Apple Beat Its Numbers And Fell Anyway, And Memory Chips Are The Reason

Apple reported after Monday's close, beat on both revenue and earnings, and the shares still slid before Tuesday's opening bell, because of what the company said the December quarter will cost it to build. Marvell agreed to buy Lumentum, paying with its own shares rather than cash, and shareholders of both companies balked at the terms. Americans vote in midterm elections today, and the oil price fell on Monday before climbing straight back on Tuesday.

Fast Facts

• Palantir's U.S. commercial revenue passed its U.S. government revenue for the first time in the third quarter, and the shares still fell (Read More)
• Down 45% in October, Intel's stock had its worst month since at least 1980 (Read More)
• American factories grew busier in October: the Institute for Supply Management's index of factory activity, where any reading above 50 means growth, came in at 55.5 against 54.5 in September (Read More)
• The Treasury Department expects the federal government to borrow $618 billion in the final quarter of 2026, $10 billion less than it previously estimated, and $800 billion in the first quarter of 2027 (Read More)
• SpaceX is reported to want to buy Boost Mobile, which would give its Starlink satellite network a ground-based mobile phone business to sell through (Read More)
• Carl Icahn's CVR Energy is near a deal worth more than $4 billion for Marathon Petroleum's refineries, the plants that turn crude oil into gasoline and diesel (Read More)

Global News

• Australia's central bank lifted its cash rate by a quarter of a percentage point to 4.85%, the highest since 2008, after materially revising up its own inflation forecasts (Read More)
• The People's Bank of China will make banks park more of their foreign-currency deposits in reserve, lifting that share by 2 percentage points to 6% from November 15, and the yuan was set for its biggest one-day fall in six months (Read More)
• Hong Kong's economy grew 5.2% from a year earlier in the third quarter, beating forecasts (Read More)
• Saudi Aramco's third-quarter net profit rose 34.5% from a year earlier to $36.25 billion (Read More)

Apple Beat On Earnings And Fell Anyway, On What Memory Chips Now Cost

Apple reported its September quarter after Monday's close and came in above what Wall Street had penciled in: revenue of $114.48 billion, up 12% from a year earlier, and earnings of $2.10 per share. We previewed it yesterday, when the consensus estimate, meaning the average forecast of the analysts who cover the company, was $1.98 per share against $1.85 a year earlier. iPhone revenue of $57.6 billion also topped estimates, in John Ternus's first quarterly report as chief executive. Then the shares slid in premarket trading on Tuesday, during the hours before the 9:30am opening bell.

A share price does not move on results by themselves. It moves on the gap between them and what the market expected, plus what the company says about the quarter ahead, which traders call guidance. Apple's guidance is the part that landed badly. Gross margin, the share of every sales dollar left after the cost of making the thing, was 47.9% in the September quarter. For the December quarter, the one that carries the holidays, Apple forecasts 45% to 46%. That is roughly two to three cents less on every dollar of sales, at a company whose quarterly sales run past $114 billion.

The reason Apple gave is memory chips, the parts that store a device's photos, apps and everything it is working on. Apple buys those chips rather than making them, so a higher memory price raises the cost of building each iPhone, iPad and Mac, and that extra cost lands in the margin. Ternus called what the company is seeing in memory pricing "unprecedented" and said he expects memory costs to be higher still in the December quarter and beyond. Chief operating officer Sabih Khan did not rule out future device price increases. That is where this stops being a story about a margin forecast and becomes a question about what a phone costs the person buying it.

The caveat sits in the same results. Apple's inventory of parts and finished products climbed to $14.54 billion from $5.72 billion a year earlier, an increase of 154.3%, and the components it has already committed to buy rose by $33 billion from the prior quarter. A company expecting memory to get cheaper does not commit that far ahead, so one reading is that Apple is locking in supply before prices climb again. The squeeze is visible elsewhere, too: iPad revenue was $6.2 billion against expectations of $6.7 billion, down 10% from a year earlier, which Apple attributed to supply. And the 45% to 46% is a forecast, not a result.

Sources: Economic Times on the quarter · Forbes on iPhone revenue · TechCrunch on margins and memory costs · TechCrunch on supply constraints · MarketWatch on why the stock fell · our briefing of November 2

Marvell Agreed To Buy Lumentum With Shares, Not Cash, And Both Stocks Fell

Marvell, which designs custom chips, agreed on Monday to buy Lumentum, which makes optical chips and networking equipment: the hardware that moves data between computers inside an AI data center. It is an all-stock deal: Marvell pays not with cash but with newly issued shares of itself, 4.5 Marvell shares for every Lumentum share (the exchange ratio). Two numbers are circulating and both are correct about different things. The equity value, what Lumentum's shareholders actually receive in Marvell stock, is about $80 billion; the enterprise value, which adds the debt Marvell takes on, is $115 billion. Shares of both companies fell on Monday.

