Apple has just delivered a standout quarterly report, with both iPhone and Mac revenue beating expectations. However, rapidly rising memory costs are eating into profits, and the continued slowdown in services growth is shaking the market's faith in Apple's "ecosystem premium." The world's most valuable company is now facing a structural contradiction of strong hardware performance alongside margin pressure.
According to the latest financial data, Apple's fiscal 2026 fourth quarter (ended September 2026) revenue reached $114.5 billion, up 12% year over year, above the upper end of its prior guidance range of 9% to 11%. Earnings per share came in at $2.10 (including a $0.05 tariff refund benefit), beating Goldman Sachs' estimate of $2.01 and the market consensus of $1.99. iPhone revenue surged 17% year over year to $57.6 billion, while Mac revenue jumped 24% to $10.8 billion, both significantly exceeding expectations and validating the view that demand elasticity after price increases is lower than anticipated. However, the company subsequently guided fiscal 2027 first-quarter gross margin to a range of 45% to 46%, down about 140 basis points from the current quarter's 46.9% (excluding the tariff refund), with the core drag being the sharp rise in memory costs.
Following the earnings release, Apple shares fell as much as 5% in after-hours trading. Wall Street is also reassessing Apple's profit trajectory. Goldman Sachs, Morgan Stanley, JPMorgan, and Bank of America all maintained buy or overweight ratings, but their language sought to balance "strong hardware" against "dual headwinds of margin and services growth."
iPhone and Mac Drive Beats, Services and Wearables Lag
The core logic of Apple's quarter can be summed up in one sentence: hardware beat expectations, while services and profit margins came under pressure.
On the product side, iPhone revenue was $57.6 billion, up 17% year over year, exceeding Goldman Sachs' forecast by $1 billion. Mac revenue reached $10.8 billion, up 24% year over year, far above Goldman Sachs' estimate of $8.7 billion, marking Apple's strongest September-quarter Mac revenue ever. By contrast, iPad revenue was $6.2 billion, down 10% year over year, well short of Goldman Sachs' $7.4 billion forecast. Wearables and accessories revenue was $8.3 billion, down 8% year over year, also below expectations. Bank of America analyst Wamsi Mohan noted that the iPad decline was partly due to supply constraints and the high base effect from the prior-year launch of the A16 iPad.
Services revenue was $31.3 billion, up 10% year over year, broadly in line with Goldman Sachs and market consensus, but the growth rate has clearly decelerated from 12% in F3Q26. Services gross margin was 76.0%, slightly above expectations. Overall gross margin was 47.9%, beating Goldman Sachs' 47.8% forecast and the market consensus of 47.5%, but this included about 1 percentage point of tariff refund benefit. Excluding the refund, the actual gross margin was approximately 46.9%.
Goldman Sachs believes the Mac and iPhone beats were likely driven by "better pricing and lower-than-expected price elasticity." This judgment has important implications for FY2027 growth expectations: if consumer resistance to price increases is weaker than expected, Apple's room to pass through cost pressure via pricing will be better than the market had previously feared.
Memory Inflation: A New Source of Margin Pressure with No Near-Term Relief
Memory chip cost increases are the core risk variable that institutions focused on after this earnings season, and also the main pressure source explicitly cited by Apple's own management.
Apple management said on the earnings call that memory cost increases will intensify further in the December quarter and will last far beyond a single quarter. As inventory purchased at lower costs is gradually consumed, the offsetting effect will also fade, meaning product gross margins "will get worse before they get better." At the same time, additional cloud inference costs from the Siri AI rollout are quietly eating into services gross margin and are being recorded in services cost of goods sold. Several institutions believe this impact is currently relatively manageable, but its incremental effect will rise as AI features expand.
JPMorgan research shows that memory-related constraints have extended to Mac and iPad supply, with both product categories facing insufficient memory availability in the December quarter. The supply-demand gap for iPhone Duo will also be difficult to close in the short term. Apple management characterized the magnitude of memory cost increases as "unprecedented." Bank of America Securities also noted in its research that Apple's inventory and purchase commitments both rose significantly, "mainly driven by higher memory costs."
Services Growth Slowdown: Structural Problem or Cyclical Disturbance?
The services business is one of the most debated topics in the market after this earnings report. Management guided F1Q27 services growth to 8% to 9% year over year, about 2 to 2.5 percentage points below market expectations, attributing this to weakness in third-party licensing revenue (Google TAC-related revenue), continued sluggishness in App Store mobile gaming revenue, business model adjustments for the App Store in some countries, and the judicial ruling on U.S. link-out transactions, along with about 50 basis points of foreign exchange headwinds.
Morgan Stanley believes these trends will intensify market discussion about the potential impact of AI on Apple's services business. Its latest forecast shows FY2027 will be the first fiscal year since FY2023 in which Apple's services revenue growth falls below 10% (expected at 9.3% year over year).
However, Apple management emphasized a "longer time horizon" of optimism on the earnings call: more than 2.5 billion active device users growing at over 6% annually, more than 1.5 billion paid subscribers maintaining double-digit growth, rising penetration in emerging markets, and future AI monetization potential are all viewed as structural pillars of potential services growth.
For next-quarter earnings forecasts, institutions made downward revisions to varying degrees: Morgan Stanley cut FY2027 earnings per share from $9.90 to $9.85; JPMorgan lowered fiscal 2028 earnings per share from $10.60 to $10.00; Bank of America Securities slightly raised FY2027 earnings per share to $9.15 but simultaneously lowered its 2028 and 2029 forecasts. Goldman Sachs maintained its buy rating with a 12-month target price of $390, implying about 15% upside from the current share price. Morgan Stanley and JPMorgan adjusted their target prices to $350 and $355, respectively. The core proposition shared by multiple institutions is that the duration and magnitude of memory inflation, along with when services growth bottoms out, will be the two key variables determining Apple's next phase of valuation.
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