The Zhitong Finance App learned that Apple (AAPL.US) released the results for the fourth fiscal quarter of fiscal year 2026 after the market on November 2 (Monday) local time. According to financial reports, Apple achieved revenue of 114.48 billion US dollars in the fourth fiscal quarter, up 12% year on year, higher than analysts' expectations of 113.47 billion US dollars. It also exceeded the upper limit of the growth guide range previously given by the company (9%-11%), but the year-on-year growth rate slowed from 16% in the third fiscal quarter. Earnings per diluted share were $2.10, up 14% year over year, better than market expectations of $2.00. The gross margin was 47.9%, of which about 1 percentage point was positively affected by tariff refunds; the earnings per share also included a tariff refund contribution of approximately $0.05.
The highlights of this financial report still come from iPhones and Macs. iPhone revenue increased 17.5% year over year to $57.583 billion, hitting a record high for the fiscal quarter at the end of September, more than 1.9% higher than analysts' expectations. Mac's revenue was $10.792 billion, up 23.7% year over year, and more than 11% higher than analysts' expectations. Service business revenue of US$31,573 billion was a record high in a single quarter, but it was basically close to and slightly lower than market expectations of US$31.58 billion. The year-on-year growth rate slowed further to less than 10% from the previous quarter, the lowest growth rate in more than three years. The service business has always been a key part of Apple's valuation system because it has high gross margins, stable cash flow, and is tied to a huge equipment installation base.
By region, in the fourth fiscal quarter, Apple recorded revenue of 17.539 billion US dollars, a year-on-year increase of 21%. On the surface, it was still very strong growth, maintaining a year-on-year growth rate of more than 20% in the previous fiscal quarter, but it is already the lowest quarterly growth rate in a year, which is significantly lower than Wall Street's forecast of 18.75 billion US dollars, and lower than the 18.82 billion US dollars of the third fiscal quarter. In other words, although Greater China continued to increase year over year, it fell 6.8% month-on-month, which is not as optimistic as the market expected a slight decline of 0.4% month-on-month.
Apple's revenue for the fourth fiscal quarter in other major regional markets was mostly higher than expected. Among them, revenue from the Americas was US$48.680 billion, up 10.2% year on year, and analysts expected US$48.51 billion; European revenue was US$32.08 billion, up 11.5% year on year; analysts expected US$30.21 billion; Japan's revenue was US$6.540 billion, down 1.4% year on year, and analysts expected US$7.3 billion; and revenue from the rest of the Asia-Pacific region was 9.710 billion US dollars, up 15.0% year on year, and analysts expected US$9.02 billion.
This was John Turnus's first earnings call since taking over as CEO on September 1. iPhone revenue for the fourth fiscal quarter hit a record for the September quarter. Both the US and Greater China achieved strong double-digit growth, and the number of upgraded users globally in the US, mainland China, and India set the same record for the September quarter. According to a World Panel survey, the iPhone is the best-selling model in the US, urban areas of China, India, the United Kingdom, Germany, Australia, and Japan. In response to a question about the absence of the standard iPhone 18 from the September release lineup, Tenus did not positively explain the reason; he only stated that the iPhone 17, iPhone Air, and 17e will continue to improve the holiday season product lineup. Regarding the first folding screen iPhone Duo, which was unveiled in September, Sabih Khan said that the initial market response was enthusiastic and “progressing smoothly,” but “it is currently difficult to predict when supply and demand will balance.” Tenus said the company is “making every effort to get consumers to get the iPhone Duo as soon as possible.” Also, according to media reports, Duo will only go on sale after the end of this quarter, and its revenue contribution will mainly be reflected in the December quarter.
In the conference call that followed, Apple Chief Financial Officer Kevin Parek made it clear that memory costs are the main source of pressure on gross margins this season, and the impact of high memory costs will be even heavier next season. Apple previously stocked up on lower-priced components, but this batch of inventory is rapidly being exhausted, and it will have to purchase memory at a higher price in the future. According to this, Apple's gross margin guidance range for the December quarter is 45% to 46%. Parek emphasized that “this mainly includes the impact of higher memory costs, as well as some of the costs associated with the launch of Siri AI.” This guidance range fell sharply by nearly 2 to 3 percentage points from the actual gross margin of 47.9% this quarter. It was also far below Wall Street's previous expectations, and became a direct trigger for the accelerated decline in Apple's stock price after the earnings call. Apple CEO Tenus also issued a warning on the profit margin outlook during a conference call, confirming that the pressure on high memory prices will continue in the coming quarters.
Furthermore, Apple management made it clear during the earnings call that the growth rate of the service business will continue to slow down in the next quarter. Investors are particularly concerned about this outlook, as the deceleration in the service business is not a temporary issue, but is a source of structural stress. Courts and regulators around the world continue to restrict Apple's ability to charge developers high commissions from the App Store, which is the largest component of the service business. What is more noteworthy is that OpenAI's ChatGPT app, one of the App Store charging sources that previously contributed significantly, has begun directing potential subscribers to pay directly to its website after a dispute between Apple and OpenAI over a trade secret dispute, thus bypassing Apple's “toll booth.”
In terms of artificial intelligence (AI) strategy that the market is paying close attention to, Tenus called the latest AI-driven version of Siri a “new chapter” for the company. “This is the Siri we've always wanted,” he stressed several times during the call. Regarding investors' concerns about how AI can generate revenue for the company, Apple has given a clear path: the limitations of cloud AI will be a booster for services. Tenus reiterated that some server-based AI features will have usage limits. The direct purpose of this strategy is to push heavy users who want to break the default usage limit to subscribe to iCloud+ services.
However, Wall Street doesn't seem to be completely buying up on Apple's AI narrative. When asked if AI agents will disrupt Apple's service business in the future, and when Apple can launch smart devices that go beyond simple question and answer, Tenus chose to avoid it. He only stated: “Currently, Siri is request-based... but Apple sees an opportunity to expand its capabilities over time. The most important thing is protecting people's data.”
