Benzinga on $AAPL (Nov 2, 2026)

Good afternoon and welcome to Apple's fiscal 2026 fourth quarter earnings conference call.

Today, Apple is pleased to report revenue of $114.5 billion, up 12% from a year ago and a record for the September quarter. These results helped Apple achieve its best fiscal year ever in terms of revenue and EPS.

This is a remarkable time for Apple. We just completed one of the most successful product launches in our history.

I am very optimistic about Apple's future prospects.

Apple is the best company in the world.

In addition to record total revenue for the September quarter and fiscal year, iPhone also posted record revenue in the September quarter, culminating in its best fiscal year ever.

The services sector set an all-time record this quarter, culminating in our best year ever. iPhone revenue was $57.6 billion in the September quarter, up 17% from a year ago despite supply constraints and foreign exchange headwinds.

Coming to Mac's words, despite supply constraints, our revenue reached $10.8 billion, up 24% from a year ago.

Now let's talk about the iPad, which had revenue of $6.2 billion in the September quarter.

In the Wearables, Home and Accessories segment, revenue for the quarter was $8.3 billion.

Revenue was $31.6 billion, up 10% from a year ago and an all-time record.

We are happy to be able to produce more in the United States. Through our American Manufacturing program, we are deepening partnerships with suppliers across the country , including titanium producer Permatek, who now supplies the iPhone Duo , and Unity Electronics, who is developing the camera technology for the new variable aperture system in the iPhone 18 Pro.

Nearly 100 components in our new iPhone come from American companies in more than a dozen states. In total, Apple supports more than 450,000 American jobs through thousands of suppliers and partners across all 50 states.

This is part of our 4-year, $600 billion commitment to American innovation and advanced manufacturing. I am proud of what we have achieved this quarter and I am very optimistic about the days ahead.

We have everything we need for outstanding success. And with this team, this vision , this mission, and these values, I am confident that we will succeed.

Our revenue of $114.5 billion increased 12% year-over-year, a record for the September quarter.

Despite this strong performance, there was an adverse impact of foreign exchange rates of approximately two percentage points, as well as supply constraints on iPhones, Macs, and iPads.

Product revenue was $82.9 billion, up 12% from last year, driven by strong growth in iPhone and Mac.

Our installed base of 2.5 billion active devices reached new heights across all major product categories and geographies. Revenue from the services sector came in at $31.6 billion, up 10% from last year.

The company's gross margin was 47.9% and the product's gross margin was 37.2%.

Excluding tariff refunds from both the June and September quarters, gross margins for both the company and the product would have been down about one point sequentially, largely due to higher memory costs.

As of the September quarter, we have received most of the refunds against the taxes paid. The gross margin for the services sector was 76%, up 40 basis points from the previous quarter.

Operating expenses were $19.2 billion, up 21% from last year, as we continued to invest in research and development.

Net income was $30.7 billion. Diluted earnings per share were $2.10, up 14% from last year and including the positive impact of 5 cents from tariff refunds.

Even excluding the benefit of tariff refunds, net income and EPS set records in the September quarter. Operating cash flow was also very strong at $28.1 billion. This performance marked our best fiscal year yet , with revenue of $478.8 billion, up 15% year-over-year, and EPS reaching a new record of $8.98, up 20% year-over-year.

Despite supply constraints, iPhone revenue came in at $57.6 billion, up 17% from last year. We achieved double-digit growth in most of the markets we track and generated record revenue in the September quarter in both developed and emerging markets.

As John mentioned, it was a record-breaking year for the entire company. And it was our best year yet for iPhone too. This success has occurred globally and in every geographic region.

The number of active iPhone users reached an all-time high, and it was a record year for iPhone upgraders around the world and in several markets, including the United States, mainland China, India, and Japan.

According to a recent survey by World Panel, the iPhone was the best-selling model in the United States, urban China, India, the United Kingdom, Germany, Australia, and Japan.

Despite supply constraints, Mac revenue came in at $10.8 billion, up 24% from last year. This performance was driven by the strong position of the Mac, Neo, and MacBook Pro.

We saw double-digit growth in both developed and emerging markets, with markets like India and Southeast Asia reaching all-time records. Mac continued to perform strongly in emerging markets , ensuring Mac's best fiscal year there, driven by record numbers of upgraders and new Mac customers.

Revenue from the iPad came in at $6.2 billion, down 10% from last year. This is due to the aforementioned supply constraints and the difficult situation compared to the A16-powered iPad launch last year.

The number of active iPad users reached an all-time high this quarter, and more than half of iPad buyers were new to the product. Revenue from Wearables, Home and Accessories was $8.3 billion, down 8% year-over-year, as we experienced a difficult year-over-year comparison with the launch of the Watch SE 3 and AirPods Pro 3.

