidated financial statements for the quarter ended June 27 put inventories at $11.09 billion, up 87% year over year, with $5.46 billion of cash consumed building that position over nine months. CFO Kevan Parekh said the benefit Apple gets from that carry-in inventory shrinks after September.
Apple held $5.93 billion of inventory at the end of June 2025 and $5.72 billion at its September fiscal year end, so the $11.09 billion reported for June 27 is a 94% increase in nine months. The cash flow statement puts the same movement at $5.46 billion consumed by inventories over those nine months, against a $1.22 billion release in the year-ago period. Measured against quarterly cost of sales of $54.65 billion, the June position works out to roughly 18.5 days of inventory, up from about 10.7 days a year earlier. Apple has run one of the leanest working capital positions in consumer electronics for two decades, but that has now been flipped on its head.
Parekh told analysts the carry-in inventory partially offset memory costs in the June quarter and will do so again in September, with a decreasing benefit beyond that. Cook said market pricing for memory keeps rising past September and that the effect on Apple's business could grow. Erik Woodring of Morgan Stanley asked whether Apple intends to pursue multi-year long-term agreements with suppliers at pre-agreed prices. Cook answered the second half of the question, on pricing philosophy, and left the agreements question alone.
Company gross margin was 49.3% in the March quarter and 48.1% in June, once the roughly two percentage points of tariff refunds come out, Parekh said, and more than 100% of that 120 basis point decline is explained by memory costs. Apple guided September gross margin to 47% to 48%, including about one percentage point of tariff refunds, putting the adjusted midpoint near 46.5%, and Parekh attributed that step down to the same dynamic. Foreign exchange was a factor in the June quarter but not the main one.
The cost of sales for products rose 8.1% year over year to $47.15 billion, while product revenue increased 18.1% to $78.68 billion, which lifted product gross margin to 40.1% from 34.5%. The Mac and iPad price increases that came in June, the tariff refunds, and the stockpile together more than covered the memory increase in the reported quarter. On the other side of the trade, SK hynix ran a 76% operating margin over the same three months on revenue of 79.32 trillion won and operating profit of 60.54 trillion won, the company said recently, and guided third-quarter DRAM bit shipments up only about 10% sequentially. TrendForce expects conventional DRAM contract prices to rise a further 13% to 18% in the third quarter.
Cook, asked whether Apple's push for sourcing flexibility is about securing volume or protecting its price points, said the DRAM market has three suppliers and that more of them would help on the supply side and perhaps on pricing, then corrected himself to say the pricing effect is unclear. He said Apple is "evaluating all options." The fourth supplier available to him is CXMT, which the Financial Times reported in July that Apple has begun testing DRAM for devices sold in China while lobbying Washington for clearance to use its parts more broadly. Representatives John Moolenaar and George Whitesides wrote to Commerce Secretary Howard Lutnick earlier this month, asking for purchases from CXMT and YMTC to be barred outright, including through allied supply chains. CXMT listed on Shanghai's STAR Market in July.
The unit supply constraints Apple flagged for the September quarter are a separate problem from memory pricing. Cook attributed them to the availability of the advanced process nodes Apple's SoCs are built on, after iPhone and Mac demand ran ahead of the company's plan, and said they'll hit iPhone, Mac, and iPad in September, against Mac primarily in the June quarter. Apple guided September revenue growth of 9% to 11% year over year, down from 16% in the previous quarter.
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