Here are the details of Apple's fourth fiscal quarter call.
I. Executive speeches
1. John Turnus - CEO
Hello everyone, and thank you all for participating. This is my first time communicating with you as the CEO of Apple, and I am very honored. I'm also honored to represent our team and the work they do every day.
Today, Apple is pleased to announce revenue of US$114.5 billion, a year-on-year increase of 12%, setting a record for the September quarter. These results helped Apple achieve the best fiscal year ever in terms of revenue and earnings per share.
This is an exciting time for Apple. We've just completed one of the most intensive new product launch periods in the company's history, with impressive innovations across all product categories. One of the best proofs is the new iPhone Duo — the most revolutionary iPhone since the original iPhone. We're also incredibly excited about the iPhone 18 Pro and iPhone 18 Pro Max, which have taken a huge leap forward in camera, battery life, and performance, all features that users are deeply concerned about. At the same time, the new MacBook Pro brought Touch (Touch) to the Mac for the first time; we also released the new iMac and 14-inch MacBook Pro. The new iPad mini is equipped with a stunning new OLED display, bringing an ultra-thin design to the smallest member of the iPad family. Apple Watch now offers users the clearest window to date on heart health. We introduced AirPods 5, which enable industry-leading active noise cancellation in an open design. We're also laying the foundation for a smarter smart home with the new HomeView, Apple TV 4K, and HomePod mini.
In addition, we're unlocking more powerful AI experiences across our entire product line, including the new Siri AI — a powerful, deeply personalized assistant that seamlessly integrates across our platforms. Like everything we make, Siri AI has the necessary privacy protections built in, so no one can access user data, and neither can Apple itself. We launched a beta version of Siri AI for English users in the US in September, and expanded to French, Japanese, Korean, Portuguese, and Spanish in October. All of these innovations have already been implemented, and we plan to do more.
I'm confident about the opportunities ahead for Apple — from the product roadmap and broad range of services to promising sectors such as health, emerging markets, enterprise, and education. As an example, we recently signed the largest ever Mac education order with the Philippine Department of Education to deploy 170,000 MacBook Neos to teachers and staff. This opportunity allows more users to enter our ecosystem and helps grow the entire business.
Apple is the greatest company in the world. We've brought together an extraordinary team of talents—the best engineers, designers, developers, and experts in every corner of the business, from the supply chain to retail stores. Every day, we bring together the right people and the best ideas to create life-changing products and services, guided by a set of fundamental values, and believe that the best technology should make the world a better place. We do this by building products that are powerful and intuitive and meet Apple's uncompromising standards for quality, performance, design, and durability. This is the Apple experience users love. With the latest product lineup, people have more reasons than ever to upgrade or switch to Apple products.
At the same time, Apple's services amplify the experience on every device, helping people work, play, listen, watch, and stay connected to the world around them. I am very satisfied with the current state and direction of development of the service business. With over 2.5 billion active devices installed, I'm looking forward to expanding our services and improving the lives of users around the world.
We are also seeing huge opportunities in the field of AI. Siri AI marks a new chapter in Apple AI. It's a completely reimagined assistant: powerful, personalized, privacy-preserving, and deeply relevant to users' everyday lives. Siri AI can understand content relevant to users, understand information on the screen, and have natural conversations to help them complete the things they need to do every day. This is the Siri we've always dreamed of. We're very happy with the reviews and feedback we've received, and we're excited that more and more users will be able to experience it.
As an intelligent personal hub (intelligent personal hub), the iPhone is still at the core of our opportunities. It's always there for you, understanding your personal context — from messages, photos, notes to apps — providing powerful intelligence when you need it. Mac is also experiencing its own AI moment. It was Mac that brought me to Apple, and it opened up endless possibilities for me over the years. More than 40 years after the first Mac, the category is at its most brilliant moment: every Mac in our newest lineup is a powerful AI platform. Mac mini and Mac Studio, in particular, are breaking through the boundaries of local private AI, enabling users to do things that were once thought impossible. From Macs to iPhones to iPads, we're proud that our products are the best AI platforms for first-party and third-party applications, and we're excited about the opportunities this creates.
At the end of the day, everything Apple does is for users. The best measure of the success of every innovation is its impact on people's lives. It's what drives us to keep building great products and getting them into the hands of people all over the world.
Now let's take a deeper look at this quarter's results. As I mentioned before, it was a fantastic quarter. In addition to the company's total revenue record for the September quarter and full fiscal year, iPhone set a record for the September quarter, ending its best fiscal year in history; the service business reached a record high this quarter, which also brought an end to the best year in history. The vast majority of markets we track have achieved growth, with records for the September quarter in the Americas, Europe, Greater China, and the rest of the Asia-Pacific region; developed markets and emerging markets also hit record sales records for the September quarter, and India even reached record highs.
Let's take a look at the product line. Despite supply restrictions and exchange rate headwinds, iPhone revenue for the September quarter was $57.6 billion, up 17% year over year. We achieved strong double-digit growth in the US and Greater China, setting a revenue record for the September quarter; the number of upgraded users globally and in the US, mainland China, and India also hit a record for the September quarter, helping achieve the best financial year for global upgrade users.
At the press conference in September, we unveiled the new iPhone Duo. Right from the start, we were clear about what we wanted to create: a foldable shape with a larger display that was as natural and intuitive to use as an iPad. We've designed the hardware and software together to make it look like an iPhone at a glance, and at the same time enable a new way to use it. The end result is a series of outstanding innovations that we believe will redefine the possibilities of folding screen phones. We're incredibly proud of our team's results. Developers are rapidly adapting to this new format, and we're excited to see more and more apps optimized for iPhone Duo. We were very excited by the early feedback from reviewers and users, and we are working hard to get the iPhone Duo to consumers as soon as possible.
