Apple delivered better-than-expected results for the final quarter of its fiscal year, but investors focused on the mounting cost of memory chips and a projected slowdown in services growth, sending shares down roughly 3% in after-hours trading on Monday.
Revenue for the three months to 26 September rose 12% year-on-year to $114.5 billion (€102.1bn), helped by record September-quarter iPhone sales. Net income climbed to $30.71 billion (€27.4bn), or $2.10 per share, up from $27.47 billion (€24.5bn), or $1.85 per share, a year earlier. Analysts polled by FactSet had expected earnings of $1.99 per share on revenue of $113.4 billion (€101.1bn).
The profit beat was partly flattered by tariff refunds, which added $0.05 per share and lifted gross margin by about one percentage point to 47.9%. Without that one-off, the underlying margin picture would have been less rosy.
The quarter captured only the first few days of sales of the premium iPhone 18 Pro models. Apple's new foldable device, the iPhone Duo, went on sale in the current quarter, so its contribution is not reflected in these numbers. iPhone revenue jumped 17.5% to $57.6 billion (€51.4bn), while Mac sales rose nearly 24%. iPad revenue fell 10.4%, and wearables, home and accessories dropped 7.9%.
This was the first earnings report under CEO John Ternus, who took over from Tim Cook on 1 September. Ternus pointed to a recovery in Greater China, where revenue grew 21% in the quarter and 28% for the full fiscal year, driven by iPhone and Mac sales. However, Investing.com senior analyst Jesse Cohen noted in a MarketWatch report that China, wearables and home device revenue all came in below analyst expectations.
A stronger sales outlook, but thinner margins
On the earnings call, Apple guided for revenue growth of 7% to 10% in the December quarter, which would make it the company's biggest quarter ever. But services growth is expected to slow to 8–9%, down from 9.8% in the September quarter when services revenue hit a record $31.6 billion (€28.2bn). Apple cited pressure from third-party licensing and currency movements.
The company also warned that rising memory costs and spending on the rollout of Siri AI would push gross margin down to between 45% and 46% in the December quarter, below the 46.3% analysts had forecast. Higher memory chip costs account for most of that pressure.
Apple has already raised prices on several products this year and is trying to mitigate the impact by using inventory bought at lower prices and trimming spending on other components. The company expects revenue to grow by 7% to 10% in the quarter, above the 6.1% analysts had anticipated.
Apple's AI spending in focus
Long criticised for lagging in artificial intelligence, Apple is taking a cautious approach to AI infrastructure spending, preferring partnerships over building massive data centres. That strategy has helped protect cash flow, according to eMarketer analyst Jacob Bourne. He said collaborations with companies such as Alphabet could enhance Apple's AI capabilities without the same financial risks as its rivals.
In September, Apple confirmed that the models powering its new Siri were built with Google, following a multi-year agreement announced in January. Capital spending fell 29% to $9 billion (€8bn) over the full fiscal year, while research and development spending rose 32% to $45.8 billion (€40.8bn). The company does not disclose how much of either is allocated to AI.
The earnings report comes amid broader concerns about rising costs across the tech sector, from memory chips to energy. In Europe, where Apple's products remain popular, the company faces similar margin pressures. Meanwhile, Apple's new CEO faces an earnings test as chip costs rise, and the company's ability to navigate these headwinds will be closely watched by investors on both sides of the Atlantic.
