Apple (AAPL) Q4 2026 earnings review
Apple's phone sales beat its plan, but underlying margins slip
Apple sold more phones and laptops than its supply-constrained plan called for, while rising memory costs and research spending squeezed underlying profit margins. Fourth-quarter revenue rose 12% to $114.5 billion, beating the 9% to 11% outlook as chief executive John Ternus launched the iPhone Duo and touch-screen Macs. However, excluding a 1 percentage point boost from customs tariff refunds, gross margin fell 1.2 points from last quarter to 46.9% by our math.
| Revenue | $114.5B +12% from a year ago (planned 9–11%) |
|---|---|
| Gross margin excluding tariff refunds | 46.9% -1.2 percentage points from last quarter by our math |
| iPhone revenue | $57.6B +17.5% from a year ago (planned mid-teens) |
| Quarterly dividend outlook | Unchanged $0.27 per share; Q1 sales plan awaits the call |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because strong hardware demand and worsening component inflation offset each other, and the release contains no holiday-quarter outlook. Beating the September sales plan shows the prior forecast was cautious, while Services growth slowed below 10% and operating margin dipped as artificial-intelligence engineering costs rose 32%.
The question now is whether buyers will pay enough for new hardware to cover soaring memory-chip prices once Apple uses up its older component stockpiles. Either the iPhone Duo and touch-screen Macs lift prices and margins, or memory inflation and slower Services growth push profitability down in fiscal 2027. The December-quarter gross margin outlook on the conference call and the inventory footnote in the annual report will tell.
🐂 Bull Case
iPhone and China Carried the Quarter Past Supply Limits
Three months ago Apple warned that chip shortages would cap September sales and hold total growth to between 9% and 11%. Instead, chief executive John Ternus introduced the iPhone Duo, calling it the "most transformational iPhone since the original", alongside the iPhone 18 Pro lineup, and total revenue rose 11.7% to $114.5 billion.
- iPhone sales: $57.6 billion, up 17.5% from a year ago against a mid-teens plan
- Greater China sales: $17.5 billion, up 21.0% after falling 3.6% a year ago
- iPad and Wearables sales: down 10.4% and 7.9%, absorbing the chip shortage
The numbers show that the consumer tech giant prioritised its flagship phones and Asian buyers when allocating scarce processor chips. Beating the outlook proves the previous forecast was cautious, but it does not prove the chip shortage is over because iPad and accessory sales shrank.
What to watch: holiday-quarter revenue outlook on the conference call. A growth target in the double digits against last year's 16% iPhone 17 jump would show that supply can now meet demand.
Mac Grew 24% Against a Tough Comparison and Higher Prices
Apple raised prices on Mac and iPad last quarter to offset dearer memory chips, leaving open whether buyers would balk or had merely bought early ahead of the hike. In the fourth quarter, Ternus said the group "brought Touch to Mac for the first time", and Mac revenue rose 23.7% to $10.8 billion on top of 12.7% growth a year ago.
That result rules out a one-quarter pull-forward on laptops, whereas iPad sales fell 10.4% to $6.2 billion under the same price rises and supply limits. Customers paid more for Macs with touchscreen features and on-device artificial intelligence, while tablet buyers waited.
What to watch: December-quarter Mac sales against last year's 6.7% drop. Sustained double-digit growth during the holiday season would confirm that corporate and touch-screen upgrades outweigh higher prices.
🐻 Bear Case
Memory Costs and AI Spending Squeezed Operating Margin
Finance chief Kevan Parekh highlighted September records for net income and earnings per share, and reported gross margin rose 0.7 percentage points from a year ago to 47.9%. However, the release notes this included a "favorable impact of approximately 1 percentage point from tariff refunds" worth $0.05 per share, down from 2 points and $0.11 last quarter.
- Gross margin excluding tariff refunds: 46.9% by our math, down 1.2 percentage points from last quarter and 0.3 points from a year ago
- Research and development (engineering and AI costs): 10.2% of revenue, up 1.6 percentage points from a year ago
- Operating margin: 31.1%, down 0.5 percentage points from a year ago
Stripping out the temporary customs refunds shows that rising memory-chip prices are already hurting hardware profitability. At the same time, research spending rose 32.3% to $11.7 billion, so operating profit grew slower than sales and a lower 15.0% tax rate provided $0.04 of the earnings beat.
What to watch: first-quarter gross margin outlook on the call. A target below 47% without tariff refunds would show that older, cheaper component stockpiles are running out while memory prices keep rising.