The response from the iPhone 18 Pro and Pro Max was equally exciting. It's easy to see why consumers love them: the latest models are equipped with vastly improved camera systems, bringing breakthrough upgrades such as variable aperture and a new photography style; the A20 Pro chip and next-generation vapor chamber (vapor chamber) together achieve the highest continuous performance in iPhone history; and the iPhone 18 Pro Max brings the biggest increase in battery life in iPhone history. The A20 Pro is also equipped with a new dual 16-core neural network engine to accelerate on-device AI and computational photography.
Let's look at the Mac again. Despite supply constraints, revenue was $10.8 billion, up 24% year over year. Most of the markets we track have achieved double-digit growth, with emerging markets performing particularly well and setting a record revenue for the September quarter. The number of new Mac users also hit a record for the September quarter. According to IDC, we gained global share this quarter and throughout the fiscal year; we sold more Macs this fiscal year than any other — the strongest proof of these extraordinary products.
Last week, we launched a new way to experience Mac: the new MacBook Pro with ProLED xDR display, bringing touch to Mac for the first time. It also has the best professional laptop display we've ever shipped, all-weather battery life, and the most immersive laptop audio, all in a lighter and thinner design. We also brought the M6 chip to the new 14-inch MacBook Pro and the new iMac. The latest generation of Apple Silicon contains the world's fastest CPU core to speed up everyday tasks, and is equipped with dual 16-core neural network engines to drive private on-device AI tasks.
Now let's look at iPad. The September quarter revenue was $6.2 billion. Last week we unveiled the new iPad mini, with a stunning new OLED display, an ultra-thin design, and an A20 Pro chip. With this new addition, our iPad lineup is stronger and more diverse than ever before. Wherever users go, there are uses for iPads — such as helping students explore the world in amazing ways in the classroom and providing artists and creatives with a vast canvas in the design studio.
The revenue from the wearables, home and accessories business was $8.3 billion. Apple Watch makes the simple act of “wearing a watch” a powerful way to protect health. We are pleased to launch a new health sensing system to help users make full use of health tracking; with Apple's most powerful wearable chip S11, the system achieves the most accurate heart rate sensing in wearable devices. We've also released new features such as health age (health age) and fitness (readiness) — which tells you when to step up and when to slow down — and a completely revised health app; we're also looking forward to audio intelligence, which will be introduced in future software updates to help you remember moments you might have missed. The Apple Watch Series 12 incorporates all of this into a lightweight and beautiful design; the Apple Watch Ultra 4 goes a step further, has a longer battery life than the previous generation, and is equipped with the most accurate device-side GPS in sports watches. Meanwhile, AirPods 5 offer best-in-class open active noise cancellation at a very competitive price with improved sound quality, battery life, and durability. Coupled with iPhone and Apple intelligence (including Siri AI), AirPods allow users to perform extraordinary operations — such as communicating with someone speaking another language through real-time translation, or gaining a wide range of knowledge about the world with complete freedom of hands.
Just a few weeks ago, we introduced a new generation of home hardware. This includes Apple HomeView — designed to be the center of the home, provide a personalized experience for everyone in the home, and bring together entertainment, connectivity, and family management in one place. Also released along with it were the new Apple TV 4K equipped with Apple Intelligence, the new HomePod mini, and the Apple Home Collection — a new plan to expand Apple Home beyond its own products through in-depth cooperation with key partners. All of this, as always, is built on Apple's philosophy of privacy.
Now let's look at the service business. Revenue was $31.6 billion, up 10% year over year, to a record high. We achieved double-digit growth in most of the markets we track, with record revenue records in the Americas and Europe, and September quarter records in the rest of Asia Pacific. The 78th Primetime Emmy Awards was an unforgettable night for Apple TV, and our show won more awards than any other TV network. “Widows Bay” became a “summer drama”, making it the most awarded comedy in a single year in history with 14 awards. We're looking forward to the lineup of contents—from hit series like “Slow Horses” (Slow Horses) and “Ted Lasso” (Ted Lasso) to the upcoming movie “Human Being.” To date, Apple TV works have received more than 900 awards and more than 3,800 nominations.
Let's take another look at Apple Pay. We recently partnered with Axis Bank to launch Apple Pay in India, bringing seamless, secure, and reliable payment methods to one of the world's largest markets. Today, Apple Pay is available in over 90 markets, giving users around the world peace of mind with every transaction.
Apple Music's original intention was to bring artists and fans closer together. With the opening of Apple Music Hall, we have a beautiful new venue where we can host more intimate shows and bring them closer. To celebrate the opening of the London venue, we hosted an unforgettable Elton John (Elton John) performance.
People love Apple products and services because they make life easier, more enjoyable, and better in countless ways. People also trust Apple to create technology responsibly — in the right way, not to save trouble. This means using more recycled materials to make products and less demanding from the planet; it means better durability, making products last longer. This means developing smart features such as Apple Watch voice recognition to alert deaf or hearing impaired users to what is happening around them. This means designing privacy protections such as on-device processing to keep personal data on the user's device. This means introducing new child safety features that make it easier for parents to manage when and how their kids use devices.
We are also happy that more and more products are being manufactured in the US. Through the “American Manufacturing Program” (American Manufacturing Program), we are deepening our cooperation with suppliers across the US, including Perryman, which supplies titanium for the iPhone Duo, and Qnity Electronics, which produces camera technology for the iPhone 18 Pro's new variable aperture system. Nearly 100 components in our latest iPhone come from companies in more than a dozen US states. Overall, Apple supports more than 450,000 US jobs with thousands of suppliers and partners across 50 states. It's all part of our $600 billion, four-year commitment to American innovation and advanced manufacturing.
I'm proud of what we've achieved this quarter and excited for the future. We have everything you need to achieve extraordinary success. With this team, this vision, this mission, and these values, I have no doubt we can do it. Let's leave it to Kevan.
