Apple is cutting internal AI spending for employees, shrinking daily caps on token usage and compute costs from up to $300 per day to about $200 in October, with some staff facing limits as low as $25, as part of a broader push to curb expenses.

These AI budgets cover the tokens and data processed by models like OpenAI's ChatGPT, Anthropic's Claude, and Google's Gemini.

Overall operating expenses rose 22% to $75.54 billion in the latest fiscal year, representing 16% of total revenue, with R&D driving most of the increase.

Apple delayed several high-profile product rollouts, including the foldable iPhone Duo, touch-screen MacBook Pro, and HomeView hub, and will rely on launches next fiscal year to restore confidence and sustain growth momentum.

Total quarterly revenue grew 12% year over year to $114.5 billion, led by a 17% jump in iPhone revenue to $57.6 billion, while iPad, China, and wearables underperformed.

Apple did not immediately respond to Reuters or comment on the report.

Market reaction saw Apple’s stock fall more than 3% as investors weighed the margin pressures against an otherwise upbeat revenue trajectory.

Analysts warn that high investor expectations, buoyed by AI optimism, could heighten volatility as margins compress and product rollouts lag.

CEO John Ternus signaled that price increases for customers are likely as production challenges persist.

Supply chain issues persist with rising memory costs and shortages of key parts threatening flagship iPhone and Mac production.

Apple’s first quarterly results under CEO John Ternus were mixed, with forecasts for revenue growth but thinner gross margins than expected.

The report also notes stronger holiday revenue guidance but thinner margins, reflecting a cautious outlook despite momentum.