Apple's $1,999 Foldable Sellout Meets a 4% Stock Drop

By Amara Osei

Apple shares fell as much as 4% after new CEO John Ternus said “rising memory costs will keep squeezing margins,” according to The Wall Street Journal. Apple reported 12% revenue growth in the September quarter, slightly ahead of Wall Street’s expectations, with price hikes driving much of the increase.

Ternus joined Chief Financial Officer Kevan Parekh on the company’s earnings call yesterday. He said services growth would keep slowing and gross margins would keep falling, partly because memory costs were high. The revenue beat therefore came with a weaker near-term profit outlook.

Apple’s $1,999 foldable iPhone Duo is selling so fast that shipping dates have slipped to January. The device supplies a strong product signal as Ternus warns on services and margins.

What changed on Apple’s earnings call?

Ternus is Apple’s new CEO following Tim Cook and Steve Jobs. His earnings-call remarks paired 12% revenue growth with a warning about profit. Price increases supported reported revenue, but they did not erase memory costs while services growth slows.

Apple’s operating result and market reaction point in opposite directions. The 12% revenue increase beat expectations slightly, while the shares fell as much as 4% after Ternus’s margin warning. The market gave more weight to the forecast for profit than to the reported top-line gain.

Why didn’t investors reward the 12% revenue growth?

Investors have given Apple a pass for skipping the massive AI spending of its rivals. That tolerance is complicated by a product gap: Apple’s new Siri AI chatbot already trails AI agents such as Instinct and Muse. The spending restraint does not erase that product gap.

Courts and regulators are also limiting the fees Apple can charge through its App Store. The App Store is the biggest piece of Apple’s services business, so those limits hit the segment Ternus already expects to slow. Investors cannot treat services as a clean offset to hardware cost pressure.

The juxtaposition sharpens the debate around Apple’s strategy. Skipping rivals-scale AI commitments has earned investors’ tolerance, while weaker Siri performance raises the question of product execution. Regulatory limits on App Store economics add another constraint to a services segment that Ternus expects to decelerate.

The spending restraint and hardware strength therefore do not eliminate Apple’s broader earnings risks. A fast-selling device can support the top line while memory costs, App Store rules and slower services weigh on the economics beneath it.

What does the $1,999 sellout show?

The foldable is the clearest hardware counterweight to Ternus’s warnings. Its $1,999 price and January shipping schedule underscore strong initial demand, although one successful product cannot resolve Apple’s margin pressure.

Oppenheimer analyst Martin Yang said Apple’s stock “is overpriced.” Investors are paying $36 for every $1 Apple is expected to earn next year. Yang does not see much room for the stock to climb from here.

Yang’s view leaves Apple with little valuation cushion. Even a fast-selling $1,999 device must support a broader earnings case at the multiple he cites. Services growth, App Store fees and gross margins remain the larger tests.

The near-term test is whether Apple can turn the Duo’s strong demand and 12% revenue growth into earnings that outrun memory costs and App Store constraints while services growth slows. Until then, Ternus’s margin warning and Yang’s valuation view sit against the clearest product signal in the lineup.