2. Kevin Parek - Chief Financial Officer
Good afternoon everyone. Here's a quick review of our key financial metrics.
Revenue was US$114.5 billion, up 12% year over year, setting a record for the September quarter. While achieving this strong performance, we are also suffering from nearly 2 percent month-on-month exchange headwinds and supply restrictions on iPhones, Macs, and iPads. Product revenue was $82.9 billion, up 12% year over year, driven by strong double-digit growth in iPhones and Macs. The installed capacity of more than 2.5 billion active devices reached record highs across all major product categories and geographical segments.
Service revenue was US$31.6 billion, up 10% year over year. Many service categories performed strongly, with video, cloud services, payment services, and advertising all at record highs, and music set a record for the September quarter.
The company's gross margin was 47.9%, and the product gross margin was 37.2%. Both include revenue from tariff refunds, which had a positive impact of around 1 percentage point in the September quarter. If tariff refunds for the June quarter and September quarter were excluded, the company's gross margin and product gross margin both fell by about 1 percentage point month-on-month, mainly driven by rising memory costs. As of the September quarter, we have received almost all refunds relating to the customs duties paid. Service gross margin was 76%, up 40 basis points from month to month.
Operating expenses were $19.2 billion, up 21% year over year as we continued to increase investment in R&D. Net profit was $30.7 billion. Diluted earnings per share were $2.10, up 14% year over year, including the favorable impact of the $0.05 tariff refund — even after excluding this portion of earnings, both net profit and earnings per share set records for the September quarter. Operating cash flow was also very strong, at US$28.1 billion.
This performance ended our best fiscal year in history: full-year revenue of US$478.8 billion, up 15% year over year; earnings per share of US$8.98 set a record fiscal year, up 20% year over year.
Each revenue category is described in more detail below.
Despite supply constraints, iPhone revenue was $57.6 billion, up 17% year over year. Most of the markets we track achieved double-digit growth, and hit September quarter revenue records in both developed and emerging markets. As John said, it was a record year for the company as a whole, and the iPhone was also the best in history globally and in every geographical region. The number of active iPhone installs has reached a record high; the number of iPhone upgrade users has reached record levels worldwide and in various markets such as the US, mainland China, India, and Japan. According to a recent World Panel survey, the iPhone is the best-selling model in the US, urban areas of China, India, the United Kingdom, Germany, Australia, and Japan.
Despite supply constraints, Mac's revenue was $10.8 billion, up 24% year over year. This performance was driven by the strong momentum of MacBook NEO and MacBook Pro. Both developed and emerging markets have achieved double-digit growth, with markets such as India and Southeast Asia reaching record highs. Emerging market Macs continued to perform strongly. Driven by a record number of upgraded users and new Mac users, Macs achieved their best fiscal year in emerging markets.
iPad revenue was 6.2 billion US dollars, down 10% year over year due to the supply restrictions I mentioned earlier and the high base due to the release of iPads equipped with the A16 chip in the same period last year. The number of iPads installed this quarter reached a record high, and more than half of iPad buyers were new users of the product.
Revenue from the wearables, home and accessories business was $8.3 billion, down 8% year over year, mainly due to the high base brought about by the release of Watch SE3 and AirPods Pro 3 in the same period last year. The number of wearable devices installed was at a record high, and more than half of the users who bought an Apple Watch this quarter were new users.
Service revenue hit a record high of $31.6 billion, up 10% year over year, despite withstanding more than 1.5 percentage points month-on-month exchange rate headwinds. Most of the markets we track have recorded historical revenue records, including several emerging markets such as Latin America and India.
We are optimistic about the long-term future of the service business. With a massive installed capacity of over 2.5 billion active devices, we have an extremely solid foundation for growth. Our service continues to attract more users, and the number of trading and paid accounts reached record highs this quarter. With more than 1.5 billion paid subscribers, the quarter achieved double-digit growth, which also reached a record high. We're also continuously improving and expanding our services: iCloud+ packages now include Apple TV and Apple Arcade in more than 100 countries; Apple Maps ads have launched in the US and Canada, providing local merchants with a new way to reach customers while respecting users' privacy.
Let's take another look at the corporate market. Organizations are continuing to expand the deployment of Apple devices to transform operations and increase productivity. Duke Health (Duke Health) completed the first hip arthroscopic surgery using Apple Vision Pro, using Stryker's FDA-approved application. American Airlines (American Airlines) is deploying more than 37,000 iPhone 17s to flight attendants for tap to pay (Tap to Pay) in-flight purchases, and 25,000 iPads for pilots and mechanics. More and more companies are choosing Macs for more and more use cases, including device-side AI: Gap runs AI entirely on Mac mini to prevent loss, eliminating cloud token costs; world-leading auction house Christie's (Christie's) runs local models on Mac Studio to improve core workflows such as pricing estimation.
Next, let's look at the cash position and capital return plan. At the end of the quarter, we held $137 billion in cash and marketable securities, with a total debt of $80 billion. This quarter, we returned $28 billion to shareholders, including $3.9 billion in dividends and equivalents and $24 billion in share repurchases.
As we enter the December quarter, I'll introduce our outlook — which includes all kinds of forward-looking information mentioned by Suhasini. It should be emphasized that the information provided assumes that global tariff rates, policies, and implementation remain as they were at the time of this conference call, and that the global macroeconomic outlook is not worse than the current one.
We expect the company's total revenue to increase 7% to 10% year over year for the December quarter, which reflects our best estimate in the face of limited supply. We expect this to be the highest-grossing quarter in the company's history. We expect service revenue to increase 8% to 9% year over year in the December quarter, which takes into account the month-on-month headwinds mainly driven by third party authorizations and exchange rates. We expect gross margins of between 45% and 46%, which mainly include the impact of rising memory costs and some of the costs associated with the promotion of Siri AI. We expect operating expenses to be between $20.4 billion and $20.8 billion. We anticipate other revenue and expenses (OI&E) of approximately $300 million, not including the potential impact of minority equity investments in terms of market value. The tax rate is approximately 17%.
