Apple shares fell about 3% in after-hours trading after the iPhone maker beat forecasts for the September quarter but warned that rising memory costs would squeeze profit margins over Christmas.
The stock closed at $338.32 on Monday, having already dropped 1.83% in regular trading.
It briefly rose after the results landed, then fell as much as 4.4% during the earnings call before ending the after-hours session at $328.81, down 2.81%.
These were the first results under John Ternus, who took over as chief executive from Tim Cook on 1 September.
Step one: the headline numbers
Revenue rose 12% to $114.5 billion in the three months to 26 September, ahead of the $113.4 billion analysts expected.
Earnings per share rose 14% to $2.10, beating forecasts of $1.99.
That beat included a five-cent boost from tariff refunds.
Step two: what went well
iPhone revenue rose 17% to $57.6 billion, a record for a September quarter, helped by the iPhone 18 range and a $100 price rise on the Pro models.
Mac was the surprise, with revenue up 24% to $10.8 billion.
Greater China revenue rose 21% to $17.54 billion, though that was below the $18.75 billion analysts had pencilled in.
Gross margin, the share of sales left after production costs, was 47.9%, but about one percentage point of that came from tariff refunds.
Step three: the weak spots
Services revenue, which includes the App Store, iCloud and Apple Music, grew 9.8% to $31.6 billion, broadly in line with forecasts but the slowest pace in years.
iPad revenue fell 10%, which Apple blamed on supply shortages, while wearables and accessories dropped 8%.
Operating cash flow of $28 billion fell well short of the roughly $35 billion analysts expected, and inventories climbed to $14.5 billion from $5.7 billion a year earlier.
Step four: the margin warning
This is what spooked investors.
Apple forecast a gross margin of 45% to 46% for the December quarter, below the 46.3% analysts expected.
Ternus described the rise in memory chip prices as unprecedented and said costs were likely to keep climbing this quarter and beyond.
Step five: slower services growth
Apple expects services revenue to grow 8% to 9% in the December quarter, short of the 10.7% analysts forecast.
It blamed unfavourable currency moves, regulation and a continued slowdown in mobile gaming.
Step six: the good news on sales
Apple expects December-quarter revenue to rise 7% to 10%, to between $153.8 billion and $158.1 billion, which would be its best quarter ever.
That is ahead of the roughly 6% growth Wall Street expected, despite continued shortages of Mac and iPad models.
Step seven: what analysts say
Dan Ives at Yorkville Ives said the 17% iPhone growth and strong margin answered worries about component order cuts and memory costs.
He flagged the services slowdown and the cash flow shortfall as likely sources of questions.
Before the call, Ives said the December margin guidance would decide whether memory costs or pricing would win the profit argument over the holiday quarter.
On that measure, memory costs came out ahead. Yorkville Ives kept its outperform rating and $400 price target.