Paying in paper rather than cash has two consequences. First, Marvell has to create new shares to hand over, so the people who already owned Marvell end up owning a smaller slice of a bigger company. That is dilution. Second, the offer is denominated in Marvell stock, so what it is worth to a Lumentum holder moves with Marvell's share price: a deal agreed on Monday is worth less by Tuesday morning if Marvell falls in between. That is a large part of why shareholders on both sides of the table panned the terms, with one telling MarketWatch it was "a trash offer." Nothing is settled yet. The companies do not expect to close until the first half of calendar 2028, and the deal needs approval from both sets of shareholders and from regulators, the government agencies that review deals this size.

For scale: at roughly $80 billion in equity value this is one of the largest acquisitions in technology history, larger than Microsoft's $68.7 billion purchase of Activision Blizzard in 2022 and Dell's $67 billion purchase of EMC in 2016. Nvidia put $2 billion into Lumentum and $2 billion into Marvell in March 2026, which puts it on both sides of a deal whose terms shareholders are complaining about.

Sources: WSJ · TechCrunch · MarketWatch

Oil Reversed Course In 24 Hours, And Government Borrowing Costs Followed It Both Ways

Crude oil posted its biggest one-day percentage decline since July on Monday, as diplomatic efforts toward direct talks between the United States and Iran took some of the fear out of the price. By Tuesday it had gone the other way. Al Jazeera reported explosions heard on Iran's Qeshm Island and in Bandar Lengeh, and said U.S. media were reporting American strikes in the Strait of Hormuz, the narrow shipping passage at the mouth of the Persian Gulf; the strikes are reported rather than confirmed. Oil climbed back to around $107 a barrel.

The chain from a Persian Gulf headline to the price of government debt is short. Oil is an input to nearly everything that is made or moved. When crude gets more expensive, the cost of producing and shipping other things rises with it, and that is inflation. Lenders want to be compensated for inflation, because money repaid later buys less than it used to. So the yield on a government bond, meaning the annual return a lender earns for holding that government's debt, tends to rise when oil rises and to ease when oil falls. Part of any oil price is a risk premium, the extra that buyers will pay to be sure of getting supply when a conflict threatens it, which is how a diplomatic headline moves the price without a single barrel changing hands. That chain ran in both directions inside a single day: Monday's fall in oil pulled yields down, and Tuesday's rebound pushed them back up, with U.S. Treasury yields rising in early European trade. The Treasury's own curve for Monday, November 2 put the yield on its 10-year note at 4.91% and its 2-year note at 4.59%.

Sources: Al Jazeera · WSJ on oil's fall · Nasdaq.com on oil's rebound · WSJ on Treasury yields · Economic Times on German and Indian bonds · Forbes · U.S. Treasury

What To Watch

Reporting today:

• Advanced Micro Devices (AMD) is expected after the close, with analysts' average estimate at $1.68 in earnings per share against $0.97 a year ago, alongside Amgen (AMGN) at $5.74, Arista Networks (ANET) at $0.99 against $0.67, and Booking Holdings (BKNG) at $4.48.
• Before the opening bell, Shopify (SHOP) is expected at $0.33 against $0.27, Pfizer (PFE) at $0.72 against $0.87 a year ago, Eaton (ETN) at $3.54 and Ferrari (RACE) at $2.66. 279 companies are scheduled in all.

Tonight:

• U.S. midterm election results begin arriving once the first polls close. Control of Congress might not be settled for days.

Later this week:

• Wednesday brings 479 scheduled reporters, with Arm Holdings (ARM) and Qualcomm (QCOM) expected after the close and McDonald's (MCD), Uber (UBER) and Novo Nordisk (NVO) before the open.
• Thursday is the heaviest day at 618, including Lumentum (LITE) after the close at $3.82 against $0.60 a year ago, which would be its first report since agreeing to be bought, plus Airbnb (ABNB) and ConocoPhillips (COP).
• October jobs data is expected this week, and the Federal Open Market Committee next meets December 8-9.
• Every earnings figure above is an estimate rather than a result, and an expectation is not a decision.

The Classroom Takeaway

Apple sold more than Wall Street expected and the shares fell anyway, because a price already holds the good news and moves on what comes next. Students can watch that gap between a result and an expectation play out on real quotes in our stock market simulator.