Finally, the Board of Directors today declared a cash dividend of $0.27 per common share, which will be paid to shareholders of record as of the close of November 12, 2026 on November 16, 2026. Give it back to John.
3. John Turnus
Before going into the Q&A session, I'd like to introduce Sabih Khan, Apple's chief operating officer. Many people know Sabih's work in global operations and supply chains. He leads many of Apple's key functions, including manufacturing, AppleCare, environmental work, and global supplier collaboration. Sabih and his team are the reason we are able to build and deliver products at a scale and quality that no one else can match. I've invited Sabih to join me and Kevan to answer everyone's questions during these phone meetings.
II. Q&A session
1. Moderator: The first question comes from Goldman Sachs's Michael Ng.
Michael Ng (Goldman Sachs Research): I have two questions. First, with regard to the iPhone 18 — the standard edition didn't appear in the September launch lineup. Can you share why? Was this decision due to supply restrictions or parts issues, or was it related to Duo's launch? Any info would be helpful. Then I have one more question.
Tenus (CEO): OK, thank you, Michael. We're excited to launch the iPhone Duo and iPhone 18 Pro this September; at the same time, the iPhone 17, iPhone Air, and 17e will continue to fill our very strong holiday season lineup. Obviously, we won't be commenting on the future product roadmap, but we're very excited about the progress so far.
Michael Ng (Goldman Sachs Research): OK. My second question is about iCloud+. Given its linkage with home security and the potential monetization opportunities of Apple Intelligence, it appears to be becoming a more strategic product. How are you currently seeing iCloud+? In the context of the increase in iPhone storage capacity prices and the company's aggressive entry into household products, are there any advantages in terms of additional rates?
Tenus (CEO): OK, thanks for the question. We just set a record for cloud service revenue in the September quarter. You mentioned iCloud+, which is something we're very excited about: iCloud+ plans now include Apple TV and Apple Arcade in over 100 countries, and we think this will really reach new potential subscribers. Also, as you mentioned, we think Apple Intelligence also has a good opportunity: some features that rely on the server-side model — including Siri AI, smart photo editing, etc. — will set usage limits, and any user that needs more capacity can buy extended access rights in the future. Like you said, initially iCloud's plans revolved around storage, but we've been adding more capabilities and features to it.
2. Moderator: The next question comes from Morgan Stanley's Erik Woodring.
Erik Woodring (Morgan Stanley Research): John, congratulations on your first quarter. As the AI world evolves from chatbots to consumer-grade agents (agents), opportunities for Apple seem to be increasing, and risks also seem to exist. I'd love to hear from you: What role do you want Apple and Siri AI to play in the consumer-grade smart AI landscape? What do you think about the risk that some of these agents might encroach on your service business? Then there's a quick question.
Tenus (CEO): OK, thank you, Erik. First and foremost, we're excited to launch Siri AI along with the latest generation of Apple's smart features. Siri has long been loved by users, processing more than 2.5 billion requests every day. With Siri AI, we really have the Siri we've been dreaming of. Currently, it's mainly based on user requests, but as we mentioned at WWDC, it's built on a modern orchestrator-driven (orchestrator-driven) architecture, providing real space for us to gradually expand our capabilities in the future. As for intelligent capabilities, we think these are promising tools for users, but we want to ensure that users are aware of what access rights they have granted, and we want this to be done in a way that protects security and privacy. So we're doing our best to push this forward with Siri AI, and we're also very encouraged: we think Apple devices are the best platforms for using all forms of AI.
Erik Woodring (Morgan Stanley Research): OK, thank you so much, John. The short question is: if we take a step back, how should we view the continued growth of the service business? Service growth in the September quarter was 10%, and the December quarter will be slightly lower. As businesses such as search evolve and regulatory changes affect App Store monetization, are there any new services worth our attention—do you think they can grow into sufficient complements to reduce the pressure on these historically important revenue streams?
Parek (Chief Financial Officer): Erik, I'm Kevan, thank you for your questions, I'll answer them. Let's take a look back at the September quarter: services increased 10% year over year. Compared to the June quarter, the exchange rate was the main driver of the month-on-month change in year-on-year growth. Our many service categories continued to perform strongly during the September quarter—video, cloud services, payment services, and advertising (including our first-party Apple ads) hit record highs, and music set a record for the September quarter. But I think it's also important to take a step back and look at the evolution of the service business over the past few quarters, which is an important context. As we said in our last conference call, the exchange rate is expected to be the biggest driver of the year-on-year growth change in the March to September quarter — in the end, this is a significant headwind of about 4 percentage points; entering the December quarter, we also expect the service business to face an additional month-on-month headwind of about 0.5 percentage points. We also saw some factors affecting App Store performance: the App Store's performance in the September quarter was roughly similar to the same period last year, the number of paid subscriptions reached a record level, and third-party apps achieved double-digit growth on the App Store. At the same time, we did see the mobile gaming headwinds we've discussed before, which are expected to continue into the December quarter. Note also that we have made some adjustments to the App Store business model in some countries; in the US, we continue to operate under court rulings affecting backlink transactions (link-outs). Looking ahead, as I said in my opening statement, we expect service growth of 8% to 9% in the December quarter — this outlook takes into account our best estimates of month-on-month headwinds, mainly due to third-party licensing and the additional 0.5 percentage point exchange rate impact I just mentioned. Let's ask John to share his views on the future.
