Apple Beat on iPhone and Mac. The Margin Guidance Is What Sent AAPL Lower

Apple reported the best September quarter in its history on Monday. Revenue was $114.5 billion, up 12%. iPhone sales rose 17%. Mac jumped 24%. Earnings of $2.10 a share beat the $1.99 Wall Street expected.

The stock fell anyway. AAPL closed at $338.32 on November 2, down 1.8% on the day, and slid to about $329 after the report.

The reason sits in one line of the outlook. Apple expects its gross margin to drop to between 45% and 46% this quarter, below what analysts had modeled, mostly because memory chips cost more. Below are the numbers from the report, what Apple is guiding to, how the stock is priced and what analysts expect.

Apple’s September quarter

Apple revenue by product line, September 2026 quarter vs. a year earlier

The quarter ended September 26, 2026, the last of Apple’s fiscal 2026. According to the company’s earnings release, net income was $30.7 billion, up from $27.5 billion a year earlier.

iPhone brought in $57.6 billion, compared with $49.0 billion a year ago. That growth came with only eight days of iPhone 18 Pro sales in the period, and none from the new iPhone Duo, which went on sale after the quarter closed. Apple also said it couldn’t make enough iPhones, Macs and iPads to meet demand, and that currency moves cost it close to 2 points of growth.

Mac was the surprise. Sales of $10.8 billion beat estimates by more than a billion dollars.

Two product lines went the other way. iPad fell 10% to $6.2 billion. Wearables, Home and Accessories, which covers the Watch, AirPods and the Vision headset, fell 8% to $8.3 billion. Both missed estimates.

Services, the App Store, iCloud, Apple Music and the payments Google makes to be the default search engine, hit a record $31.6 billion. Growth slowed to just under 10%, though, the slowest pace since 2022.

Greater China, a weak spot for most of the last three years, grew 21% to $17.5 billion.

A record year, and a new CEO

For the full fiscal year, Apple’s revenue was $478.8 billion, up 15% from $416.2 billion. Earnings per share rose 20% to $8.98. The company generated $145 billion in cash from operations.

This was also the first earnings call for John Ternus, who took over as chief executive from Tim Cook on September 1. Ternus ran hardware engineering before that, and he spent much of the call on the product lineup. He called the iPhone Duo “the most transformational iPhone since the original,” which is a big claim for a company that has been criticized for slow, incremental phone updates.

Why the stock fell

Apple gross margin by quarter with December 2026 guidance

Apple’s gross margin in the September quarter was 47.9%. That looks fine until you read the footnote. About a full point of it came from tariff refunds, which also added 5 cents to earnings per share. Without them, the margin was closer to 47%, down from 50.1% the quarter before.

For the December quarter, Apple guided gross margin to 45% to 46%. Analysts had expected about 46.3%. Ternus said memory costs were higher than in the June quarter. AI data centers are buying huge amounts of DRAM and flash, and phone and PC makers are paying more for the same chips. Apple said it “reluctantly” raised some prices to offset that.

Revenue guidance was the good part. Apple expects growth of 7% to 10% in the December quarter, against a Street estimate around 6%. On last year’s $143.8 billion, that points to roughly $154 billion to $158 billion, which would be the biggest quarter Apple has ever had.

So investors got more sales but a smaller share of each sale kept as profit. With the stock near its high going in, that was enough to knock it down.

Apple isn’t spending like Microsoft

One number in the report shows how differently Apple is playing the AI race. Its capital spending in the September quarter was $2.24 billion, below the $3.33 billion analysts expected.

Microsoft spent about $45 billion in the same three months, most of it on servers and chips. Apple isn’t building giant data centers for AI models of its own. It launched an updated Siri during the quarter as a free upgrade on supported iPhones, and it hasn’t said how, or if, it plans to charge for AI features.

That cuts both ways. Apple doesn’t have the depreciation bill that worries Microsoft investors. But it also pays the higher memory prices that companies like Microsoft and Nvidia are driving, without selling AI computing to anyone. When analysts asked about AI revenue, Ternus said Apple sees “a lot of opportunities” and left it there.

Is Apple stock expensive at $338?

At the November 2 close, Apple was worth about $4.94 trillion, roughly level with Nvidia as the most valuable company in the world. Over the last twelve months it earned $8.98 a share, so the trailing price to earnings ratio was about 37.7. On forward estimates it’s around 35.

That’s a richer multiple than Microsoft’s 25 forward, for a company whose revenue grew 12% last quarter against Microsoft’s 19%. What investors are paying for is the steadiness: an installed base that Apple says hit an all-time high in every major product category, and a Services business with gross margins far above hardware.

Apple also shrinks its share count every year. It spent $86.4 billion on buybacks in fiscal 2026, and shares outstanding fell from 14.77 billion to 14.53 billion. That alone adds about 1.6% to earnings per share.

The dividend is small. Apple pays $0.27 a share every quarter, $1.08 a year, for a yield of about 0.32%. The next payment goes out November 16 to shareholders of record on November 12.

What analysts expect from AAPL

Before the report, the average 12 month price target from 43 analysts tracked by StockAnalysis was $332.39, about 2% below the November 2 close. The consensus rating is a buy. Targets ran from a low of $245 to a high of $405.

A few firms stand out. Bank of America has a $370 target and Evercore ISI $380. Monness raised its target to $355 from $335 just before the report. UBS rates the stock a hold with a $296 target, the most cautious of the large brokers.

When a stock trades above the average target, it usually means analysts haven’t caught up with the price yet, or they think the run went too far. Expect a round of target changes over the next few days as firms update their models for the lower margin guidance.

What could move Apple from here

The iPhone Duo is the biggest variable. It’s the first full quarter on sale, and Ternus has set high expectations. Strong early demand reports from Asian suppliers would help. Delays or reports of production cuts would hurt.

Memory prices come next. If DRAM costs keep climbing into 2027, the margin squeeze could last longer than one quarter. Apple has more buying power than almost anyone, but it can’t make the industry’s shortage go away.

Services growth needs to stop slowing. Apple guided to 8% to 9% for the December quarter, down from double digits in recent years. Legal cases over App Store fees and Google’s search payments are a standing risk to that line.

China is the wild card. A 21% gain is strong, but it came against a weak year-ago quarter, and Apple’s China sales have swung sharply on local competition and politics before.

The next report should come in late January 2027.

Questions people ask about Apple stock

When is Apple’s next earnings report?

Apple usually reports its December quarter in the last days of January or the first days of February, after the market closes. The date goes up on Apple’s investor relations site a few weeks ahead.

Does Apple stock pay a dividend?

Yes, quarterly. The current rate is $0.27 a share. Apple usually raises it by a penny or so each spring, alongside a new buyback authorization.

Is Apple a safer stock than Nvidia?

It moves less. Apple’s beta is about 1.07, close to the overall market, while Nvidia’s is above 2. That doesn’t mean Apple can’t fall. Over the past year it traded as low as $243.42, about 28% below Monday’s close.

Should I buy Apple or an index fund?

That depends on how much of your money you’re comfortable putting in one company. Apple is already the largest or second largest holding in most S&P 500 funds, so anyone with an index fund owns a good piece of it. Our guide on how much money you need to start investing covers both approaches.