Apple CEO John Ternus holds the iPhone Duo during Appleâs âSurprise and Shineâ event at the company’s corporate headquarters, Apple Park, on September 9, 2026 in Cupertino, California.” width=”970″ height=”647″ data-caption=’Apple CEO John Ternus holds the iPhone Duo during his first keynote at Apple Park on Sept. 9, 2026. He is now working to secure component supplies and cut costs elsewhere as rising memory prices squeeze Apple’s profit margins. <span class=”lazyload media-credit”>Benjamin Fanjoy/Getty Images</span>’>
John Ternus is trying to lock down Apple’s component supply as inflated memory costs test his first months as CEO. In Apple’s fiscal 2026 annual report released Nov. 3, the company outlined manufacturing purchase obligations of $89.7 billion, with $82.7 billion payable in the 12 months after Sept. 26. This is up from roughly $57 billion in obligations in the previous quarter.
The commitments cover components and manufacturing services, and the increase spans a quarter that began before Ternus took over Sept. 1. Apple has not disclosed how much of the increase was committed after that date or how much went to memory alone.
“What we’re seeing with memory pricing right now is unprecedented,” Ternus said during the Nov. 2 earnings call, adding he expects memory costs to increase further in the December quarter and beyond.
Apple isn’t alone in facing memory cost increases—contract prices for a 16-gigabit DDR5 memory chip climbed about 450 percent from October 2025 to September, according to TrendForce data presented by memory-module maker TeamGroup. For an organization driven largely by consumer products, the squeeze reaches directly into its hardware. Increased A.I. demand means memory chip manufacturers are moving production towards high-bandwidth chips in lieu of standard random-access memory (RAM) chips used in smartphones and laptops, according to Sriram Nithin Gopal Lanka, senior product development engineer at chipmaker AMD.
“So device makers are stuck bidding against hyperscalers for a pool of chips that keeps shrinking,” Lanka tells Observer. Apple’s larger commitments aim to secure supply as the company expects memory costs to climb further.
“We forecast that next year will be the worst year in the industry’s history from the supply perspective,” South Korean memory chipmaker SK Hynix chief executive Kwak Noh-jung told Reuters on July 10. “We still forecast that customer demand will remain higher than our supply capacity even beyond 2030. But we are doing our best to solve the problem.”
The downstream impact of memory prices has pressured Apple’s margins, even as sales reached a September-quarter record. The company’s gross margin hit 47.9 percent for the quarter, down from 50.1 percent in June. CFO Kevan Parekh said during the earnings call that tariff refunds increased September’s margin by about one percentage point. “When you remove the tariff refunds from both the June and September quarters, both company and product gross margin would be down about 1 point sequentially, primarily driven by higher memory costs,” he said. Apple expects gross margin of 45 percent to 46 percent in the December quarter, with higher memory costs and expenses tied to Siri A.I. contributing to the decline.
How Ternus is fighting back
His team continues to pursue lower costs on non-memory components, according to Parekh. On the product side, Apple has staggered its releases, frontloading premium models. The standard iPhone 18 is expected in spring 2027, roughly half a year after the Pro models, though Apple has not announced that launch date.
Apple has also passed some of the memory cost increases to consumers. The base 14-inch MacBook Pro jumped by $300 to $1,999 in the U.S. in June, before Ternus became CEO. Defying traditional cycles where older models drop in price, Apple raised the iPhone 17’s advertised U.S. starting price by $100 to $899 in September.
Higher retail prices are already dampening PC sales in Asia and Europe, TrendForce said in a Nov. 11 report, with some manufacturers reassessing their memory purchases for next year. It still expects PC DRAM contract prices to rise 13 percent to 18 percent from the preceding quarter in the final three months of this year.
Ternus is also expanding monetization opportunities. “We have these iCloud+ plans that now include Apple TV and Apple Arcade in more than 100 countries and regions where we think we can really reach new potential subscribers,” he said on the Nov. 2 call, noting usage limits on features like Siri A.I., intelligent photo editing and other features that rely on server-side models. “Anyone who needs greater capacity will be able to purchase expanded access in the future.”
Meanwhile, research and development costs continue to jump. According to the annual filing, R&D cost the organization nearly $46 billion for the year, up 32 percent from 2025, primarily because of infrastructure-related costs, including A.I. investments, and headcount expenses. Most of that fiscal year preceded Ternus’ arrival as CEO. Apple’s first foldable phone, smart home hub and touch-screen laptops have all been introduced since he took over. Apple said its HomeView smart home hub became available for purchase in select regions today (Nov. 13).
Even for a company with lower capital spending than its competitors, market-wide demand for A.I. infrastructure is causing a ripple effect. Alphabet expects $195 billion to $205 billion in capital expenditures this calendar year, compared with Apple’s roughly $9 billion in cash payments for property, plant and equipment in its fiscal year ended Sept. 26. Those figures cover different periods and measure more than A.I.; they also exclude ongoing expenses such as cloud services.
“Apple runs much of its A.I. on the device, which is why Apple Intelligence needs at least 8 gigabytes of memory in an iPhone—and keep in mind it’s not like Android, it’s more optimized,” Andrei Romanescu, chief marketing officer of European cloud hosting provider LumaDock, tells Observer. “That kept Apple’s data center spending small, but it puts the memory cost into every iPhone and Mac it sells.”
But memory costs aside, Romanescu says getting the parts is more important than the price. “If they run out, they’d have to pay obscene premiums or halt a clockwork-like production machine, which would cost them even more.”