Tenus (CEO): OK, thank you. I'd like to add one more point, Erik. Fundamentally, we are very confident in the long-term opportunities in the service business. We're seeing a continued increase in installed capacity of over 2.5 billion active devices, which is the foundation for future growth — more and more customers are able to experience our products and services. For example, the average number of weekly visits to the App Store hit a record of nearly 1 billion in the September quarter, and the number of users paying for at least one service also reached a record high. Another great example is our recent partnership with Axis Bank to launch Apple Pay in India, bringing seamless, secure, and reliable payment methods to one of the world's largest markets. On top of that, as we've discussed, we think smart technology will also bring new opportunities. Overall, we are very optimistic about the company's long-term development direction.
3. Moderator: The next question comes from Evercore's Amit Daryanani.
Amit Daryanani (Evercore ISI Research Department): Thank you and congratulations to John for attending the first earnings call. John, in your opening statement, you described the iPhone as an intelligent personal center. As personal AI agents become more popular, do you think major customer relationships are likely to shift from devices to smart devices over time? Considering Apple's integration in chips, hardware, and software, where do you think it has the best chance of integrating capabilities such as personal context and screen perception into an intelligent body, so that it goes beyond simply answering questions? How do you think Siri is currently progressing in integrating these capabilities?
Tenus (CEO): OK, thanks for the question, Amit. As I said before, and as we mentioned in our announcement, we do regard the iPhone as a smart personal center. If you think about it, all of your personal data is on your iPhone — contacts, communication records, health data, financial data, etc. — Siri can access this data to help you use it in a very safe and private way, and no one else can access it, not even Apple itself. We believe this is a core differentiator we are proud of and will continue to invest in it. So this is an area where we are very confident.
Amit Daryanani (Evercore ISI Research Division): Understood. Kevan, I'd like you to take a moment to talk about gross profit margins for the December quarter. If you exclude all tariff refunds, you seem to be implying a decline in gross margin of at least 140 basis points month-on-month. Can you break it down, how much of this is due to the increase in the price of commercialized memory, changes in the product portfolio, and the Siri AI promotion costs you mentioned? It would be helpful to discuss the various drivers of month-on-month gross margin.
PALEK (CFO): OK, let me explain. As you mentioned, the gross margin forecast for the December quarter is between 45% and 46%; as you said, after excluding the revenue from the September quarter tariff refunds, the implied month-on-month decline in the median guideline value is comparable to the magnitude you mentioned. We expect most of the decline will be driven by rising memory costs. Let's ask John to share his thoughts on the memory situation, and I'll answer the rest of your questions later.
Tenus (CEO): OK, let me give you an overview of the memory situation. The increase in memory pricing we are currently seeing is unprecedented. As mentioned in our September quarterly results, memory costs did rise compared to the June quarter, but were partially offset by inventory carry-over earnings and lower costs for certain non-memory components. Entering the December quarter, we expect memory costs to be higher, and some factors will partially offset this increase: as we all know, we adjusted the prices of many products, including Macs and iPads, at the end of June, and adjusted the prices of iPhones in September. These price increases provided some hedging; we also expect the December quarter to continue to benefit from inventory carry-over and falling costs for some non-memory components. Looking ahead to the December quarter, we expect memory purchase prices to continue to rise; as we said before, the benefits from inventory carry-over will decline over time. I'd like to add one more thing: to improve supply, our manufacturing procurement obligations increased by $33 billion from the June quarter to the September quarter, as you'll see in the annual document to be released tomorrow. Leave it to Kevin to answer the rest.
PALEK (CFO): Okay. Amit, you mentioned AI, which is what I implied in my opening statement. As we roll out Siri AI to more users, the associated cloud costs will be factored into the cost of selling the service. Consistent with our consistent accounting treatment for device-bundled sales services such as Maps, Siri, and iCloud, we defer a portion of revenue and recognize it during the device's lifecycle. As a result, through the December quarter, our hardware delays will reflect the addition of Siri AI. Both have an impact on gross margins. But as always, we will continue to make the investments needed to support our business. We've also seen that AI can drive revenue growth in many ways: on the product side, we think AI provides compelling reasons for users to upgrade and switch to new products to get the latest features; we also see opportunities in third-party apps and partners, as well as the first-party opportunities John mentioned earlier — achieved by expanding access to Siri AI and Apple's intelligent server-side features.
4. Moderator: The next question comes from Melius Research's Ben Reitzes.
Ben Reitzes (Melius Research): John, my first question is about your cash-neutral policy. In an earlier conference call, you said you're no longer focusing on this goal; it's no longer a company policy. What does that mean under your leadership? Is it possible to turn into net debt to buy back stocks or carry out mergers and acquisitions, or do the opposite and re-stock up on cash? Welcome to share your thoughts.
Parek (Chief Financial Officer): Ben, I'm Kevan, I'll answer. As you know, we did talk about not targeting net cash neutral (net cash neutral) anymore. As we explained in our last call, we think it makes sense to evaluate cash and debt positions separately, so that allocations can be optimized and the right amount of flexibility can be achieved. We remain committed to our capital allocation philosophy: investing all the capital required for the business and returning excess cash to shareholders. We will continue to maintain this discipline. We do believe that removing the net cash neutral target gave us the flexibility to optimize and make the right investment decisions for the company.
Ben Reitzes (Melius Research): Okay. Next, I would like to ask about the service business. I know you're only guiding one quarter at a time, but looking at the long term from 8% to 9%, I wonder if you think the growth rate can be further accelerated on this, and if AI can help you launch new services that we haven't anticipated yet that can increase service growth.
PALEK (CFO): Okay, Ben. I think you've just heard John talk about a lot of long-term factors, which really make us confident about the long-term opportunities in the service business. Once again, we're talking about more than 2.5 billion active devices; weekly visits to the App Store in the September quarter clearly set a record; paid users continued to grow, and both trading accounts and paid accounts reached record highs. We are confident in emerging markets—we talked about the launch of Apple Pay in India, and the overall emerging market service business continues to maintain good momentum and achieve double-digit growth. So looking at the longer term, we have full confidence in all of these factors. And as John mentioned, we're also continuously improving the functionality and coverage of existing and new services — such as packaging Apple TV and Apple Arcade into the iCloud package, which clearly reached a large number of potential new subscribers; AppleCare One Family is another example. We will continue to look for opportunities to grow our service business.
