$AAPL · David Lin · 2026-11-05

We're going to take a deep dive on the financials of two tech heavyweights today. Apple and Palanteer both reported earnings after the closing bell on Monday, November 2nd.

Both beat Wall Street expectations, but both stocks sold off afterward. Apple fell 2.8% in after hours trading while Palanteer dropped about 3%. The selling continued on Tuesday, November 3rd as Apple fell as much as 3.8% 8% during the session and Palunteer dropped as much as 7.3%.

Starting with Apple, fourth quarter revenue rose about 12% to $114.5 billion, beating Wall Street's forecast of about 113.5 billion. Earnings per share also came in above expectations and iPhone revenue rose 17% to 57.6 billion.

Greater China revenue was 17.5 billion compared with an analyst estimate of $18.75 billion. That's a miss of about $1.2 2 billion or roughly 6.5% below the analyst forecast. One important distinction, China revenue was still up about 21% from a year earlier.

So, this was a miss against expectations, not a year-over-year collapse in China sales.

Next are profit margins. Apple reported a gross margin of 47.9%, but around 1 percentage point of that came from tariff refunds. For the holiday quarter, Apple is expecting gross margin of about 45 to 46%, so slightly lower than Q3.

Management pointed to higher memory costs and expenses related to Siri AI. In other words, the company is forecasting a lower gross margin next quarter, even as sales continue to grow.

There's also new leadership at Apple to take a look at. John Turnis took over as CEO on September 1st, and Tim Cook became executive chairman. Turnis is 50 years old. He joined Apple in 2001 and previously led hardware engineering.

He's been CEO for about two months now. So most of the fiscal year results reflect decisions that were made before he took over.

So let's now take a look at Apple's revenue over the last five fiscal years. It was $394.3 billion in 2022, 383.3 billion in 2023, 391 billion in 24, and 416.2 2 billion in 25 and finally 478.8 billion in this year 2026.

So far annual growth went from -2.8% in 2023 to positive 22 2% in 2024, 6.4% in 2025, and 15% in 2026. So Apple's annual revenue growth has actually accelerated for three consecutive years.

Looking at the two biggest product and service categories, annual iPhone revenue went from $29.6 billion in 2025 to $254 billion in 2026. Services revenue went from $ 109 billion to $123.3 billion.

That services business brings in revenue from Apple's existing base of devices. But future growth still depends partly on how often customers upgrade and whether Apple can hold its market share.

Here's the major difference in how Apple and Google spend money. And this is the key that I want to stress. Apple spent about $9 billion on companywide capital expenditures during the entire 2026 fiscal year, down from 12.7 billion in 2025.

So Apple doesn't report a separate figure for AI data center spending. So we can't treat all $9 billion as AI spending. And we can't say Apple has no data centers. The reported capex do show a different level of infrastructure spending from companies like Alphabet and Meta.

The idea is that Apple can focus on its devices, Siri, software and customer experience and use outside cloud providers or AI partners when it comes to making financial sense. That can reduce how much capital Apple needs to put into data centers and specialized chips.

It also means Apple depends at least partly on other companies AI models and computing infrastructure.

For shareholders, spending less on infrastructure can leave more free cash flow available for buybacks, dividends, or other investments. It also reduces the risk of owning equipment that becomes outdated or obsolete.

The trade-off is whether Apple can offer an AI experience that keeps customers buying its products without controlling all the underlying infrastructure itself.

I'm convinced the most exciting time in my career to be building product because AI has so much potential to kind of allow us to change products, make new products, all of that.

Our focus is what it always is. We we focus not on technology but on product and how do we leverage technology to build products and features and experiences that really matter to people that people love.

And if we're doing that right, you don't even really know, no one has to know that it was AI that had it happen. and they just want to know that wow I was able to do that thing that I couldn't do before and it was fun and it was easy and we can make it happen.

So that's our focus and we are really keen to to enable sort of the personal side of it which we talked about today. Um there's so much of your personal life is on your phone, right?

Your phone is such like a key part of your life. Uh and the beauty of our system is that privacy is such it's just all built in. And so that using Siri AI, you can tap into that personal contact, but nobody else can see it.

Apple can't even see it. We don't want to see it and we can't see it. It is your information. And I think that is going to be our contribution in the space is how do we build deeply personal experiences leveraging AI that help us all be more creative, be more productive, do whatever it is that we want to do.

So now let's take a look at the cash flow. In fiscal 2026, Apple generated about $145.1 billion in operating cash flow. Subtract about 9 billion in capex and conventional free cash flow comes to about 136.1 billion.

Apple ended the year with approximately $136.9 billion in cash and marketable securities compared with about 80.1 billion in term debt and commercial paper. That's approximately 56.8 billion in net cash if we include marketable securities.

We've already seen that Apple's revenue growth accelerated to about 15% this year. That's great. So, let's take a look at the next metric. Apple's estimated return on invested capital for fiscal 2026 was approximately 185%.

That's based on a back of the envelope calculation on after tax operating income divided by invested capital, which we calculate using shareholders equity, debt, lease liabilities, and cash and investments.

We're assuming a 21% tax rate and using year-end balances. So, this is a simplified estimate, not Apple's reported return on invested capital.

On leverage, Apple's debt to equity ratio was approximately 71.5%, but it also held 56.8 billion dollars more in cash and investments than debt. These figures come from its reported borrowing, shareholders equity, cash, and marketable securities.

Total liabilities, including obligations other than debt, represented about 72.3% of assets.

Apple has a different approach altogether by spending less on its own infrastructure. The question for Apple is whether that approach will support its product and services growth as AI becomes more important.

So that's the bigger picture for Apple. Revenue and earnings beat expectations. China revenue came in below the analyst estimate and management expects a lower gross margin next quarter.

The company has also substantial free cash flow and a different capital spending profile from the largest AI infrastructure builders.

Apple spent about $9 billion over a full fiscal year, but faces questions about its China results and margin guidance.

Apple grew annual revenue by 15.1%, generated about $136 billion in conventional free cash flow, and guided to a lower gross margin next year. These two companies have different investment requirements, different valuations, and much different risk profile.

So, which one do you think offers a better investment at today's prices and valuations?