^{Photo: CNBC}

Strong Earnings Highlighted by Supply Chain Pressure

Apple delivered a standout first-quarter performance, reporting blockbuster earnings and forecasting revenue growth of up to 16% for the current quarter, matching the pace of the period that just ended. The results underscore continued global appetite for iPhones, Macs, and iPads, even as broader consumer electronics markets remain uneven.

But executives made it clear that sales could have been even higher if Apple were able to manufacture enough devices to meet demand, particularly for iPhones.

Chief Financial Officer Kevan Parekh told analysts that Apple expects total company revenue in the March quarter to rise between 13% and 16% year over year. That outlook already factors in what the company describes as constrained iPhone supply.

In other words, demand is outpacing production.

Advanced Chips, Not Just Memory, Are the Real Bottleneck

During the earnings call, analysts pressed CEO Tim Cook about the impact of soaring memory prices, which have surged as artificial intelligence data centers consume massive volumes of DRAM and high-bandwidth memory. The AI boom has tightened global memory supplies, pushing costs higher for nearly every hardware maker.

Cook acknowledged that memory inflation is becoming a headwind but emphasized that Apple’s most immediate challenge lies elsewhere.

According to Cook, the primary constraint is access to advanced semiconductor manufacturing capacity for Apple’s custom-designed A-series and M-series processors, collectively referred to as system-on-chips. These chips power everything from iPhones and iPads to Macs and Vision Pro.

“The constraints that we have are driven by the availability of the advanced nodes that our SoCs are produced on,” Cook said, adding that Apple is seeing less flexibility in its supply chain than usual, in part because of stronger-than-expected demand.

Apple relies heavily on Taiwan Semiconductor Manufacturing Co. for leading-edge production. TSMC dominates advanced-node fabrication globally, and Apple confirmed it is increasingly dependent on TSMC’s 3-nanometer process to support its latest devices.

Cook said Apple is actively working to expand its access to this capacity but stopped short of offering guidance beyond the March quarter.

Memory Prices Rising as AI Reshapes the Supply Chain

While advanced logic chips are currently the biggest production limiter, memory costs are also climbing.

The surge in AI infrastructure spending has created intense competition for memory components, especially high-performance variants used in data centers. That has spilled over into consumer electronics, tightening supply and lifting prices across the board.

Cook said higher memory prices had only a minimal impact on Apple’s margins in the December quarter but warned the effect would be more noticeable in the March period. Even so, Apple expects gross margins of 48% to 49% in the current quarter, which at the midpoint would exceed the prior quarter’s margin, reflecting Apple’s pricing power and premium product mix.

The company said it is evaluating a range of options to manage the cost pressures, though executives declined to provide details on specific procurement or design strategies.

Lean Inventory Meets Surging iPhone Demand

Apple also pointed to unusually lean inventory levels as demand for iPhones accelerates in key markets. Industry analysts note that recent product refreshes, expanded financing options, and stronger uptake in emerging economies have helped drive unit sales higher, particularly for Apple’s premium models.

Market researchers estimate that global iPhone shipments rebounded strongly in the past quarter, with Apple capturing a growing share of the high-end smartphone segment. In some regions, wait times for certain configurations have lengthened, a sign that supply is struggling to keep up.

Cook reiterated that Apple is prioritizing ramping production wherever possible, but advanced-node capacity remains the gating factor.

Billions Flow Into US Manufacturing

Apple is also pushing to diversify its manufacturing footprint.

Last year, the company announced plans to invest more than $600 billion in the United States over five years, with a significant portion earmarked for domestic chip production and advanced manufacturing partnerships. Several of those investments involve suppliers building or expanding fabrication facilities in the U.S., including TSMC, which is constructing major operations in Arizona.

On Thursday, Cook revealed that Apple expects to source about 20 billion chips from U.S. suppliers in 2025, up from its earlier target of 19 billion. That increase highlights Apple’s efforts to reduce geographic concentration risk and strengthen its domestic supply base.

While the bulk of Apple’s most advanced chips are still produced in Taiwan, executives say U.S. capacity will play a growing role over time, particularly for certain components and older process nodes.

Outlook: Demand Is There, Capacity Is Catching Up

Apple’s message to investors was clear: customer demand remains strong, but production limits are holding the company back from reaching its full sales potential in the near term.

Between tight advanced-node capacity, rising memory prices driven by AI infrastructure, and an increasingly competitive global semiconductor landscape, Apple is navigating one of the most complex supply environments in its history.

Still, with revenue projected to grow as much as 16%, margins holding near record levels, and billions flowing into future manufacturing capacity, Apple is signaling confidence that these constraints are manageable. The company expects supply to improve over time, positioning it to better capture demand as new fabrication facilities come online and component markets stabilize.

For now, Apple finds itself in an unusual position: selling everything it can make, and working aggressively to make more.

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