5. Moderator: The next question comes from Bank of America's Wamsi Mohan.
Wamsi Mohan (Bank of America Securities Research): John, I'm so glad you're attending the conference call as CEO. Thanks also for sharing the memory. Obviously, you are now facing more intense competition for memory than in history—your opponents are mostly well-funded companies that are signing long-term agreements. My question is: Has Apple changed the way it purchases memory? What do you think of the evolution of memory supply over time? If memory continues to pose a headwind, will product prices remain dynamically adjusted, or may even rise further? I have one more question.
Sabih Khan (COO): Good afternoon, Wamsi, I'm Sabih, I'm here to answer that question. As you know, we've been working with many suppliers for decades, and we value our partnerships over the years. We know our products wouldn't have been possible without them, and we look forward to continuing to work with them. We're always working to improve supply — as John mentioned earlier, our manufacturing procurement obligations increased by $33 billion from the June quarter to the September quarter.
Parek (Chief Financial Officer): Wamsi, I'll add that because you asked about pricing and how we manage pricing. We are responding through a series of measures: you mentioned earlier that we are continuing to reduce the cost of non-memory components; John mentioned that we have benefits from inventory carry-over; we also had to make the decision to adjust the prices of some products — starting with the iPad and Mac in June, and recently adjusted the iPhone prices in September. In all of these decisions, we evaluate the revenue and profit margins of each product line and carefully weigh short- and long-term considerations. We do believe that we have achieved a good balance in this regard.
Wamsi Mohan (Bank of America Securities Research): OK. My question is about Siri AI. At the beginning of its launch, could you explain how Siri AI's token consumption was distributed between the device side, private cloud computing (Private Cloud Compute), and GCP? Are you seeing an acceleration in usage? If it accelerates very fast on a global scale, will it change your outlook on computing power spending?
Parek (Chief Financial Officer): Wamsi, I'll answer that too. As we envision Siri AI, some of its queries are processed on the device side, and some are processed in the private cloud computing environment we described above. It's still at a very early stage, and it's hard to predict exactly what the cost structure will look like in the end. Obviously, the device side is very efficient, and there are almost no associated costs; on the server side, there are some inference costs, which are exactly what I mentioned, the costs associated with Siri AI that will be included in the cost of service sales. But I want to emphasize once again that we have just launched and opened it up to more users, and we are still in the very early stages of understanding these cost structures and whether we have any further needs on the computing power side.
6. Moderator: The next question comes from J.P. Morgan's Samik Chatterjee.
Samik Chatterjee (J.P. Morgan Chase Research): John, Sabih, I'm happy to have the opportunity to talk to you, and so is Kevin. Regarding Duo, I'd like to ask: What have you learned from Duo's release and the demand you've seen? What supply chain-related issues are currently being faced that need to be addressed to meet demand? Is there more visibility in this area? Also, when will Duo reach a balance between supply and demand? I have one more brief question.
Sabih Khan (Chief Operating Officer): Sam, I'm Sabih, I'll answer. We were very excited about the initial response to the iPhone Duo. The iPhone Duo is currently in a state of limited supply, and production capacity is progressing smoothly. We are doing our best to deliver this revolutionary new product to consumers as soon as possible. However, at this point in time, it is indeed difficult to predict when supply and demand will balance.
Samik Chatterjee (J.P. Morgan Chase Research): OK, got it. Kevan, next question for you: You mentioned that supply chain restrictions affected the September quarter and will continue until December. Can you help us understand, judging from the impact on the company as a whole, whether these restrictions are expanding or shrinking in terms of the magnitude of the impact on revenue? If it's convenient, can you quantify the impact of the September quarter and December quarter respectively?
Sabih Khan (Chief Operating Officer): OK, I'll answer first, I'm Sabih. In the September quarter, we experienced supply restrictions on iPhones, Macs, and iPads, which were driven by high levels of demand — as we said before, supply chain flexibility is currently below normal. The supply restrictions in the fourth fiscal quarter were mainly due to the advanced process production capacity we relied on for self-developed SoCs; however, as more of our product lines moved to the latest 2 nm process nodes, restrictions on advanced processes were easing. Entering the December quarter, we expect Macs and iPads to face limitations, mostly driven by memory — as demand is higher than we expected.
7. Moderator: The next question comes from TD Cowen's Krish Sankar.
Sreekrishnan Sankarnarayanan (TD Cowen Research Department): First question for Kevan or Sabih: I understand memory price inflation — it seems to affect 1 to 1.5, or even 2 percentage points, is that right? Also, I want to confirm if there are any supply availability issues with memory? Do you have long-term agreements (LTAs) with memory vendors to guarantee supply availability — even if prices may still be an issue in the future? Then I have a quick question.
Sabih Khan (COO): OK, thank you, Krish. As we said before, we are continuing to work to improve supply. As you can see, our manufacturing and procurement obligations increased by $33 billion from the June quarter to the September quarter.
Sreekrishnan Sankarnarayanan (TD Cowen Research Division): Understood. Kevan, is there anything else you can share about the future impact on profit margins?
PALEK (CFO): Krish, I'll answer that. Judging from the change in gross margin from the June quarter to the September quarter, if the impact of tariffs in both quarters is excluded, the change in gross margin is about 1 percentage point month-on-month, which is entirely driven by the impact of memory. The total impact of memory is actually greater than that, but we have some hedging — as John mentioned earlier: inventory carry-over benefits, lower costs for some non-memory components, and the benefits of price increases. As we mentioned, we expect memory costs to remain a challenge in the December quarter, and this is reflected in the guidance. Looking at the median guideline, we expect most of the month-on-month decline in the December quarter to be driven by rising memory costs.