Services Growth Dropped Below 10% as Deferred Revenue Lagged
Services — which includes the App Store, iCloud storage, search licensing and Apple TV — carries a 76.0% gross margin, roughly double the 37.2% margin on hardware devices. Parekh noted that Services revenue reached an all-time high of $31.6 billion and that the "installed base of active devices reached a new all-time high across all major product categories and geographic segments".
Even so, Services growth slowed to 9.8% from a year ago, down from 12.1% last quarter and 15.1% a year earlier. Current deferred revenue — cash collected from customers for subscriptions and services not yet delivered — rose only 6.4% to $9.6 billion, trailing both hardware and software sales.
Because Services grew slower than Products (up 12.5%), its share of total revenue dipped to 27.6% from 28.1% a year ago, depriving the group of its usual margin boost. Currency swings explain part of the slowdown, but slower growth in upfront subscription balances points to softer App Store and gaming spending.
What to watch: total deferred revenue in Note 2 of the annual report (Form 10-K). Growth staying in the single digits would mean new Siri AI features are not yet lifting paid iCloud subscriptions.
Risks this quarter didn't answer
The earnings release consists only of financial tables and brief quotes, leaving four standing risks and commitments without an update until the conference call and annual report.
- Component inventory buffer: total inventory jumped 31.1% from last quarter to $14.5 billion, and Note 5 of the 10-K will show whether raw memory stockpiles rose above June's $7.6 billion or shifted into finished phones.
- AI licensing and intangibles: net intangible assets (acquired rights and licences) stayed high at $20.3 billion, up 82.8% from a year ago, and the 10-K footnotes will test whether this reflects capitalised third-party AI model deals.
- Siri AI in Europe and China: the release mentions the all-new Siri AI for the holiday season without stating whether regulators in the European Union and China have approved it.
- US manufacturing commitment: no update on the $600 billion four-year US spending plan or when the Houston facility will begin assembling Mac mini computers.
👓 Other Themes
New Hardware Categories Mark John Ternus's First Quarter
September was the first reporting period under chief executive John Ternus, who succeeded Tim Cook on September 1. Ternus highlighted "a whole new generation of hardware for the home" alongside the iPhone Duo and touch-screen Macs. None of these new lines are broken out separately in the category table yet, where Wearables, Home and Accessories fell 7.9% to $8.3 billion.
💲 Other KPIs
Stockpiles on the balance sheet rose 154.3% from a year ago and 31.1% ($3.4 billion) from the June quarter. In the first nine months of the year, Apple built up raw components to shield margins from memory-chip inflation; the jump at year-end also reflects finished iPhone 18 and iPhone Duo units shipping for the holiday quarter.
Payments for property, plant and equipment fell 28.9% in fiscal 2026 to 1.9% of revenue, and dropped 30.9% in the fourth quarter to $2.2 billion by our math. While factory and data-centre spending shrank, net intangible assets on the balance sheet rose 82.8% over the year to $20.3 billion, reflecting off-balance-sheet or licensed capacity.
The iPhone maker spent $24.3 billion buying back its own shares in the fourth quarter by our math, bringing full-year repurchases to $86.4 billion, down 4.8% from fiscal 2025. Combined with $12.4 billion of term-debt repayments, buybacks lowered the diluted share count by 1.6% from a year ago to 14.63 billion.
🔮 Guidance
Unchanged. The board declared a quarterly cash dividend of $0.27 per share, payable on November 16, matching the rate set after the 4% increase in the second quarter. Apple does not include revenue or margin targets in its press release, reserving its holiday-quarter financial outlook for the conference call.
❓ Key Questions
What is the holiday-quarter outlook for revenue and gross margin?
Apple gives its quarterly targets on the earnings call rather than in the release. Investors need the December gross-margin range to see how fast rising memory costs are hitting profits as tariff refunds fade.
Did the $14.5 billion inventory build go into components or finished phones?
Total inventory jumped $3.4 billion in the quarter and $8.8 billion over the year. Only the Note 5 breakdown in the 10-K will show whether the pre-inflation memory buffer is shrinking or growing.
What caused net intangible assets to nearly double to $20.3 billion?
Net intangibles rose $9.2 billion over fiscal 2026 while capital expenditures fell 29%. Management has not said whether this balance capitalises third-party AI model licensing such as the Google partnership.
When will Siri AI launch in the European Union and China?
Chief executive John Ternus touted the all-new Siri AI for the holiday season, but Europe and Greater China represent 43% of sales and faced regulatory blocks last quarter.