Apple (NASDAQ: AAPL) CEO Tim Cook issued a striking warning on his final earnings call before handing leadership to incoming CEO John Ternus, describing current memory chip pricing as a “100-year flood”-level event.
The warning was not hyperbole, as some memory prices surged by as much as 90% in the first quarter of 2026 alone, driven by a technology industry rush to secure chips for devices and data centers.
The supply-and-demand imbalance driving those price spikes could take years to resolve, raising serious questions about Apple’s ability to protect its historically strong margins.
In Apple’s fiscal third quarter, which ended June 27, the company reported a gross margin of 50.1%, a figure that included a two-percentage-point benefit from a tariff refund.
Without that tariff benefit, the gross margin would have landed at the midpoint of guidance and declined quarter over quarter, highlighting the underlying pressure on profitability.
CFO Kevan Parekh stated that “more than 100% of that can be explained by the memory cost change,” making clear that rising chip costs are the dominant force weighing on the company’s financials.
Looking ahead to the fiscal fourth quarter, Apple guided for gross margin of between 47% and 48%, which itself includes a one-percentage-point tariff benefit, suggesting the underlying situation is notably worse.
Parekh acknowledged that the expected margin decline could be partially offset by price reductions on other components and by existing inventory, but indicated that the peak impact from higher-priced memory shipments may still be approaching.
Apple has already moved to raise prices on its Mac lineup and other devices since June, and further price increases are possible when the latest iPhone models launch in September.
The company’s large-volume purchasing relationships with suppliers have historically afforded it better pricing power on components, including memory, which may provide some cushion against the broader market spike.
iPhone sales grew 22% year over year in the third quarter, continuing a streak of strong growth that has persisted across the past three consecutive quarters.
Cook noted that Apple is actively working to reduce costs on other components to help offset the rising memory chip burden, providing at least a partial buffer for margins in the near term.
Despite those efforts, Cook warned that memory prices were expected to continue climbing beyond the September quarter and said the trend “could drive an increasing impact on our business.”
If memory costs remain elevated and Apple is forced into repeated price increases across its product lines, it risks alienating cost-sensitive consumers at a time when household budgets remain under pressure.
The transition from Cook to Ternus adds another layer of uncertainty, as the incoming CEO will inherit a pricing environment that Apple’s own outgoing leader described in historically stark terms.
