By Nora Redmond
Shares in Apple fell 4.5% in Tuesday's premarket trading.
Apple's stock has slipped after the iPhone maker disappointed investors with its margin forecast and services growth outlook. Analysts say the slowdown could likely continue until memory prices start to fall.
Shares in the Big Tech name (AAPL) fell 4.5% to $323.48 in premarket trading on Tuesday, following a decline of nearly 2% on Monday, before the company reported its fourth-quarter financial results.
Although Apple posted revenue of $114.5 billion and earnings per share of $2.10 - both beating Wall Street consensus - traders were left underwhelmed by its gross margins, hit by an "unprecedented" jump in memory chip prices.
Margins for the three-month period ended September came in at 47.9%, lower than the previous quarter. And for the next quarter, the company said its targeting 45% to 46%, which fell short of projections of 47%, on an expectation of prolonged high memory costs and costs associated with the ramp-up of its Siri artificial-intelligence assistant.
Analysts at Evercore ISI, led by Amit Daryanani, wrote in a Monday note that they foresee Apple having to deal with a "choppy gross margin environment" right up until memory prices stabilize or fall and for evidence that Siri AI can be monetized.
A team at Goldman Sachs, led by Michael Ng, said it came away with increased confidence in the iPhone refresh cycle. But they also highlighted slowing growth in the company's services unit, partially driven by the App Store.
The company said it projects services revenue growth of between 8% and 9% in the current quarter, below analysts' estimates of 12%. While it reached an all-time high of $31.57 billion in the fourth quarter, this represented growth of just 9.8%, down from 12.1% in the prior quarter. Apple also pointed to lower revenue than hoped for in its wearables, home and accessories segment.
For Morgan Stanley's Erik Woodring and team, while the company has multiple potential tailwinds to ease pressures in its services segment, the slowdown could extend into March quarter.
-Nora Redmond
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11-03-26 0520ET