Apple Is Down 10%. Should Investors Buy the Dip?
Key Points
The consumer tech giant reported a 26% year-over-year revenue gain.
Like others, Apple is feeling the effects of a memory chip shortage.
However, the company's products remain in strong demand.
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Despite reporting record earnings per share and beating Wall Street estimates, Apple (NASDAQ: AAPL) stock fell hard after reporting its fiscal third-quarter 2026 results on July 30. Apple shares fell as much as 10% in the sell-off. So what triggered the investor negativity, and is this an opportunity or a red flag warning?
First, services revenue fell short of analysts' expectations at $30.7 billion. Secondly, and perhaps most concerning, management made it clear that there are serious constraints tied to DRAM and NAND memory. There is a shortage in the memory market, and that is causing the available supply to skyrocket in price.
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This, in turn, means Apple will either have to absorb the additional costs and cut into its own margins or pass them on to consumers who are already constrained in their discretionary spending.
Analysts expected 12% revenue growth for the upcoming fourth quarter, but Apple's guidance is between 9% and 11%. This is largely what caused the big drop in stock price. So what should investors do now?
Image source: The Motley Fool.
Even with the significant price decline, Apple is still trading at a premium. For long-term investors, Apple's outlook is not exactly alarming. The memory shortage is affecting technology companies across the board, so it's not just an Apple-specific problem. Apple also has a very healthy business overall. Demand for the company's products remains strong and is likely to continue for the foreseeable future, even after CEO Tim Cook's departure this year.
I'm bullish on Apple because it's taking a more conservative approach to artificial intelligence spending than its peers. The company's revenue still grew 16% year over year, and aside from the memory shortage, there isn't much slowing Apple down right now. It remains a great dividend-paying company.
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Catie Hogan has positions in Apple. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
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