“What we’re seeing with memory pricing right now is unprecedented.”
John Ternus, Apple’s CEO, on the November 2 earnings call
Apple told investors Monday it expects the December quarter to be the best revenue quarter in its history, and its stock fell about 4% in premarket trading Tuesday anyway. CNBC’s coverage leads with a gross margin forecast of 45% to 46% against the 46.3% analysts expected. Apple’s release gives no profit guide, so the number that explains the sell-off has to be built. Run the company’s own December ranges through its income statement and operating income lands between $48.4 billion and $52.4 billion, against $50.9 billion in the same quarter a year ago. That is a change of minus 4.8% to plus 2.9% on revenue growth of 7% to 10%.
The Arithmetic Behind the Range
Start with last December’s revenue of $143.8 billion, gross margin of 48.2% and operating expenses of $18.4 billion. Apply what CFO Kevan Parekh told analysts: revenue growth of 7% to 10%, gross margin of 45% to 46% and expenses of $20.4 billion to $20.8 billion. The low case pairs the weakest revenue and margin with the highest costs, and the high case does the reverse.
| Dec. 2025 (actual) | Low | Midpoint | High | |
|---|---|---|---|---|
| Revenue | $143.8B | $153.9B | $156.0B | $158.2B |
| Gross margin | 48.2% | 45.0% | 45.5% | 46.0% |
| Gross profit | $69.2B | $69.2B | $71.0B | $72.8B |
| Operating expenses | $18.4B | $20.8B | $20.6B | $20.4B |
| Operating income | $50.9B | $48.4B | $50.4B | $52.4B |
| Change from last year | n/a | -4.8% | -1.0% | +2.9% |
Our calculation. The midpoint uses 8.5% revenue growth, a 45.5% margin and $20.6 billion in expenses.
At the midpoint, Apple sells $12.2 billion more than last December, keeps $1.8 billion of it as gross profit and spends $2.2 billion more running the company. Operating income slips about $0.5 billion.
Where the Margin Goes
Parekh said the margin range “includes primarily the impact of higher memory costs, as well as some costs related to the ramp of Siri AI.” Ternus said Apple expects “even higher memory costs” in December. COO Sabih Khan said manufacturing purchase obligations rose by $33 billion from June to September. Apple has already raised prices, which we covered in September, and Ternus said those increases “provided some offset.”
Memory takes the blame on the call, but part of the squeeze is a choice. Operating expenses rose 21% in the September quarter against revenue growth of 12%, and Parekh guided December expenses up 11% to 13%, driven by R&D “in particular AI.” At the midpoint, the drop from last December’s 48.2% margin to 45.5% costs $4.2 billion of gross profit, and the expense increase costs another $2.2 billion. Apple attributes the lower margin to memory and some Siri AI costs. Taking that at face value, margin is about two thirds of the squeeze and the rest is spending Apple controls.
Our read: the 0.8-point shortfall against consensus is the wrong thing to be upset about. Multiply the two consensus figures CNBC printed, 6.1% revenue growth and a 46.3% margin, and you get roughly $70.6 billion of gross profit, an approximation because they are separate averages. Apple’s midpoint is $71.0 billion. Apple missed on the percentage and beat on the dollars. What the market is pricing is the line below it, where even the top of the range grows operating income less than a third as fast as sales.
What the Tariff Refund Hid
The September quarter’s 47.9% gross margin included about one point from tariff refunds, and its $2.10 in earnings per share included five cents. CNBC’s MacKenzie Sigalos flagged it on air shortly after the release, saying the figure “includes a five cent benefit from tariff refunds.”
Parekh said Apple has now received “the vast majority” of those refunds, so the boost does not repeat. Strip it out and September’s margin was about 46.9%, which makes the 45.5% midpoint a drop of roughly 1.4 points.
Testing the Range Against Last Quarter
Apple’s guidance has been conservative lately. In July it guided the September quarter to revenue growth of 9% to 11%, a gross margin of 47% to 48% and expenses of $19.1 billion to $19.4 billion. The same arithmetic gives operating income of $33.1 billion to $35.5 billion. Apple reported $35.6 billion on revenue growth of 11.7%. One quarter is not a pattern, but it says to read December from the top of the range, which is operating income up about 3% on a record quarter.
Memory is not easing on Apple’s telling: Khan said Mac and iPad will be constrained in December “primarily driven by memory,” and the iPhone Duo is “constrained as of today.” At its next report, the test is simple. Operating income above $52.4 billion means the guide was cautious again. Operating income below last year’s $50.9 billion means memory is winning.