The number of active users of wearables has reached new highs, and more than half of Apple Watch buyers this quarter were new customers. Revenue from the services sector reached an all-time record average of $31.6 billion, up 10% from last year, although the adverse impact of currency exchange rates was more than 1.5 percentage points.

We achieved all-time record revenue in most of the markets we track , including several emerging markets, Latin America and India. We are optimistic about the long-term future of our services business.

With our massive user base of over two and a half billion or 2.5 billion active devices , we have a very strong foundation for growth opportunities.

Our services are attracting more customers and the number of paying accounts reached new highs this quarter. We have over 1.5 billion paid subscriptions, which grew by double digits this quarter, reaching an all-time high.

We continue to improve and expand our services : from the iCloud Plus plan, which now includes Apple TV and Apple Arcade in more than 100 countries and regions, to ads in Apple Maps, now available in the US and Canada, which will give local businesses new ways to reach customers while protecting our users' privacy.

Looking back at the enterprise, organizations continue to expand their fleets of Apple devices to transform their operations and increase productivity.

Duke Health has completed the first hip arthroscopy surgery with Apple Vision Pro using Stryker's FDA-approved app.

American Airlines is deploying more than 37,000 iPhone 17 devices for in-flight shopping and tap-to-pay convenience for flight attendants. Along with this, 25,000 iPads are also being provided to pilots and mechanics.

And more companies are choosing Macs for a variety of uses, including on-device AI. For example, App Annie is running AI entirely on Mac minis to prevent losses across hundreds of stores, reducing the cloud and costs.

Christie's, the world's leading auction house, is running local models on Mac Studio to improve their core productivity tasks, such as price estimation.

Now let's take a look at our cash and capital return programs. We ended the quarter with $137 billion in cash and marketable securities and $80 billion in total debt.

This quarter, we returned $28 billion to shareholders. Of this, $3.9 billion was paid in dividends and equivalents and $24 billion in share repurchases.

As we move forward into the December quarter , I would like to review our outlook, which includes the types of forward-looking information mentioned by Su Hosting. Importantly, the information we provide is based on the assumption that global tariff rates, policies, and their implementation will remain in effect through today's call and that the global macroeconomic outlook will be no worse than it is today.

We expect our December quarter total company revenue to grow 7 to 10% year-over-year, reflecting our best-case scenario of tight supply. We expect this to be the best quarter in terms of revenue in the company's history.

We expect service revenue to grow 8% to 9% year-on-year in the December quarter. This mainly takes into account the disadvantages caused by third-party licensing and foreign exchange fluctuations.

We expect gross margin to be between 45% and 46%. This mainly includes the high cost of memory and some costs associated with enhancing Siri AI.

We expect operating expenses to be between $20.4 billion and $20.8 billion. We expect Aline to be around $300 million, including any potential impact from the mark-to-market of minority investments and our tax rate of around 17%.

Finally, today our Board of Directors declared a cash dividend of 27 cents per share of common stock , payable on November 16, 2026 to shareholders of record as of November 12, 2026.

Before we get to the questions, I'd like to introduce Sabih Khan, Apple's Chief Operating Officer. Many of you know about Sabih's work with global operations and supply chain, where he manages important functions such as Apple's manufacturing, Apple Care, environmental initiatives, and supplier partnerships around the world.

It is because of Sabih and his team that we are able to manufacture and deliver products on a larger scale and at a higher quality than anyone else.

First, the standard model of the iPhone 18 was not included in the September lineup. I was wondering if you could share the reasons behind this, such as whether there were any supply constraints or parts issues that led to this decision, or whether it had something to do with the Duo launch.

Look, we were very excited to launch the iPhone 12 and 12 Pro in September of this year. And we're continuing our strong lineup for the holiday season with iPhone 17, iPhone Air, and 17e.

So, obviously, we do n't comment on future roadmaps, but we are very optimistic about our current state .

My second question is about iCloud Plus. It seems like it's becoming a more strategic product, especially given its connection to home security and the potential revenue opportunity for Apple Intelligence.

So, I wanted to know what you guys are seeing with iCloud Plus? Are you seeing any positive impact on attach rates due to the increased cost of iPhones to increase storage and the company's shift towards home products?

Yes, thanks for the question. I think we set an all-time record in revenue from our cloud services in the September quarter. And you mentioned iCloud Plus. This is something we are very excited about.

Our iCloud plans now include Apple TV and Apple Arcade in more than 100 countries and regions, where we believe we can reach new potential customers. And as you mentioned, we think there's a good opportunity in Apple Intelligence as well.

