Even stingy Apple endures AI collateral damage

Meta Platforms

04/11/2026 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Robert Cyran
NEW YORK, Nov 3 (Reuters Breakingviews) - AI is taking a bite out of Apple AAPL.O. Unlike its big technology peers, which are spending voraciously to build data centers, the iPhone maker keeps churning out profit and handing it back to shareholders. The boom, however, has been steadily pushing up prices of memory chips, sucking more companies into its vortex.
Apple’s latest financial results, the first helmed by CEO John Ternus, depict a $5 trillion company that's motoring along. Quarterly revenue increased 12% from the same period a year ago, just shy of the blended growth across the S&P 500 Index .SPX, according to FactSet. Services including music, TV and games grew 10% and now represent more than a quarter of the top line.
Although Apple has generated $145 billion of cash from operations over the past four quarters, it only allocated $9 billion to capital expenditure. The company's ability to churn out excess money increasingly contrasts with profligate companies such as Meta Platforms META.O, Alphabet GOOGL.O and Microsoft MSFT.O.
In many ways, Apple is a shelter in the storm. It consistently buys back its own stock and distributes dividends, throwing another $28 billion at shareholders last quarter. AI builders, meanwhile, are making investors jittery about returns. Apple shares have surged 25% this year, outperforming competitors and the tech-heavy Nasdaq Composite Index .IXIC.
The protections only go so far, however. Training and operating large-language models demands prodigious amounts of memory, and ever-rising demand has swamped suppliers such as Micron Technology MU.O. Computer and phone makers are therefore forced to pay up to secure chips.
Passing such costs onto consumers can be fraught, prompting them to forgo or delay purchases. PC shipments from Lenovo, Apple, Dell and others tumbled 21%, to 57 million, in the third quarter from the same span in 2025, Counterpoint Research estimates.
Apple is more insulated than most. Buyers of its high-end products tend to have a little more wallet flexibility. Ternus is testing the company's power, raising iPhone prices in September. It could mean selling fewer of them during the important holiday season.
Moreover, despite a benefit from tariff refunds, Apple's gross margin dipped to 48% during the quarter from 50% in the three months ending on June 27. The figures imply that it is eating some of those cost increases. Ternus also expects another fall of 2 to 3 percentage points in profitability before the end of the year, largely because of memory costs. AI expenses can be contained, but not avoided.
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Apple said on November 2 that it generated $115 billion for the quarter ending September 26, a 12% increase from the same period a year ago. The company earned $30.7 billion, compared to $27.5 billion over the same stretch in 2025.

(Editing by Jeffrey Goldfarb; Production by Pranav Kiran)
((For previous columns by the author, Reuters customers can click on CYRAN/robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))