Fiscal Q4 2026 earnings call, November 2, 2026, John Ternus's first as CEO
Memory Is Now the Central Margin Variable
The most consequential disclosure on the call was the scale of the memory cost problem. Apple guided December quarter gross margin to 45% to 46%, against 47.9% reported for September. That September figure included roughly 1 percentage point of benefit from tariff refunds. Stripping the refunds out of both the June and September quarters, CFO Kevan Parekh said company and products gross margin each fell about 1 point sequentially, a decline driven "entirely by memory impacts." The gross memory hit was larger than that. It was masked by carry-in inventory, lower costs on certain non-memory components and the price increases Apple took on Mac and iPad in June and on iPhone in September.
Management expects those offsets to fade. Ternus described the market in unusually blunt terms: "What we're seeing with memory pricing right now is unprecedented." He said Apple sees memory purchase prices continuing to rise beyond December and a shrinking benefit from carry-in inventory over time. Parekh said most of the sequential margin decline at the guidance midpoint comes from memory. On an ex-refund basis, the guide implies a decline of about 140 basis points, as Evercore's Amit Daryanani calculated, and management did not dispute that math.
Apple also showed more urgency on supply commitments. Manufacturing purchase obligations rose by $33 billion between June and September, a figure that will appear in the 10-K due today. COO Sabih Khan, who joined the call for the first time at Ternus's request, repeated that number in answer to three separate questions on memory procurement and long-term agreements. He did not say whether Apple is signing long-term supply agreements or changing how it buys memory. The company is competing for memory against better-funded AI infrastructure buyers, and management offered no detail on how it plans to win that competition beyond committing more capital.
Management called its price increases "reluctant" and said it is weighing unit revenue and margin against short- and long-term considerations. Parekh said it is "early to really read price elasticity," since Mac and iPad have been supply constrained since the June increases and the iPhone increase is only weeks old.
Supply Constraints Shift From Silicon to Memory
The nature of Apple's supply problem is changing. Khan said September quarter constraints on iPhone, Mac and iPad stemmed mainly from the availability of advanced nodes for its SoCs. Those are easing as more of the lineup moves to 2-nanometer. For December, he expects constraints on Mac and iPad driven primarily by memory, "as demand has been higher than what we expected." The new iPhone Duo foldable is also supply constrained, and Khan said it is "really hard to predict when supply and demand will be in balance." Apple gave no outlook beyond December.
The December revenue guide of 7% to 10% growth reflects this constrained supply. Management expects it to be the best quarter in company history, even though it laps a December quarter that grew 16%. Apple declined to split the guide between volume and price.
Siri AI Brings Real Cost, and a Path to Monetization
Siri AI launched in beta for U.S. English in September and expanded to five more languages in October. It carries a cost that investors had not seen before. Parekh said server-side inference for Siri AI, which includes Private Cloud Compute, will be recognized in services cost of sales. Apple will also defer a portion of device revenue to cover Siri AI, as it already does for Maps, Siri and iCloud, which will pressure margin through the deferral accounting. Management cited both effects, with memory, in the 45% to 46% gross margin guide. Parekh said the on-device and server mix is "very early days" and that Apple is "in very, very early stages of understanding" it, including whether compute requirements will need to rise.
Ternus gave the first indication of how Apple intends to recover those costs. Features that rely on server-side models, including Siri AI and intelligent photo editing, will have usage limits, and "anyone who needs greater capacity will be able to purchase expanded access in the future." That points to AI usage becoming a tiered iCloud+ upsell. Ternus noted that iCloud tiers "in the beginning were largely about storage, but we've been adding more capabilities and features to it." Apple has not disclosed pricing or timing.
On agentic AI, Ternus was non-committal. He said Siri is "primarily request-based today" but is built on "a modern orchestrator-driven architecture that gives us real room to expand its capabilities over time." His emphasis was on privacy and on making users aware of what access they grant to agents. He did not directly address the risk of third-party agents encroaching on App Store or services revenue, which Morgan Stanley's Erik Woodring raised. Siri handles more than 2.5 billion requests a day.
Services Growth Decelerates, With FX and the App Store Both at Fault
Services revenue reached a record $31.6 billion, up 10%. Apple guided December growth to 8% to 9%. Parekh gave an unusually detailed explanation of the slowdown. Foreign exchange was a headwind of about 4 percentage points from the March to September quarters, with about another 0.5 point expected in December. He also cited third-party licensing as a sequential headwind, which is the line most consistent with pressure on search-related income. The company did not name Google.
The App Store is not a clean story. September quarter App Store performance was "similar to the prior year," with paid subscriptions growing at double digits. Parekh said mobile gaming headwinds will persist into December. He also cited business model changes in certain countries and the court ruling on link-out transactions in the U.S. Management offered no new services category to offset these pressures. It pointed instead to the 2.5 billion-device installed base, nearly 1 billion average weekly App Store visitors, more than 1.5 billion paid subscriptions, the bundling of Apple TV and Arcade into iCloud+, Apple Pay in India and ads in Apple Maps in the U.S. and Canada. Services gross margin was 76%, up 40 basis points sequentially.
iPhone and Mac Drive an Exceptionally Strong Quarter
Total revenue was $114.5 billion, up 12%, despite nearly 2 points of sequential FX headwind and constrained supply. iPhone revenue was $57.6 billion, up 17%, with a record number of upgraders. Mac revenue rose 24% to $10.8 billion, helped by the MacBook Neo and MacBook Pro, and Apple said IDC data shows share gains for the quarter and the full year. Ternus said Apple has never sold more Macs in a fiscal year. He also highlighted local AI use cases on Mac mini and Mac Studio. Gap is running loss-prevention AI on Mac mini across hundreds of stores, "eliminating cloud token costs."
The weaker categories were iPad, down 10% to $6.2 billion on supply constraints and a tough comparison, and Wearables, Home and Accessories, down 8% to $8.3 billion against the prior-year launches of the Watch SE 3 and AirPods Pro 3. Apple did not explain why a standard iPhone 18 was missing from the September lineup. Ternus said only that the iPhone 17, Air and 17e round out the holiday lineup, and he declined to discuss the road map.
Greater China was a notable bright spot. Revenue rose 21% in the quarter and 28% for the full year, after two years of declines. Ternus credited "having really great products" and cited Worldpanel data that iPhone held the top 3 spots in urban China. Counterpoint ranked the MacBook Air and MacBook Neo as the top 2 laptops there.
Opex, Capital Return and Balance Sheet
Operating expenses were $19.2 billion, up 21% year over year, on R&D investment. The December guide of $20.4 billion to $20.8 billion implies growth of 11% to 13%, which is a clear moderation. Ternus said Apple is "spending what we need to spend to achieve our road map." EPS was $2.10, up 14%, including $0.05 from tariff refunds. Fiscal 2026 revenue was $478.8 billion, up 15%, with EPS of $8.98, up 20%. Apple returned $28 billion in the quarter, including $24 billion of buybacks, and ended with $137 billion in cash and marketable securities against $80 billion of debt. Asked by Melius's Ben Reitzes about the dropped net cash neutral target, Parekh said the change gives Apple "flexibility to optimize" cash and debt separately. He did not signal a shift toward net debt or more M&A. The dividend is $0.27 per share.