Though Apple predicted revenue growth of 7% to 10% during the holiday season — beating the 6.1% estimated by Wall Street — the company warned that gross margins would be thinner than projected.
Apple Inc. delivered a mixed outlook to investors in its first quarterly report under Chief Executive Officer John Ternus, with tightening profit margins overshadowing an upbeat sales forecast. Though Apple predicted revenue growth of 7% to 10% during the holiday season — beating the 6.1% estimated by Wall Street — the company warned that gross margins would be thinner than projected. It’s also suffering from supply constraints that will make it harder to capitalize on a wave of new products.
Ternus, who took the CEO job last month, is contending with another challenge: lofty investor expectations. A rally in recent months — fueled in part by Apple’s reputation as a haven from AI tumult — added roughly $1 trillion to Apple’s market value. Against that backdrop, the shares fell more than 3% as trading got underway Tuesday morning in New York. “Product gross margin degradation remains a key near-term issue,” Bloomberg Intelligence analysts Anurag Rana and Josh Christensen said in a note.
Total revenue rose 12% to $114.5 billion during the fiscal fourth quarter, which ended Sept. 26. Analysts had estimated $113.5 billion on average, according to data compiled by Bloomberg. Sales growth in the quarter decelerated from a 16% clip in the previous three months, and the numbers from Apple’s iPad, China and wearables businesses were disappointing. But the iPhone, the company’s biggest moneymaker, remained strong.
Gross margin — the percentage of sales remaining after deducting production costs — will be 45% to 46% in the December quarter. Analysts projected 47%, and the benchmark was above 50% in the June quarter. Higher memory costs and expenses related to the new Siri AI digital assistant weighed on the figure, Apple said. The first day of in-store sales of the iPhone Duo in Shanghai on Oct. 23. Photographer: Qilai Shen/Bloomberg
Ternus became CEO on Sept. 1, putting him in charge for the final month of Apple’s fourth quarter. He has since overseen the unveiling of the foldable iPhone Duo, touch-screen MacBook Pro and HomeView hub, though none of those products went on sale until the current quarter, which runs through December. Apple itself had projected fourth-quarter revenue growth of 9% to 11%. Though sales from greater China increased 21% to $17.5 billion, that was more than $1 billion short of estimates.
Revenue from the iPhone grew 17% to $57.6 billion during the quarter, topping an average estimate of $56.5 billion. That shows the company is weathering a schedule change in its product releases. Apple typically launches multiple new iPhones in September, but this time only released the iPhone 18 Pro line. A regular iPhone 18 and new iPhone Air aren’t arriving until the first half of 2027, while the foldable iPhone Duo didn’t launch until Oct. 23 — deep into the following quarter.
Services, a segment that includes music streaming, the App Store, iCloud subscriptions, Apple TV and other digital offerings, rose 9.8% to $31.6 billion. That matched estimates. Earnings came in at $2.10 a share, topping an estimate of $2. Mac revenue climbed 24% to $10.8 billion. That smashed the average projection of $9.7 billion. And a wave of new products should help keep momentum going. The company’s touch-screen MacBook Pro, refreshed iMac and new low-end MacBook Pro ship on Nov. 6.
Apple is planning to keep updating the Mac in the coming months. That includes a new MacBook Neo and MacBook Air early next year, Bloomberg News has reported. The iPad brought in $6.23 billion, missing an estimate of $6.9 billion. A new iPad mini is launching in the current quarter, while a new iPad Air, low-end tablet and iPad Pro refresh are coming next year. The wearables, home and accessories category brought in $8.3 billion, declining 7.9% from a year earlier.
That missed a prediction of $9 billion. The company launched the AirPods 5 earbuds and two smartwatches in the fourth quarter, but all the updates were relatively minor.
