Apple's Tim Cook Exits With a Record Quarter, But Leaves John Ternus a Supply Crunch and a "100-Year Flood" in Memory Costs
Q3 fiscal 2026 earnings call, July 30, 2026 — Cook's final call as CEO before incoming chief executive John Ternus takes the reins
Tim Cook closed out his run as Apple's chief executive with a June-quarter revenue record of $109.4 billion, up 16% year over year, powered by 22% iPhone growth and a stunning 29% jump in Mac revenue. But the headline for investors isn't the victory lap — it's what comes next. Apple is guiding September-quarter revenue growth down to 9%-11%, a meaningful deceleration from the mid-teens pace the Street had modeled, and management was explicit that the culprit is not softening demand but a supply chain that can no longer keep up with it.
Supply constraints widen from Mac to iPhone and iPad
The most consequential disclosure on the call was Cook's characterization of the constraint as a demand-forecasting miss rather than a conventional supply problem. "The root cause of it is not a regular supply issue. It's a demand forecast issue, to be candid, where the iPhone and the Mac are both doing remarkably better than we thought they would do," Cook said, adding that the company has been "pulling supply ahead" and has hit a limit. CFO Kevan Parekh confirmed the constraint, tied to advanced-node SoC capacity, will broaden in the September quarter to hit iPhone, Mac, and iPad simultaneously, whereas in June it was concentrated mainly in Mac. Combined with a 2.5 percentage point sequential FX headwind, that pushes total company growth down to the 9%-11% range, with iPhone growth decelerating to "mid-teens" from 22%. Cook was careful to push back on any read-through to Apple's chip partners, including the speculative link to a possible domestic foundry relationship: "This isn't a partner or a supplier issue... it's an incredibly strong iPhone and Mac product cycle that has really yielded demand beyond our expectation."
Memory costs described as a "100-year flood"
Apple's gross margin guidance for September — 47% to 48%, including roughly 1 point of tariff-refund benefit — represents a sharp step down from the 50.1% reported in June (itself inflated by a 2-point tariff refund benefit). Parekh told analysts that more than 100% of the sequential gross margin decline, both from March to June and from June to the September guide, is explained by rising memory costs, partially offset by carry-in inventory, lower non-memory component costs, and favorable mix. Cook did not mince words about the scale of the move: "We're in what I would characterize as a 100-year flood on the memory pricing with exponential increases in memory prices." He confirmed Apple "reluctantly raised prices" on iPad and Mac as a result, and warned that carry-in inventory benefits will fade beyond September while market pricing for memory keeps climbing. On sourcing, Cook noted the DRAM market is effectively a three-supplier oligopoly and said Apple is "evaluating all options" to diversify supply — a signal the company may be exploring additional memory partners, though he stopped short of committing to specifics.
Services growth deceleration tied to mobile gaming weakness
Services revenue hit a June-quarter record of $30.7 billion, up 12%, but that was a deceleration from 16% growth in the March quarter, and guidance implies further softening — Parekh's math points to sub-10% reported growth in September. FX explains roughly half the sequential slowdown, but Parekh also flagged "some headwinds in mobile gaming" within the App Store, along with a difficult comp against the theatrical release of F1 a year ago and changes to App Store business model economics in certain countries. Despite the softness, Apple set records across every services category, including all-time highs in cloud services and payment services, and surpassed 1.5 billion paid subscriptions. The company remains under a U.S. court ruling on App Store link-out transactions, though Parekh noted the Supreme Court has agreed to hear Apple's appeal — a legal overhang investors should continue to track given its App Store monetization implications.
Siri AI momentum, but regulatory gaps in Europe and China persist
Cook was unusually effusive about the reception to Siri AI, Apple's reworked assistant unveiled at WWDC, calling developer and public beta feedback "overwhelmingly positive" and "off the charts" exciting. He framed the product as strategically important both for user experience and for controlling compute costs, noting the ability to run "some percentage of requests on device is also very strategic and sort of a competitive weapon." Still, Siri AI's rollout remains geographically incomplete. Cook confirmed the feature will not launch simultaneously in the European Union or China. In the EU, Apple is "working closely" with the European Commission to find a workaround, though the Mac version is unaffected since it falls outside DMA-style device regulations. In China, Apple only received regulatory approval last week to ship the original, more basic Apple Intelligence features such as Clean Up, with Siri AI approval still pending. On monetization, Cook indicated Apple will monetize heavy AI usage partly through iCloud+ tier upgrades, though he was candid that the cost structure is still being worked out: "We don't have a complete plan for that... we'll see how the pickup for that is."
Broadcom deal deepens U.S. silicon ambitions
Apple disclosed a new multiyear agreement with Broadcom, expected to exceed $30 billion, to design and produce custom silicon components and wireless connectivity technology domestically — the company's largest-ever American manufacturing commitment and a further step toward building an end-to-end U.S. silicon supply chain. This sits alongside the previously announced $600 billion, four-year U.S. investment pledge and the upcoming Apple Advanced Manufacturing Center in Houston, which will begin producing Mac mini units later this year. Cook also noted Apple now sources over 100 million components this year from its Arizona operations, underscoring the reshoring push even as the company grapples with near-term chip supply shortfalls elsewhere in the network.
Apple Upgrade leasing program and enterprise share gains
Apple launched Apple Upgrade, a hardware leasing program in partnership with Klarna, currently available only in U.S. retail stores. Cook framed it as a way to capitalize on Apple's higher residual values relative to competitors, lowering the effective cost of entry for customers on a regular upgrade cadence, though he was cautious about near-term uptake given the limited distribution. On the enterprise and education side, Apple cited concrete displacement wins — Morgan Stanley deploying over 20,000 iPhone 17 units as it shifts to corporate-owned devices, Credit Agricole cutting manual regulatory processing time by over 80% using on-device AI on MacBook Pro, and roughly half of large education MacBook Neo purchases in the quarter displacing Windows or Chromebook devices. These data points support management's broader argument that on-device AI economics — lower cloud token costs, better privacy, and security — are becoming a competitive lever in commercial channels, not just consumer marketing.
A clean handoff, with hard numbers left for Ternus
Cook used his final call to thank shareholders and analysts and to formally hand the baton to Ternus, who fielded one question on competitive threats from AI-native device entrants without offering much specificity. The succession itself appears non-disruptive to the business narrative, but Ternus inherits a September quarter with tightening margins, a memory cost shock still working through the P&L, and supply constraints that management itself admits it cannot fully solve in the near term. The 9%-11% revenue growth guide, the sub-48% gross margin outlook, and the acknowledgment that any additional memory relief is unlikely before conditions ease further out are the real signal from this print, layered underneath an otherwise record-setting quarter.