Apple's $4.5T rout on supply warning, soft China

Apple Inc. suffered its worst single-day stock drop since 2025 on Friday, falling 7.4% to $308.91 after the company warned that component shortages and rising memory costs would squeeze results in the current quarter.

Revenue will grow 9% to 11% in the fiscal fourth quarter ending in September, Apple said on its post-earnings call. Analysts had modeled growth above 12% – a period that traditionally includes the launch of new iPhones.

Chief Executive Officer Tim Cook described the memory cost situation as a "100-year flood" and said chip shortages reflected higher-than-expected demand for the iPhone 17 line and the new MacBook Neo. The supply constraints have already forced Apple to raise prices on Macs and iPads and are now producing extended wait times on machines like the Mac mini and Mac Studio.

Currency moves are weighing on results as well, Apple said.

Apple also warned that services growth would decelerate in the September quarter. That business, which includes the App Store, Apple Music, iCloud and streaming video, grew 12% last quarter to $30.7 billion, missing the $31.4 billion analysts had expected. The company flagged regulatory changes in the European Union that let developers collect subscription payments directly, bypassing Apple's fee. Gaming revenue was softer than anticipated, too.

The quarter that just ended showed two other weak spots. China sales came in at $18.8 billion, below the $19.6 billion estimate. And iPad revenue of $6.19 billion missed the $6.89 billion consensus, even after Apple refreshed the iPad Air in March and the iPad Pro last year.

There were bright spots. iPhone revenue climbed 22% to $54.3 billion, topping projections of $53.6 billion and suggesting steady demand for the iPhone 17 series launched last September. Mac revenue hit about $10.4 billion, up 29% and well ahead of the $8.62 billion Wall Street expected. Earnings came in at $2.02 a share, beating the $1.89 average estimate. Total sales rose 16% to $109.4 billion.

The stock had been up 23% this year before the report and briefly approached the $5 trillion market-cap mark this month. Friday's selloff pushed the value back to $4.5 trillion, and gave back Apple's recent lead over Nvidia Corp. as the world's most valuable company. NVDA was up 2.93% on the day.

The quarter is a milestone in its own right: it is Tim Cook's last full period as CEO. He hands the role to hardware chief John Ternus on Sept. 1. Ternus, a 25-year Apple veteran, will take charge roughly two-thirds of the way through the current quarter – a critical window when new iPhones and other major devices typically go on sale.

"There is so much opportunity for us, with everything that's happening in this space, and we're just really focused on our plans and very excited about it," Ternus said on the call.

The incoming CEO faces a company playing catch-up on AI, a leadership bench near retirement, and a talent drain to OpenAI and other AI rivals. On the product side, Apple is preparing its first foldable iPhone, smart glasses, a touch-screen MacBook for 2026, and an overhauled iPad mini. The company also launched a device leasing program called Apple Upgrade this week that lets users effectively subscribe to hardware, similar to car leasing.

The current quarter will test whether the supply and cost pressures Cook described are temporary or structural. Apple's stock profile page shows the company carries an Alpha Score of 60 out of 100, a Moderate label reflecting the mixed signals between solid product demand and the widening operational constraints.