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If I set apc.shm_size = 64M, will 64M of memory be allocated by APC when it starts or does it get allocated in chunks as it is needed?

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It is allocated at startup. apc.shm_size = 64M is very low you should use much more (GB)if your server is running several websites. Use apc.php to check your config.

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According to apc.shm_size defines the segment size. The number of segments allocated is defined by the apc.shm_segments configuration value.

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