Apple shares fell about 4% during its earnings call after the company forecast lower December-quarter gross margins, overshadowing a fiscal fourth-quarter revenue and profit beat driven by strong iPhone, Mac and China sales. Higher memory-chip costs are expected to cut into profitability during Apple's most important seasonal sales period, while services growth is also set to slow modestly.
Apple reported fiscal 2026 fourth-quarter revenue of $114.48 billion on Nov. 2, up 12% from a year earlier and above the $113.39 billion estimate compiled by LSEG. Diluted earnings per share reached $2.10, compared with the $1.99 analysts expected, while net profit increased 11.8% to $30.71 billion.
The results showed that demand for Apple's core devices remained resilient through the September quarter. The market's reaction instead centered on the company's outlook for the December period, when new iPhone sales and holiday spending typically make it one of Apple's largest quarters of the year.
December outlook points to lower gross margins
Apple guided for December-quarter revenue growth of 7% to 10% from a year earlier. That forecast leaves room for another sizeable increase in sales, but the company expects gross margin to fall to between 45% and 46%, from 47.9% in the quarter just reported.
Memory-chip costs were identified as a source of pressure. The decline is substantial for a company of Apple's scale: even a one-percentage-point change in gross margin can affect billions of dollars in quarterly gross profit when revenue exceeds $100 billion.
The September-quarter margin also benefited from roughly one percentage point related to tariff refunds, Apple said. Those refunds added $0.05 to diluted earnings per share, and the company said it had already collected most of the amount. That means the December margin outlook reflects both a less favorable cost environment and the absence of a comparable contribution from tariff recoveries.
Apple forecast operating expenses of $20.4 billion to $20.8 billion for the December quarter and projected an effective tax rate of about 17%. Taken together with the margin range, the guidance suggests that higher sales alone may not translate into the same pace of earnings expansion seen in the September quarter.
Services, a closely watched source of recurring revenue, is expected to grow 8% to 9% year over year in the December quarter. That was below the roughly 10.7% growth rate expected by analysts, according to the figures provided. The segment generated $31.57 billion in the September quarter, up 9.8% year over year and broadly in line with the $31.58 billion consensus estimate.
iPhone sales beat expectations as China rebounds
iPhone revenue rose 17.5% from a year earlier to $57.58 billion, exceeding the $56.54 billion estimate. The performance accounted for a large share of Apple's overall revenue beat and indicates that its flagship product continued to drive growth despite concern about consumer demand for premium smartphones.
Mac was the fastest-growing major hardware category. Revenue increased 23.7% to $10.79 billion, providing another positive result for Apple's device portfolio. The gains were not evenly distributed across all product lines.
iPad revenue fell 10.4% to $6.23 billion, while Wearables, Home and Accessories revenue declined 7.9% to $8.30 billion. Those declines show that Apple's quarter depended heavily on iPhone and Mac demand rather than a broad-based rebound across every hardware category.
Geographically, Greater China delivered one of the clearest improvements. Revenue in the region increased 21% to $17.54 billion, outpacing the company-wide growth rate. Sales in the Americas rose 10.2%, while Europe expanded 11.5%. Japan was the only reported region to decline, with revenue down 1.4%.
China's growth offers Apple a stronger starting point heading into the holiday quarter, especially as the company competes in a market where local smartphone makers have increased pressure in recent years. Yet the regional rebound does not remove the cost challenge outlined in Apple's outlook.
Record annual revenue but a more demanding earnings setup
For the full fiscal year, Apple reported record revenue of $478.83 billion, up 15.1% from fiscal 2025. Diluted earnings per share rose 20.4% to $8.98. The annual figures show that Apple converted revenue growth into faster earnings growth over the past year, helped in part by the high-margin nature of its services business and its large-scale operating model.
The December-quarter forecast places a limit on how directly that annual performance can be carried forward. A 45% to 46% gross-margin range would mark a notable sequential reduction from the September quarter's 47.9%, even if revenue rises within Apple's projected range.
Apple returned $28 billion to shareholders during the September quarter and declared a cash dividend of $0.27 per share. The dividend is payable Nov. 16 to shareholders of record as of Nov. 12.
The earnings release leaves Apple with a mixed near-term picture: iPhone, Mac and China sales provided evidence of strong demand, while higher component costs and slower expected services growth weighed on the outlook that traders focused on after the market closed. The December results will show whether holiday hardware volumes can offset the expected margin compression, or whether rising input costs begin to constrain earnings more materially.
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