5 minBusiness
Ternus lands Apple's first earnings call as CEO, shares fall on margin outlook
John Ternus, Apple's new chief executive, beat September-quarter expectations but investors sold the stock after the company warned that memory costs and slowing Services growth will squeeze margins.
John Ternus, Apple's new chief executive, presented his first quarterly earnings report to Wall Street on Monday, and the reception was cooler than the company's results alone would suggest. Apple beat its September-quarter earnings expectations, yet investors sent the stock lower in after-hours trading after the company's outlook on profit margins pointed to continued pressure.
Apple said margins will keep being squeezed by a shortage of memory chips, and it gave no clear answer on how growth in its Services segment would rebound after slowing. Ternus told analysts that « what we're seeing with memory pricing right now is unprecedented » and that it had put pressure on the company's prices. He said he expects memory purchase prices to keep rising beyond the December quarter. Apple forecast a gross margin of 45% to 46% for the December quarter, down from 47.9% in the September quarter, when tariff refunds added roughly one percentage point. The company attributed the decline to the rising cost of memory and to the expense of ramping up its Siri AI features.
The first two months of Ternus's tenure have been dominated by new hardware. In early September, at his first public event as CEO, he unveiled the foldable iPhone Duo, which has shown strong demand, with orders backed up. Supply constraints have made it difficult to judge how many units will sell, and new orders for the phone are not expected to arrive until the end of January. Some units suffered cracked screens, which Apple acknowledged and said it was replacing. Asked about the rollout, Chief Operating Officer Sabih Khan said the product ramp was going well, adding that « it's really hard to predict when supply and demand will be in balance ». Analysts at Yorkville Ives estimate Apple can sell roughly 10 million iPhone Duos over the next few quarters. Apple has also staggered its iPhone lineup, with the Pro, Pro Max and Duo models available now but the base model and iPhone Air not expected until spring.
Ternus also delegated many answers on the call. Chief Financial Officer Kevan Parekh and Khan fielded a number of questions, and Apple said both would participate in earnings calls going forward, a practice the company had not followed for years. Ternus projected confidence but largely stuck to scripted marketing points, including his statement that « Apple is the greatest company in the world », which analysts said did little to address investor concerns.
The company's artificial intelligence strategy drew similar scrutiny. Ternus and Parekh offered few details about the roadmap for Siri AI, the revamped assistant that has been rolling out to users in beta. Ternus described Siri as « primarily request-based today », though he said its architecture could be substantially expanded over time. He called agentic capabilities « promising tools for users » while stressing security and privacy. Reviews of the revamp have been mixed, and rivals including OpenAI, Anthropic and Meta's personalized agents have moved faster in areas such as shopping and handling tasks independently. « Siri AI is much more capable and functional today, but how do you take it to the next level? » asked Wamsi Mohan, an analyst at Bank of America.
On the Services slowdown, which covers iCloud, the App Store and other offerings, executives pointed to an installed base of active devices that has surpassed 2.5 billion. They said this base would create future monetization opportunities, that some AI features relying on cloud rather than on-device processing will face usage limits, and that iCloud storage-focused tiers will evolve. Investor Gene Munster, who spoke with Fortune before the report, said the company was entering the holiday period with more downside than upside. Writing on X after the results, he said Apple did not want to discuss personalized agents, which he called « the biggest risk to the Apple ecosystem ».
Ternus's early record is mixed. Some measures show Apple performing at its best, including a record September iPhone sales quarter, but the company has offset headwinds partly by raising prices and relying on its large installed base. For now, the market appears to be waiting for evidence that the new chief executive can turn product momentum into durable growth in margins, services and artificial intelligence.
Source: fortune.com
6
