Apple reports record revenue growth but warns of shrinking gross margins due to elevated memory prices, challenging the stock's near-record valuation.
Apple's gross margin is declining due to rising memory costs, and its high P/E multiple leaves little room for error.
Apple faces mounting pressure on profitability as rising memory costs erode gross margins despite record-breaking iPhone and Mac sales. With the stock trading at a 37x P/E multiple, investors are scrutinizing management's ability to offset supply-chain headwinds and maintain premium valuations as margin guidance trends lower.
Apple attributes the margin decline primarily to rising memory prices, which management describes as a significant and ongoing supply-chain headwind.