Apple Inc. (NASDAQ:AAPL) filed its 10-Q with the Securities and Exchange Commission on Wednesday, and analysts at Stifel have combed through it and still have questions about the company’s gross and operating margins. In particular, they took a closer look at the margins in Apple Inc. (NASDAQ:AAPL)’s key global areas to see where the problem might lie, and it looks like China might be an even bigger problem than previously thought.

Apple

Apple’s product warranty accrual weighs on gross margins

Stifel analysts Aaron C. Rakers, Sanjiv R. Wadhwani, Joseph Quatrochi, Andrew Shinn and William C. Peterson noted early in their report that during the June quarter, Apple Inc. (NASDAQ:AAPL) saw a $736 million warranty accrual compared to the $1.551 billion accrual with a $414 million retroactive in the previous quarter. They said the result is a 230 basis point sequential impact on the company’s gross margins, which left them questioning the trend.

A disturbing trend in Apple’s operating margins

The analysts also broke down Apple Inc. (NASDAQ:AAPL)’s operating margins according to geography. They split it into Greater China, Americas, Europe, Japan, the rest of the Asia Pacific region and retail. China was one area of concern mentioned already after the company’s earnings report this week.

Revenue fell in China 14% year over year, but in the 10-Q filing, this is broken down further. They found a 42% year over year decline in operating income in Greater China. The filing indicated $1.44 billion in operating income or about 12% of total operating segment income. The result is a 31% operating margin, which is down from 34% in the previous quarter and 46% in the same quarter a year ago.

Apple’s operating margins falling elsewhere too

In the Americas, Apple Inc. (NASDAQ:AAPL)’s operating margin ended up being about 35.7% for the June quarter, compared to 36.6% in the previous quarter and 40.3% in the same quarter a year ago. It’s also the same story in Europe, where the operating margin fell 300 basis points quarter over quarter and 700 basis points year over year to 32.2%.

In Japan and the rest of the Asia Pacific region, Apple Inc. (NASDAQ:AAPL) is faring slightly better on operating margins. In Japan, the company had a 52.8% operating margin, which was actually in increase from 49.6% in the previous quarter. In the rest of the Asia Pacific region, operating margins were 35.6%, compared to 32.7% in the previous quarter and 35.1% in the same quarter a year ago.

Apple Inc. (NASDAQ:AAPL)’s retail revenue was flat year over year, although operating income fell 19% year over year to $667 million. The resulting operating margin for the company’s retail segment was 16.4%, compared to 21% in the previous quarter.