Apple stock plunged 7.4% to $308.91 on July 31 after the iPhone maker reported record quarterly revenue but issued weak forward guidance, citing severe supply constraints driven by a global memory chip shortage. The stock decline came despite the company beating earnings estimates, with Tim Cook warning in his final earnings call as CEO of what he called a “100-year flood” in memory chip pricing.
For its fiscal third quarter ended June 30, Apple posted revenue of $109.4 billion, up 16% year over year, and net income of $2.02 per share, exceeding analyst expectations of $1.89 per share. iPhone sales surged 22% to $54.3 billion, while Mac revenue jumped 29% to $10.4 billion, both setting June-quarter records.
The market’s negative reaction stemmed from Apple’s outlook for the current quarter. The company projected revenue growth of 9% to 10%, well below the 12% growth rate analysts had anticipated. Cook acknowledged the strain: “We’re seeing some very significant constraints currently, with limited flexibility in the supply chain,” he said on the earnings call. “There’s a quarter where we’re going to be scrambling on the supply side.”
The memory chip crunch stems from surging demand in AI data centers, where companies are racing to build infrastructure for artificial intelligence applications. This competition for chips has created shortages for consumer electronics, driving up prices across the industry. According to research firm IDC, the global smartphone market is projected to decline 12.9% in 2026 due to memory chip shortages and rising costs. Cook noted that the DRAM memory chip market is controlled by just three suppliers: Micron, SK Hynix, and Samsung.
Apple had already begun passing costs to consumers. In June, the company raised prices on Mac computers and iPad tablets to account for elevated memory chip expenses. On the earnings call, Cook explained the decision: “We did it because we’re in what I would characterize as a 100-year flood on the memory pricing.” He added that Apple is “evaluating all options” to address the supply challenge, signaling the company may be exploring new suppliers or alternative strategies.
The guidance miss marked a stark contrast to Apple’s strong operational performance. The company’s gross margin came in at 50.1% for the quarter, and it achieved record operating cash flow. Services revenue reached $30.7 billion, up 12% year over year, reflecting the strength of Apple’s subscription and digital services business. However, the outlook for slowing iPhone growth—from 22% in the recent quarter to mid-teens growth in the current quarter—signaled that supply pressures are beginning to bite.
Cook’s warning echoed concerns across the semiconductor industry. When other chipmakers have faced supply constraints, stock markets have reacted sharply. In May 2022, Apple shares fell 3.7% after the company cautioned that chip shortages would constrain iPad and Mac production by $3 billion to $4 billion in missed sales. That shortage, however, was driven by pandemic-related manufacturing disruptions, whereas the current crisis stems from a structural shift in demand toward AI infrastructure.
For Apple, the memory chip squeeze arrives at a pivotal moment. Cook is handing off the CEO role to John Ternus in September after 15 years leading the company, during which the stock gained 2,400%. Despite the July selloff, Apple remains the world’s most valuable company with a market capitalization of roughly $4.9 trillion. Investors will watch closely whether the new leadership can navigate the supply constraints and return to the growth rates that have made Apple a market darling in 2026, when shares had climbed 23% year to date before the earnings announcement.
Sources
- Fortune — Tim Cook’s final earnings call warning, “100-year flood” quote, memory chip market concentration, and stock decline context
- Apple Newsroom — Official Q3 2026 earnings report with revenue, EPS, and product-segment details
- Barron’s — Stock price decline to $308.91 and 7.4% drop confirmation
- Reuters — IDC smartphone market forecast, 12.9% decline projection, and supply chain analysis
- Various sources (DataForSEO) — Memory chip shortage context, AI data center demand, and 2022 precedent for chip shortage impacts
