Speaking to analysts during the earnings call for the fiscal quarter that ended in June, Apple's outgoing chief executive described the current memory pricing environment as a hundred-year flood. Tim Cook said the company will face even higher costs for DRAM and NAND components in the September quarter than it did in the period just closed. The statement comes as the increase in memory prices accounted for more than the entire sequential decline in Apple's adjusted gross margin.
Inventory nearly doubles in nine months to cushion the memory crunch
Apple's consolidated balance sheet reveals inventories of 11.09 billion dollars as of June 27, an 87 percent jump year over year and a 94 percent increase in nine months. The company held 5.93 billion dollars in inventory at the end of June 2025 and 5.72 billion at its previous fiscal year end. The cash flow statement shows that building that position consumed 5.46 billion dollars over three quarters, compared with a 1.22 billion release in the year-ago period. Inventory days have risen to roughly 18.5 from about 10.7 a year earlier.
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Memory costs explain more than the full drop in gross margin
Company gross margin came in at 49.3 percent in the March quarter and 48.1 percent in June, after stripping out about two percentage points of tariff refunds. Chief financial officer Kevan Parekh said that more than one hundred percent of the 120 basis point decline is due to memory costs. For the September quarter Apple guided a gross margin between 47 and 48 percent, including around one percentage point of tariff refunds, which puts the adjusted midpoint close to 46.5 percent. Parekh noted that the benefit from carry-in inventory will diminish after September, while Cook said market prices for memory keep rising beyond that point.
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Product margins improved thanks to price increases and stockpiling
Cost of sales for products rose 8.1 percent to 47.15 billion dollars, while product revenue increased 18.1 percent to 78.68 billion. This lifted product gross margin to 40.1 percent from 34.5 percent. The Mac and iPad price increases introduced in June, along with tariff refunds and the inventory build, more than offset the memory cost increase in the reported quarter.
AI data centers keep tightening DRAM supply and pushing prices up
The pricing pressure is driven by massive memory consumption from artificial intelligence data centers. SK hynix reported a 76 percent operating margin over the same three months, with revenue of 79.32 trillion won and operating profit of 60.54 trillion won. The company guided DRAM bit shipments to grow only about 10 percent sequentially in the third quarter. TrendForce expects conventional DRAM contract prices to climb by another 13 to 18 percent in the same period.
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Apple evaluates supplier options and watches CXMT closely
When asked about multi-year agreements with suppliers, Cook answered only the pricing philosophy part and left the agreement question aside. He pointed out that the DRAM market has three main suppliers and that more suppliers could help on the supply side, though he admitted the pricing effect is unclear. The possible fourth supplier is CXMT, the Chinese manufacturer that the Financial Times says Apple has started testing for devices sold in China. CXMT listed on Shanghai's STAR Market in July, while two members of Congress have asked the Commerce Secretary to bar purchases from CXMT and YMTC. For more on Apple's memory choices in upcoming handsets, read our analysis of the iPhone 18e and its rumored 9GB RAM configuration.
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Supply constraints on Apple SoCs are a separate issue from memory prices
Cook said the supply limitations flagged for the September quarter are distinct from memory pricing. The problem lies in the availability of advanced process nodes used for Apple's SoCs, after iPhone and Mac demand outpaced the company's plan. The constraints will affect iPhone, Mac, and iPad in September, after hitting mainly Mac in the June quarter. Apple guided September revenue growth of 9 to 11 percent year over year, down from 16 percent in the previous quarter. For a deeper understanding of DRAM price dynamics, you can consult the Wikipedia entry on dynamic random-access memory.
