Apple's latest quarterly results were a mixed bag for investors: revenue came in ahead of expectations, but the company's profit margins took a hit from soaring memory chip costs. In a separate major development, chipmaker Marvell announced a $115 billion all-stock deal to acquire Lumentum, one of the largest tech acquisitions in history.
Apple's revenue beats, but margins shrink
Apple reported quarterly revenue of $114.5 billion, up 12% from a year earlier and ahead of the $113.4 billion analysts had expected. iPhone sales led the way, bringing in $57.6 billion and topping forecasts—even though the quarter included only eight days of iPhone 18 Pro sales. Services revenue grew 10%, in line with expectations.
However, sales in China fell short of projections, despite jumping more than 20%. The bigger concern was profitability: Apple kept about 48 cents of every dollar it brought in after paying to make its products, down from 50 cents the previous quarter. That was still better than analysts expected, but it highlights the growing cost of memory chips, which have become more expensive as AI data centers gobble up supply.
What it means for investors
Apple's high prices give it more room to absorb rising component costs than most rivals. The company raised iPhone prices by $100 in September, and its customers are notoriously loyal. But if prices keep climbing, even loyal customers might start to balk.
Apple's shares trade at around 36 times next year's expected earnings, almost double the S&P 500's multiple. That premium reflects its stability and its appeal to investors wary of soaring AI spending. While rivals have poured hundreds of billions into AI infrastructure, Apple has spent a fraction of that. If AI revenue disappoints, Apple's restraint looks wise. But if those bets pay off, investors could start rewarding the spenders instead—and Apple's valuation could shrink.
Marvell's big bet on Lumentum
In another major tech move, chipmaker Marvell is acquiring Lumentum in a $115 billion deal—one of tech's biggest marriages ever and the second-biggest deal of the year. Lumentum makes the optics gear that keeps data flowing between servers and data centers. Marvell, which designs chips for data centers, was already buying Lumentum's wares and had been moving into optics itself: the firm snapped up photonics startup Celestial AI in February. So this acquisition is a natural next step.
No cash is changing hands. Instead, Lumentum's shareholders will swap their stock for Marvell's, taking 33% of the combined company and leaving Marvell's existing investors with the remaining 67%. Both companies' shares have more than doubled this year, making them well-matched in growth.
The AI spending backdrop
While Marvell is spending big on AI, OpenAI is scaling back its latest fundraising round. In September, the company was after $30 billion at a $1.4 trillion valuation. Now, it's reportedly looking for closer to $20 billion at a $1.25 trillion. That timing is no coincidence. The tech-heavy Nasdaq 100 index dropped 3.5% last Friday alone, capping a 6.7% slide in October—its worst month since March 2025. When public tech stocks get cheaper, private ones tend to follow.
Anthropic, meanwhile, is planning to take its stock public at a valuation as high as $2 trillion. The Claude-maker published a several-hundred-page IPO filing last week, giving investors their first in-depth look at its finances. Analysts note that while the business is fascinating, investors would be paying a hefty price for a company that still has a lot to prove.
What to watch next
For Apple, investors will be watching whether the company can maintain its premium valuation as AI competition intensifies. For Marvell and Lumentum, the focus will be on regulatory approval and whether the combined company can deliver on its growth promises. And with AI spending showing signs of cooling, the broader tech sector may face more volatility ahead.
For more on Apple's earnings and the chip cost squeeze, see our detailed breakdown. And for a look at how other companies are navigating the AI boom, check out Microsoft's latest results.
