Apple (AAPL) reported fourth quarter results that beat on the headline numbers but missed in key spots, and the stock barely moved - down about a tenth of a percent at first, then roughly 1%.
The Numbers
EPS came in at $2.10, 10 cents above estimate. Revenue was $114.48 billion, up about 12% year-over-year and slightly above expectations. The quarter set records for total revenue, iPhone revenue, and EPS - the best fiscal year the company has had.
iPhone revenue reached $57.58 billion, up 17% year-over-year, topping estimates by about $1 billion. Mac revenue hit $10.79 billion, up 24% year-over-year, beating the $9.7 billion estimate by about $1 billion.
Two segments missed. iPad revenue was $6.23 billion, down 10% year-over-year, below the $6.89 billion estimate. Wearables, home and accessories came in at $8.3 billion, down close to 8% year-over-year, missing the $9 billion estimate.
Services revenue hit a new all-time high of $31.57 billion, in line with estimate. Services now makes up around 28% of total sales.
China Miss
Greater China revenue was $17.54 billion (cited in the discussion as about $16.5 billion), missing the $18.75 billion estimate by more than $1 billion. The street expected China up 28% year-over-year, versus 22.4% growth last quarter, so the market was looking for acceleration and did not get it. Americas revenue was $48.68 billion, better than expected.
Gross margin was 47.9%, which included a favorable impact of about 1 percentage point from tariffs.
The Services Signal
The services beat matters more than it looks. The estimated growth number was less than 10%, down from around 12% in the June quarter, so services were expected to slow down. Beating that softer bar is meaningful because services carry high margin and now drive a growing share of sales.
Why China Was Expected to Be Strong
Expectations for China ran high going in. iPhone 18 Pro models have sold well there - Counterpoint research showed sales 29% higher in China during the first 3 weeks of availability. That strength was seen as offsetting weaker demand in the US and other key markets like Japan. Android makers in China have had to raise retail prices, which narrowed the price gap with premium iPhones and pushed some buyers toward Apple. Against that backdrop, the slight China miss stings, though it is hard to pin the muted stock reaction directly on it.
Cash and Shareholder Returns
Apple generated about $28 billion in operating cash flow during the quarter and returned about $28 billion to shareholders in the same period. One way to judge a healthy company is its cash flow and how much of it goes back to shareholders - Apple meets that test here. Free cash flow has always been positive.
Capex and AI
Apple's restrained capex spending has kept it in line relative to other hyperscalers. Capex has been falling, actually down over the last year compared to 2025 based on the first three quarters, and that restraint is one reason the stock has climbed over the last nine months while other hyperscalers escalate spending. The open question: how will Apple keep direct control over its AI infrastructure? If it hands too much control to another AI company to bolt onto its ecosystem, that becomes a concern. There is a balance between not overspending and risking reliance on frontier AI models it will need later.
What the Call Was For
Apple does not give guidance until the earnings call. The CEO quote from John Turnis touted the September quarter revenue record of $114.5 billion, up 12%, with iPhone hitting a September quarter record and services at an all-time high. He called the lineup the most ambitious yet - the iPhone described as the most transformational since the original, alongside the iPhone 18 Pro and iPhone 18 Pro Max as the most powerful iPhones, plus new home hardware, touch for Mac for the first time, and new Siri AI - framed as a setup for a strong holiday season. That language reads like a teaup for an upbeat holiday forecast.
Q1 of next year is estimated around $153 billion, including holiday sales. That quarter will also include the Duo, which is not in this quarter's sales - this report captured only 8 days of sales of the newer product.
Open Questions Into the Call
Markets were waiting on the December quarter guidance and on how Turnis, in his first earnings call as CEO, lays out the future growth strategy. Gene Munster's preview flagged likely topics: the future of new products (even robots), more color on services growth, and the impact of the June price increase, with a reference to the Intel episode.
The Duo launch has not lived up to its lofty expectations. Weekend feedback included complaints about missing Face ID - few expected people would miss it - and cracks in the screens.
The big test remains Siri, now that it has been brought into the home. Another flagged risk is the future of AI agents and how people use them, a front where Apple has a weaker story than some rivals.
