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Apple shares fell about 3% in extended trading on Monday after the company paired better-than-expected fiscal fourth-quarter results with a disappointing margin forecast, warning that surging memory chip prices and the cost of running its new AI tools would squeeze profitability into the holiday season.
Revenue for the quarter ended September 26 rose 12% year over year to $114.5 billion, topping analysts' expectations of roughly $113.4 billion. Earnings per share came in at $2.10, ahead of the $1.99 consensus. Gross margin reached 47.9%, slightly above estimates.
The results marked Apple's first earnings report under new Chief Executive Officer John Ternus, who succeeded Tim Cook on September 1. They also exposed a growing divide within the business: a resilient iPhone and a surprisingly strong Mac contrasted with softer iPad, China and wearables sales, while a looming margin squeeze raised questions about whether rising prices can keep Apple's profit machine running at historic rates.
iPhone and Mac Carry the Quarter
The iPhone, Apple's biggest moneymaker, remained strong, with revenue climbing 17% to $57.6 billion and beating the $56.5 billion analysts had expected. The company managed that despite a reshuffled launch calendar: Apple released only the iPhone 18 Pro line in September, delaying the regular iPhone 18 and new iPhone Air to the first half of 2027, while the foldable iPhone Duo did not reach store shelves until October 23 — well into the current quarter.
Mac revenue was the standout, surging 24% to $10.8 billion and smashing the $9.6 billion consensus by roughly $1 billion. A wave of new products — a touch-screen MacBook Pro, a refreshed iMac and a new low-end MacBook Pro — ship on November 6, with a MacBook Neo and MacBook Air expected early next year to keep momentum going.
Services, which includes the App Store, iCloud, Apple Pay and Apple TV, rose 9.8% to $31.6 billion, in line with estimates. Net income was $30.7 billion.
iPad, China and Wearables Disappoint
Not every segment kept pace. iPad revenue came in at $6.23 billion, missing the $6.9 billion estimate, though a new iPad mini is launching this quarter and an iPad Air, low-end tablet and iPad Pro refresh are due next year. The wearables, home and accessories category brought in $8.3 billion, down 7.9% year over year and short of the $9 billion forecast, as the quarter's AirPods 5 and new smartwatches were only minor updates.
Sales in greater China rose about 20% to $17.5 billion, but still fell more than $1 billion short of estimates near $18.9 billion. Chief Financial Officer Kevan Parekh blamed supply-chain constraints that limited Apple's ability to deliver products to meet demand. Even so, Counterpoint Research found Apple grew its smartphone market share from 18% to 22% during a quarter in which global shipments shrank 20% amid the component crunch.
Memory Crunch and AI Costs Threaten Margins
The biggest concern for investors was the outlook. Apple guided to revenue growth of 7% to 10% in the December quarter, beating the 6.1% Wall Street expected, but projected gross margin of just 45% to 46%, below the roughly 47% analysts modeled and down from above 50% in the June quarter.
Ternus pointed to an "unprecedented" rise in memory chip prices as the data-center building boom hoovers up supply, compounded by the expense of powering Apple's new "Siri AI" assistant. The company had raised prices across its device lineup in late June — including a $100 increase on iPhones — to help offset higher component costs, and said tariff refunds added 5 cents to earnings per share. But with stockpiles of cheaper components dwindling, both Ternus and Parekh warned margins would keep sliding.
The pressure arrives alongside lofty investor expectations. A recent rally — fueled by Apple's reputation as a haven from the AI spending frenzy gripping rivals like Google, Amazon and Nvidia — added roughly $1 trillion in market value and pushed Apple briefly above a $5 trillion valuation. Yet analysts note the stock trades at about 36 times next year's expected earnings even as profit is seen growing just 1%, while the once-reliable services engine slows under regulatory pressure on App Store fees.
For Apple, the foldable iPhone Duo and a refreshed Mac lineup offer bright spots heading into the holidays, with Ternus declaring the company had capped off its "best fiscal year ever." But investors will be watching whether higher prices and new products can offset tightening margins — and whether Apple can finally accelerate an innovation engine that has lagged in AI.