Apple CEO Tim Cook has said that rising memory chip prices had only a minimal impact on Apple’s gross margin during the December quarter of the 2026 calendar year. The comment came as Apple reported its record Q1 2026 earnings, which were the result of strong iPhone demand and the ongoing growth of its services. For now, Apple’s scale and pricing power have helped soften the impact of higher component costs.
Tim Cook explains why rising memory prices barely affected margins so far, while warning of growing pressure ahead in 2026
While that is good news, Cook also made it clear that this cushion may not hold indefinitely. He further noted that memory pricing is expected to have a slightly larger impact on gross margin in the current quarter. The shift signals that while Apple absorbed recent cost increases with ease, the broader semiconductor environment is becoming more challenging.
Why Apple Has So Far Absorbed Rising Memory Costs
Apple’s supply chain operations are the reason why it has the ability to limit the impact on margins. The company has long term supplier agreements and massive purchasing volumes, which allow it to secure more favorable pricing than the competition. This has allowed the company to avoid sudden margin erosion even after memory prices have climbed across the industry.
Another major reason is the company’s diverse revenue mix. It was recently reported that apart from the iPhone, the Services division has continued to grow faster than hardware and generate significantly higher margins. This recurring income helps offset rising costs in components like memory, allowing Apple to protect profitability without making abrupt pricing changes for consumers.
The iPhone 18 Pro is expected to stay at the same price as the current models, despite rising memory costs. Above all, the iPhone 18 will be the first model that will be designed around memory and not just the A20 chip, which goes on to show how well the supply chain is optimized to handle disruptions.
To understand Apple’s current position more clearly:
- Memory price increases had minimal margin impact last quarter due to supply contracts and scale of production.
- Gross margins were supported by record services revenue.
- Strong iPhone volumes helped dilute per unit component cost increases.
- Apple retained flexibility to absorb costs without immediate pricing pressure.
Why Margin Pressure Is Likely To Increase Going Forward
The challenge ahead lies in sustainability, as memory suppliers are increasingly prioritizing production for AI related hardware, which is tightening supply for smartphones and consumer electronics. As these conditions persist, Apple may find it harder to absorb higher costs quietly without affecting margins.
Cook’s comments suggest Apple is managing expectations rather than signaling alarm. What this means is that the company can respond in several ways, which include selectively passing costs to consumers, leaning further into services growth, or renegotiating supply terms. How Apple balances these options will shape margin performance through the rest of 2026 and the years to come.
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