Apple Inc. delivered a mixed outlook to investors in its first quarterly report under Chief Executive Officer John Ternus, with tightening profit margins overshadowing an upbeat sales forecast.
Though Apple predicted revenue growth of 7% to 10% during the holiday season — beating the 6.1% estimated by Wall Street — the company warned that gross margins would be thinner than projected. It’s also suffering from supply constraints that will make it harder to capitalize on a wave of new products.
Ternus, who took the CEO job last month, is contending with another challenge: lofty investor expectations. A rally in recent months — fueled in part by Apple’s reputation as a haven from AI tumult — added roughly $1 trillion to Apple’s market value. Against that backdrop, the shares fell more than 3% as trading got underway Tuesday morning in New York.
“Product gross margin degradation remains a key near-term issue,” Bloomberg Intelligence analysts Anurag Rana and Josh Christensen said in a note.
Total revenue rose 12% to $114.5 billion during the fiscal fourth quarter, which ended Sept. 26. Analysts had estimated $113.5 billion on average, according to data compiled by Bloomberg.