Apple guides holiday margin down to 45–46% as memory costs bite; Lenny's only new post is a gift guide
Apple guided holiday gross margin down to 45–46% as memory costs keep rising, its September quarter shows hardware carrying the growth while services slow, and Lenny's only new post is a holiday gift guide.
Two items cleared the twenty-four hours to 08:00 this morning, one from each of the two sources this digest follows. One carries a quarter's worth of argument about Apple. The other is a shopping list.
The Stratechery piece sits behind the paywall. It is his Tuesday Update on Apple's September quarter, and all that is public is a two-sentence summary and three section titles: Apple Earnings, Memory Problems, The Hardware Company Regression. 12 What follows is built from Apple's own results documents and the reporting around the earnings call, so the shape of the argument is visible before you decide whether to pay for it.
The Lenny's item is free in full, and it is the sixth annual holiday gift guide. 3
Device economics
Apple Earnings, Memory Problems, The Hardware Company Regression — Stratechery
Published November 3, 2026, 19:00 Shanghai. Subscriber-only; the summary line and three section titles are public.
- His public line sets up a question about software. "Apple's earnings suggest that the company's hardware business is doing better than ever, even in the face of memory challenges. Does the software story help or hurt?" 1
- The memory challenge now sits in the guidance. Apple told analysts to expect a gross margin of 45% to 46% in the December quarter, down from 47.9% in the one just reported. 4
- The quarter beat expectations and the shares fell anyway. Revenue came in at $114.5 billion against $113.4 billion expected, and earnings per share at $2.10 against $1.99. The stock fell 4% during the call and pared that to about 2% after hours. 4
What Apple's own numbers show
| Q4 FY2026 | Q4 FY2025 | Change | |
|---|---|---|---|
| iPhone | $57,583M 5 | $49,025M | +17.5% |
| Mac | $10,792M 5 | $8,726M | +23.7% |
| iPad | $6,229M 5 | $6,952M | −10.4% |
| Wearables, home and accessories | $8,300M 5 | $9,013M | −7.9% |
| Services | $31,573M 5 | $28,750M | +9.8% |
| Total net sales | $114,477M 5 | $102,466M | +11.7% |
| Gross margin | $54,820M 5 | $48,341M | +13.4% |
| Research and development | $11,730M 5 | $8,866M | +32.3% |
| Operating income | $35,631M 5 | $32,427M | +9.9% |
| Greater China net sales | $17,539M 5 | $14,493M | +21.0% |
A September record, and the year closed at $478.8 billion of revenue against $416.2 billion. 5 iPhone and Mac did the growing. The iPhone 18 Pro lineup carried early demand and higher prices, and Macs gained a touchscreen for the first time. 6 iPad and the wearables, home and accessories group went backwards. 5
Greater China grew 21% and still missed: $17.5 billion against the $18.6 billion analysts had modelled. 45
The foldable iPhone Duo sits outside these numbers. It shipped after the quarter closed, sold out within hours, and remains short of demand. 4 Ternus told Reuters a very small percentage of units came back for display problems and that Apple cannot predict when supply catches up with demand. 4
Costs outran the top line. Operating income grew 9.9% against revenue growth of 11.7%, and research spending rose by $2.9 billion, a third more than a year earlier. 5
The memory bill
Apple's problem has a mirror image on the supplier side. Micron closed its fiscal year on September 3 with $133.2 billion of revenue against $37.4 billion a year earlier, at a gross margin of 86.8% in the final quarter. 7
Its mobile and client unit, which sells memory into phones and PCs, took $13.1 billion in the quarter against $3.8 billion a year earlier, at a 90% gross margin. 7 Micron guided the current quarter to $61.5 billion of revenue at roughly 86% gross margin, so pricing has further to run. 7
Apple is absorbing it in three places. The first is supply. Kevan Parekh, the finance chief, told the call that memory costs will keep rising into next year. 4 Sabih Khan, who runs operations, said purchasing commitments rose by $33 billion in the quarter, and inventory on the books closed at $14.5 billion against $5.7 billion a year earlier. 5
The second front is price. Apple raised iPhone 17 prices by $100 at the same launch and lifted some MacBook prices, and Ternus told Reuters those increases "provided some offset". 4
The third is the subscription. Apple plans to charge more for iCloud+ to cover AI costs, and Ternus said features that rely on server-side models will come with usage limits. 4 Siri AI runs partly in Google's cloud, which Apple named as a factor on margin. 4
The 47.9% margin is flattered by about a point of tariff refunds, which puts the underlying September figure nearer 46.9%. 6 Against that, a holiday guide of 45% to 46% is a smaller step down than the headline suggests.
Hardware did the growing
His third section is titled The Hardware Company Regression, and the quarter's own split runs in the direction the title suggests. Hardware did the growing while services slowed. 1
Apple then guided services growth to 8% to 9% for the holiday quarter, against 10.7% expected. 4
Research spending reached $11.7 billion, or 10.2% of revenue, against 8.7% a year earlier. 5
What the section argues sits behind the subscription. What is visible outside it is a company whose growth came from devices this quarter, whose services growth is slowing, and whose costs are rising on both the memory and the research line. 1
Also in the inbox
Lenny's Newsletter holiday gift guide 2026 — Lenny's Newsletter
Published November 3, 2026, 22:45 Shanghai. Marked paid on the site; the full text came through the public RSS feed.
- It is the sixth annual edition, and it is substantial. 2,759 words and more than 100 items, sorted by who you are buying for rather than by price. 3
- The disclosure terms are clean. There are no affiliate links, the two companies he has invested in are marked, and returning favourites carry a medal. 3
- Every section is a list of things to buy. That leaves no product, growth or career reading in it, including in the section aimed at colleagues. 3
What it changes for you
- If you buy hardware in volume, memory is now the swing factor in a device maker's margin, and Apple is absorbing it with price rises and inventory bought ahead of the increase. 4
- If you price anything containing memory, Micron's 86.8% gross margin and its guide to roughly the same next quarter are the clearest public read on where your input costs go. 7
- If you follow Apple, the services line is the number to watch: 9.8% growth, guided to 8% to 9% against 10.7% expected, in a quarter whose hardware grew 17.5%. 4
- If you want the argument itself, the Update is behind the subscription; Apple's two documents and the call reporting are free and carry every figure above. 1
Where to start
- The press release is the shortest free route to the headline and the quotes: Apple reports fourth quarter results.
- The consolidated statements hold the category and segment tables: FY26 Q4 consolidated financial statements.
- The Reuters report has the guidance, the analyst comparison and the call quotes: Apple forecasts margin drop in holiday quarter.
- Micron's release covers the other side of the memory trade: Micron reports record fiscal fourth-quarter and full-year 2026 results.
- The Update itself, for the argument these numbers belong to: Apple Earnings, Memory Problems, The Hardware Company Regression.
References
- 1
- 2
- 3Lenny's Newsletter holiday gift guide 2026 — Lenny's Newsletter
lennysnewsletter.com
- 4
- 5
- 6
- 7
This story was produced automatically by a channel. One sentence is all it takes for Neodrop to keep producing for you.