Apple has significantly increased its inventory as it prepares for worsening supply chain disruptions caused by a global shortage of advanced memory components used in iPhones, MacBooks and other devices.
During the company's quarterly earnings call, outgoing Chief Executive Officer Tim Cook described the surge in memory prices as a "hundred-year flood," warning that the AI-driven demand for hardware is putting unprecedented pressure on component supplies.
"We continue to expect high levels of demand. However, with less flexibility in supply chain, we expect the impact from the supply constraints to increase significantly sequentially," Cook said.
He added that Apple is facing "very significant constraints" with limited options to ease supply chain bottlenecks.
Inventory nearly doubles
Apple reported $11.1 billion in inventory, almost double the $5.7 billion it held last September, marking a notable shift from Cook's long-standing strategy of maintaining lean inventory levels.
The company said its biggest challenge is securing advanced memory nodes used in Apple silicon chips that power its A-Series processors for iPhones and M-Series chips for Macs.
Despite the supply concerns, Apple reported its strongest June quarter ever, with iPhone sales rising 22% year over year and Mac sales increasing 29%.
Higher prices and slower growth
Cook said the supply shortages forced Apple to "reluctantly" increase prices for Macs and iPads last month.
Several other technology companies, including Meta, Samsung, Microsoft and Sony, have also raised hardware prices amid rising component costs.
"We're going to be scrambling on the supply side, essentially," Cook said.
For the current quarter, Apple expects revenue growth of 9% to 11% compared with the same period last year, below the roughly 16% annual growth it has maintained in recent quarters.
The more cautious outlook unsettled investors, with Apple shares falling 6% in after-hours trading following the earnings announcement.
Leadership transition ahead
The company is also preparing for a leadership change, with Senior Vice President of Hardware Engineering John Ternus set to succeed Cook as chief executive in September.
Apple said it expects supply challenges to remain a key issue in the coming months as demand for AI-related hardware continues to strain global semiconductor and memory supply chains.
