This week in 30 seconds The news: Apple made $114.5 billion in its September quarter, up 12 percent, and expects revenue to grow 7 to 10 percent this holiday quarter, which would be its biggest ever. The catch: It expects to keep less of each dollar, with gross margin dropping to 45 to 46 percent, and Siri AI features that run on Apple's servers are getting usage limits, with paid "expanded access" later. Your move: Want an iPhone Duo for the holidays? Check the delivery date in the Apple Store app before you promise one to anybody. Apple told analysts it can't predict when Duo supply will meet demand. |
Welcome back to The Cupertino Chronicles.
John Ternus's first earnings report as CEO was a record, and the forecast that came with it says Apple will keep less of what it sells. Apple brought in $114.5 billion in the quarter that ended September 26, up 12 percent, with iPhone up 17 percent and the Mac up 24 percent. For the holiday quarter it expects 7 to 10 percent growth and a gross margin of 45 to 46 percent, down from 47.9 percent.
CFO Kevan Parekh pinned most of that drop on memory, which Ternus called "unprecedented." He named a second cost too: the ramp of Siri AI. A Siri request handled on your iPhone costs Apple next to nothing. One sent to Apple's servers carries an inference cost, and Parekh said those costs get booked against Services.
Ternus supplied the line owners should remember. Features that rely on server side models, including Siri AI and photo editing, will get usage limits, and "anyone who needs greater capacity will be able to purchase expanded access in the future." He gave no price, no allowance and no date.
I don't mind Apple charging heavy users for heavy compute. What I'll be watching is where the free line sits. If a normal day of Siri fits under it, nobody notices. If people hit it in their first week, Siri AI turns into one more subscription for a feature Ternus told CNBC is a reason to buy a new iPhone.
Apple's gross margin on Services last quarter, against 37.2 percent on hardware. Parekh said Siri AI's cloud costs will be recorded in Services, so heavy Siri use eats straight into Apple's most profitable business.
The iPhone Duo Starts the Holiday Short on Supply
None of the Duo's sales are in this quarter, and Apple told analysts it can't say when supply will meet demand.
Apple can't say when iPhone Duo supply will catch up, so replacing one that takes a fall could take a while. ESR's $34.99 Classic Hybrid Magnetic Case for iPhone Duo wraps protection all the way around the hinge and holds on with magnets for MagSafe.
Sponsored and affiliate links help keep The Cupertino Chronicles free. Partners are picked to fit the issue and never shape what I write.
Apple Intelligence Starts Testing in China: iOS 27.3 beta 1 is the first build where it can be tested on the mainland, with Alibaba's Qwen behind parts of Siri, Writing Tools and Visual Intelligence, ahead of a December release. Siri AI isn't part of it. Full story →
Siri AI Now Works Inside 15 Apple Apps: The same beta lets it schedule an iMessage, unsubscribe you from a mailing list and build a playlist, and Apple has opened it to every developer. More things to ask means more people finding the new limits. Full story →
Fitness+ Gets a Lifting Plan: Gym Strength, also in the 27.3 betas, builds a four week plan around your equipment and adjusts each week to what you logged, at no extra cost for subscribers. Dumbbells are the minimum, so a garage setup counts. Full story →
A Penalty Kick Game Built for the Hinge: Fold an iPhone Duo to 90 degrees and Penalty Area: Face2Face turns it into a goal standing over a pitch. The keeper is its developer, Eray Dinç, who trained as a goalkeeper as a kid. Free to try, one time $4.99 unlock, no ads; small studios are still doing the most with the fold. App Store → · Our Duo apps roundup →
Reader Pulse
Most reported Heat and battery drain right after updating Not a bug Apple says it passes once background setup finishes. Moving up: Photos won't send in Messages, which began with your reports on October 22, is now Unconfirmed. Something broken after updating? Report it on the iOS 27 problems tracker. |
👁 One Thing Worth Watching
Memory after Christmas: Apple expects memory costs to keep rising beyond the December quarter. The cushions Parekh named, inventory bought at older prices and cheaper non memory parts, won't last forever, and Apple already raised prices in June. The first Mac or iPad price change of 2027 will show whether Apple absorbs the next round or passes it on.
📌 On the record: Apple's December quarter gross margin will come in at or below 46 percent, the top of its own range, when Apple reports early next year. I'll check it by February 15, 2027.
Scorecard: in #013 I said Apple wouldn't put a price on expanded Siri AI access during the November 2 call. Called it. Ternus confirmed paid access is coming and named no price.
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Read on the webClosing Thought
Apple sold Siri AI as part of the iPhone you already paid for, and on Monday it told investors that heavier use will cost extra. Before Apple names a number, I'd like to know where your own use lands.
How many times a day do you actually use Siri AI, and what would you pay for more?
Hit reply and tell me. I read every one, and the sharpest answers (first name only, with your OK) run in next week's issue.
Justin
The Cupertino Chronicles lands every Thursday morning.
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