QD

By Nora Redmond

A 'choppy' profit-margin environment

Shares of Apple slipped on Tuesday.

Apple's stock slipped after the iPhone maker disappointed investors with its margin forecast and growth outlook in services. Analysts say the slowdown could likely continue until memory prices start to fall.

Shares in the top-tier tech company (AAPL) fell 1.9% to $331.90 on Tuesday, following a decline of nearly 2% on Monday, before the company reported its fourth-quarter financial results.

Although Apple posted revenue of $114.5 billion and earnings per share of $2.10 - both beating Wall Street consensus - traders were left underwhelmed by its gross margins, hit by an "unprecedented" jump in memory-chip prices.

Margins for the three-month period ended September came in at 47.9%, lower than in the previous quarter. And for the next quarter the company said it's targeting 45% to 46%, short of the projected 47%, on an expectation of prolonged high memory costs and costs associated with the ramp-up of its Siri artificial-intelligence assistant.

Analysts at Evercore ISI, led by Amit Daryanani, wrote in a Monday note that they foresee Apple having to deal with a "choppy" gross-margin environment right up until memory prices stabilize or fall and are on watch for evidence that Siri can be monetized.

A team at Goldman Sachs, led by Michael Ng, said it came away with increased confidence in the iPhone refresh cycle. But it also highlighted slowing growth in the company's services unit, partially driven by its App Store.

The company said it projects services-revenue growth of between 8% and 9% in the current quarter, below analysts' estimates of 12%. While it reached an all-time high of $31.57 billion in the fourth quarter, this represented growth of just 9.8%, down from 12.1% in the prior quarter. Apple also pointed to lower revenue than hoped for in its wearables, home and accessories segment.

For Morgan Stanley's Erik Woodring and team, while the company has multiple potential tailwinds to ease pressures on its services segment, the slowdown could extend into the March quarter.

-Nora Redmond

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11-03-26 1748ET