Apple warned on Thursday that it is confronting severe supply constraints expected to impact iPhone and Mac sales in the coming months, highlighting the mounting challenges facing the company as Chief Executive Officer Tim Cook prepares to hand over leadership.

In his final earnings call as CEO, Cook struck an optimistic tone about Apple's long-term prospects. "I am beyond excited," said Cook, who took the reins from co-founder Steve Jobs in 2011 and has led the company for 15 years. He will transfer the CEO role to John Ternus, currently Apple's senior vice president of hardware engineering, in September. However, that forward-looking confidence stood in sharp contrast to the difficult near-term business conditions he and other executives described.

"We're seeing some very significant constraints currently, with limited flexibility in the supply chain," Cook said. At another point during the call, he acknowledged: "There's a quarter where we're going to be scrambling on the supply side."

The supply crunch is hampering Apple's ability to secure the advanced processors required for its iPhones and computers, which the company said will translate into lower revenue.

Apple projected that iPhone sales—which account for approximately half of the company's business—will grow at a "mid-teens" percentage rate in the current quarter, marking a notable deceleration from the 22% growth the iPhone segment posted in the just-completed quarter. Total revenue for the current quarter is forecast to grow between 9% and 10% year-over-year, below the 12% rate analysts had anticipated.

Gross profit margins, which reached 48% of revenue in the most recent quarter (excluding tariff refund benefits), will face pressure in the current quarter, Apple indicated.

Following the earnings release, Apple shares dropped as much as 8% in after-hours trading on Thursday before recovering some ground, later trading down approximately 6% from the closing price of $333.85.

Apple, the world's most valuable company with a market capitalization of $4.9 trillion, has been among the strongest performers in Big Tech this year, with shares up 23% in 2026. While Apple arrived late to artificial intelligence and has faced difficulties developing its own AI models, investors have increasingly valued the fact that the company is not entangled in the AI infrastructure spending race that has driven massive capital expenditures at Meta, Google, Microsoft, and Amazon.

Last week, Google parent company Alphabet saw its stock fall 7% after raising its capital expenditure forecast for the year above $200 billion and reporting its first-ever negative free cash flow. Meta experienced a similar sell-off earlier this week.

Although Apple is not pouring hundreds of billions into capital expenditures, its business is still being affected by the AI arms race—particularly through memory chip costs. Surging demand for high-bandwidth memory and other advanced chips used in AI data center accelerators has created shortages and sent prices soaring across the broader memory market.

In June, Apple was compelled to raise prices on its Mac and iPad lines to offset the rising cost of memory chips. "We did it because we're in what I would characterize as a hundred year flood on the memory pricing," Cook said during Thursday's call.

He noted that the DRAM memory chip market is effectively controlled by three companies: Micron, SK Hynix, and Samsung—a level of concentration that leaves buyers like Apple with limited alternatives. "If there were more suppliers that would be good. It would help us on the supply side, and perhaps the pricing side," Cook said, adding that Apple is "evaluating all options."

Regarding Apple's AI initiatives, including the forthcoming Siri AI, Cook said the company sees an opportunity in processing more AI tasks directly on users' devices—an approach Apple believes will resonate with privacy-conscious consumers and reduce dependence on cloud infrastructure. "The ability to run some percentage of requests on-device is also very strategic, sort of a competitive weapon if you will," Cook said.

He also suggested that expanded AI capabilities could drive growth in iCloud usage, potentially benefiting Apple's Services division—its second-largest business unit, which generated $30 billion in revenue last quarter.

For the three months ended June 30, Apple reported total revenue of $109.4 billion, up 16% year-over-year and roughly in line with analyst expectations. Net income came in at $29.8 billion, or $2.02 per share, exceeding the $1.89 per share analysts had projected. Apple noted that approximately 11 cents of earnings per share was attributable to a refund related to President Trump's tariffs.

Incoming CEO John Ternus was present on the earnings call but did not deliver prepared remarks and was not designated as an available executive for the Q&A session. That did not deter one analyst from directing a question his way.

The analyst asked how Ternus views the competitive landscape, particularly at a time when potential new entrants such as SpaceX and OpenAI could be developing AI-powered hardware devices that would compete directly with Apple's products.

"I would just reiterate what Tim said," Ternus responded. "There is so much opportunity for us, with everything that's happening in the space. We're just really focused on our plans, and really excited about it."

Source: Fortune