Apple lost $358 billion in market value due to chip issues

Apple shares plunged on Friday by "7.35%" to "$308.91", wiping out approximately "$358 billion" in market capitalization. This became the largest single-day loss in the company's history. The sell-off occurred even though the tech giant reported record third-quarter fiscal revenue of "$109.4 billion" and earnings per share of "$2.02" – investors, however, were unsettled by the cautious forecast for the upcoming quarter.

Apple projects revenue growth for the fourth fiscal quarter between "9%" and "11%", which is below Wall Street's consensus estimate of "12.1%". CEO Tim Cook described supply chain constraints as "extremely significant," pointing to insufficient capacity for 3nm chip production, which will affect shipments of iPhone, Mac, and iPad alike.

CFO Kevan Pareh explained that the rise in DRAM and NAND memory prices – driven by skyrocketing demand for artificial intelligence server infrastructure – fully explains the sequential decline in gross margin within the projected range of "47%" and "48%".

The spike in memory prices is expected to hit the upcoming iPhone 18 Pro series particularly hard, with estimates suggesting production costs could rise by "$200–300" per device. Cook also noted that delivery times for popular devices – specifically the Mac mini and Mac Studio – have already increased.

Excluding one-time factors, Apple's quarter turned out to be decent, but unremarkable. Of the earnings per share beat over the consensus by "$0.13", a full "$0.11" is due to recovered tariff fees – meaning about "85%" of the beat comes precisely from them. Without these recoveries, earnings per share would have been around "$1.91" versus the projected "$1.89", and the gross margin practically matches expectations – "48.1%".

The services segment, which provides "42%" of gross profit at a margin of "75.6%", grew by "12.1%" to "$30.74 billion", but fell short of estimates by nearly "$500 million". iPhone revenue increased by "21.7%", reaching "$54.25 billion", and Mac saw significant growth of "28.7%" to "$10.35 billion". Nevertheless, the miss in the highly profitable services segment had a more noticeable impact on investor sentiment.

The results come against the backdrop of Apple's preparations for a leadership transition. Cook, who has headed the company since 2011, will hand over the CEO position to head of hardware engineering John Ternus on September 1. Ternus inherits a legacy of record demand coupled with a diminishing ability to satisfy it, a shock from rising memory costs, and an artificial intelligence strategy that has yet to prove its ability to drive device upgrades.

A number of analysts lowered their price targets following the report, but Morgan Stanley and BofA Securities expressed the view that supply constraints may delay revenue, but will not destroy it. D.A. Davidson analyst Gil Luria noted laconically that "growth in the services division has been slowing".