Features that rely on the server-side model will have some usage limitations, including things like Siri AI and intelligent photo editing. So, those who need more power can purchase extended access in the future.

To quote you, iCloud services were initially primarily for storage, but we've been continuously adding more capabilities and features to it.

As the AI world moves from chatbots to consumer agents, it seems like the opportunities for Apple are growing. There seems to be a risk with this, and John, I'd like to hear your perspective on what role Apple and Siri AI will play in this context of consumer agentic AI.

And I would like to know if you see any risks that some of these agents could have on your service business.

Sure, thanks Eric. Look, first of all, we're very excited to bring you the latest generation of Siri AI and Apple Intelligence features. Siri has long been popular with our users and receives more than 2.5 billion requests every day.

And with Siri AI, we truly got the Siri we always wanted. It is currently primarily request-based, but as we said at WWDC, it is built on a modern orchestrator-driven architecture, which will allow for its capabilities to grow over time.

In terms of agentic capabilities, we think these are quite promising tools for users. We just want to make sure users are aware of what they are giving access to. We ensure that this is done in a way that maintains security and privacy.

So we're working hard on Siri AI, but we also believe that Apple devices are the best place to use all kinds of AI.

John, then a quick follow-up question, if you look at the broader context, how should we think about the sustainability of our services growth? I know it was 10% in the September quarter.

We are slightly below that in the December quarter. As the evolution of search and regulatory changes impact App Store monetization , should we look to new services that can significantly reduce the pressure on these important revenue sources ?

Yes, hey Eric, I'm Kevin. Thanks for the question. Let me give you this answer. I'll start with what we discussed in the September quarter. Services have grown by 10% year-on-year.

Compared to the June quarter, foreign exchange rates were the main factor driving the annual growth rate change. We had strong performance in many of our service categories in September, with video, cloud services, payment services and advertising—including our own Apple Ads—setting all-time records, and music also setting records in the September quarter.

But I think it's important to look at the overall performance of our services business over the last few quarters. In my opinion, this is an important context. As we said on the last call, we expected foreign exchange rates to be the biggest factor behind the change in the annual growth rate from the March to September quarter.

This stood as a major hurdle of nearly four percentage points. And we expect a continued disruption of about half a percentage point for the services business in the December quarter.

We've also seen some issues affecting App Store performance. App Store performance in the September quarter was consistent with the prior year, and we set a record for paid subscriptions, while third-party apps on the App Store grew in double digits.

At the same time, we are experiencing some headwinds in mobile gaming that we have talked about before and expect them to continue in the December quarter. Remember, we've also changed the App Store business model in some countries.

And in the United States , we continue to operate under a court ruling that is affecting link-out transactions. Looking ahead, we expect our services sector to grow by 8 to 9 percent in the December quarter, as I previously stated.

This forecast is based on our best estimate of the sequential odds, mainly due to third- party licensing and the additional half percentage point impact of foreign exchange that I mentioned.

And in the United States, we continue to operate under a court ruling that is affecting link-out transactions. This forecast is based on our best estimate of the sequential odds, mainly due to third-party licensing and the additional half percentage point impact of foreign exchange that I mentioned.

Yes, thank you. Eric, I think I want to add something more to this. In my opinion, fundamentally we are very optimistic about the long-term prospects of our services business. We are seeing continued growth in our installed base of over 2.5 billion active devices , which is a key foundation for future growth as more customers experience our products and services.

One example is that the number of weekly visitors to the App Store reached a record high in the September quarter, and the number of users paying for at least one service also reached an all-time high.

Another good example of this is in India, where we recently launched Apple Pay with Axis Bank, bringing a safe and secure way to make payments to one of the world's largest markets without any disruption.

And in addition to that, as we discussed, we think artificial intelligence is also going to be another big opportunity for us. So, overall, we're pretty positive about the path we're taking in the long term.

We are seeing continued growth in our installed base of over 2.5 billion active devices, which is a key foundation for future growth as more customers experience our products and services.

John, you described the iPhone as an intelligent personal hub in your opening remarks, and as personal AI agents become popular, do you think that over time the core customer relationship could shift from the device to the agent ?

And given Apple's combination of silicon, hardware, and software , where do you see the biggest opportunity to combine

And given Apple's combination of silicon, hardware, and software, where do you see the biggest opportunity to combine things like personal context and on-screen awareness into an intelligent system that can do more than just answer questions?

And how far do you think Siri is now in bringing these things together? As I've said before and we said in our announcement, we really think of iPhone as an intelligent personal hub.

And if you think about it, a lot of your personal information is on your device.