Sreekrishnan Sankarnarayanan (TD Cowen Research Division): Understood. One last quick question for John — and congratulations on your first call. Competition in the consumer-grade smart device sector appears to be intensifying, with multiple app-based options emerging. What do you think about how the competition between Siri's intelligent capabilities built into the operating system platform and AI agents based on independent application architectures will evolve in the future?
Tenus (CEO): OK, thank you, Krish. As I said before, Siri is currently mostly based on user requests; and as we've mentioned before, it's built on a modern orchestrator driver architecture, so we see opportunities to gradually expand its capabilities in the future. We believe the most fundamental and most important: the capabilities we give to our users are private and secure — we're really focused on protecting our users' data.
8. Moderator: The next question comes from UBS's David Vogt.
David Vogt (UBS Research): Congratulations, John. First question for Kevan: If you break down your comments on the supply chain — parts availability and December quarterly outlook — can you help us understand the respective effects of “volume” and “price” of products online? Because it looks like you expect both the iPhone and Mac businesses to achieve double-digit growth; and we all know that the price inflation in the PC/Mac ecosystem is quite obvious, and you mentioned price increases as a last resort. Can you help us understand the driving dynamics behind this market? Then I have one more question.
PAREK (CFO): OK, David, thanks for the question, I'm Kevan. Regarding the outlook, we don't usually provide that granular information; we only explain once again: our guide is a year-on-year increase of 7% to 10%; it is also important to note that this is on top of the high base of 16% revenue growth in the December quarter last year. We won't provide more details, but I'll say it's too early to assess price elasticity: the iPad and Mac price adjustments are due to limited supply, and we only adjusted the iPhone price in September. So it's really too early to assess any impact of price elasticity.
David Vogt (UBS Research): OK. My question goes back to the question of the investment cycle — whether it's intelligent Siri or anything else. Looks like you've just gone through a very aggressive year of investing in R&D. Commentary on the first fiscal quarter sounds like spending growth is slowing down. Can you talk about what is driving the slowdown in expenditure growth in various operating expenses projects?
PALEK (CFO): OK, David. Again, we won't split the details of the outlook, but let me repeat: we expect operating expenses to increase 11% to 13% year over year in the December quarter, driven by continued investment in R&D — particularly AI. As you pointed out, this growth rate is lower than the level of FY2026; but as we said before, while we continue to drastically increase our overall investment in AI, we are also continuing to invest in product roadmaps. The December quarter guidance is a continuation of this.
Tenus (CEO): Let me add: We are confident that we are fully funded to achieve the roadmap.
9. Moderator: The next question comes from Richard Kramer of Arete Research.
Richard Kramer (Arete Research): John, your latest MacBook Pro includes more iOS features, such as touch and Dynamic Island (Dynamic Island), and of course Siri AI. Should we expect macOS and iOS to have closer functionality — or even one day move towards a unified operating system for simplification or cost reduction? Then I have one more question.
Tenus (CEO): OK, thank you for the question, Richard. We're very proud of both our Mac and iPad. What you've seen over the years is that we've been happy to unlock features and capabilities across the entire ecosystem to create an excellent experience that spans handoff (Handoff) between iPhone, Mac, and iPad. So when designing products, we think about how to make each product the best. Check out everything we did with the MacBook Pro last week — it was a huge leap forward, the new MacBook Pro surpassed the previous generation in every way, and we're very proud of that. So, we don't currently have plans to make fundamentally different changes — even if there were, we wouldn't talk about them here.
Richard Kramer (Arete Research): Okay. Next question: Previously, we saw two consecutive years of decline in the Chinese market, and this year Apple grew by a very healthy 28% in fiscal 2026. Can you talk about what you attribute this recovery to? Do you think Greater China can maintain this high level of growth — it is currently leading companies in all regions?
Tenus (CEO): OK, let me talk about the situation in China. We are very satisfied with the performance of Greater China: revenue for the September quarter increased 21%, setting a quarterly record. Growth was mainly driven by iPhones — we hit the September quarter record; Macs also experienced very strong double-digit growth. Looking back, the Greater China region grew by 28% for the full fiscal year. Tim (Cook) and his colleagues have recently met with customers, developers, and partners in China, and the response to our latest product line-up — including the iPhone Duo — has been exciting. The installed volume of our active devices has reached a record high; the number of iPhone upgrade users in mainland China has also set a record. According to a World Panel survey, iPhone models are the top three best-selling smartphones in urban China; we think both iPhone and Mac have gained their share. Mac also has a few very impressive things: both upgraded users and new users set records; according to Counterpoint data, the MacBook Air and MacBook Neo were the two best-selling laptop models in the September quarter, while the Mac mini was the best-selling desktop. So, to answer your question: we believe success comes from having a truly great product.
10. Moderator: Let's ask Ben Bollin of Cleveland Research.
Ben Bollin (Cleveland Research): Thanks for asking. John, in the context of higher product prices, I'd like to hear your views on “affordability” related programs — the importance of trade-ins, subsidies, and other methods to sales; and how can Apple promote more such arrangements without paying for subsidies out of its own money?
TENUS (CEO): Okay. Whether building products or pricing products, we always focus on creating the best products and services in the world to provide extraordinary value to users. Obviously, as we mentioned, the price of memory is unprecedented, which is putting pressure on our prices. But it's great to see how successful the product has been. We're also investing in projects like the Apple Upgrade Program (Apple Upgrade Program), which is a great way to improve affordability. This type of affordability plan is certainly an important factor.
Ben Bollin (Cleveland Research): One last question: in terms of the level of balance between supply and demand, can you talk about the gap between where you are currently and where you expect to achieve your goals across the product portfolio?
Sabih Khan (COO): OK, Ben, let me answer that, I'm Sabih. Entering the December quarter, we expect Macs and iPads to face supply constraints, mostly driven by memory — as demand is higher than our expectations. As for the December quarter, we do not provide an outlook.