Apple Inc. (NASDAQ: AAPL) reported record September-quarter revenue and earnings on Monday that topped Wall Street estimates, but forecast a lower gross margin for the holiday quarter as memory chip costs rise. Revenue for the fiscal fourth quarter ended Sept. 26 rose 12% to $114.5 billion, while diluted earnings per share rose 14% to $2.10.
Analysts had expected revenue of $113.39 billion, according to LSEG data, and earnings of $1.99 per share. The report was Apple's first under Ternus, who took over from Tim Cook in September. Shares were little changed in extended trading after the results were released, then fell about 4% during the conference call with analysts. The shares later pared their losses to about 2% in extended trading.
Apple forecast gross margin of 45% to 46% for the December quarter, down from 47.9% in the fourth quarter and below the 46.3% analysts had expected. It projected services revenue growth of 8% to 9%, short of the 10.7% analysts had forecast, while its outlook for total revenue growth of 7% to 10% was above the 6.1% average estimate.
"We did see higher memory costs as compared to the June quarter, which was partially offset by the benefit of carrying inventory and lower costs on certain non-memory components," Ternus told Reuters in an interview.
#iPhone 18 Pro Sales Lift Apple to September Quarter Revenue Record
iPhone revenue rose 17% to $57.6 billion, above the $56.5 billion analysts had expected, according to LSEG. The total included the new iPhone 18 Pro models but not the iPhone Duo, Apple's first foldable phone, which went on sale after the quarter ended.
Apple, based in Cupertino, California, makes the iPhone, Mac, iPad and Apple Watch and sells services such as the App Store, Apple Music and iCloud. The iPhone accounted for about half of quarterly sales.
Mac revenue rose 24% to $10.8 billion, and services revenue rose 10% to $31.6 billion, which the company said was an all-time high. iPad revenue fell 10% to $6.2 billion, and wearables, home and accessories revenue fell 8% to $8.3 billion.
By region, Greater China revenue rose 21% to $17.5 billion and the Americas rose 10% to $48.7 billion. Japan was the only region to decline, slipping 1% to $6.5 billion.
For the full fiscal year, revenue rose 15% to $478.8 billion, which Apple called an all-time record, and diluted earnings per share rose 20% to $8.98.
"We generated $28 billion in operating cash flow during the quarter, allowing us to return $28 billion to shareholders," Kevan Parekh, Apple's chief financial officer, said in the earnings release. The board declared a quarterly dividend of $0.27 per share, payable Nov. 16 to shareholders of record on Nov. 12.
#Apple Raises Prices and Builds Inventory as Memory Costs Climb
When it launched the iPhone 18 Pro models, Apple raised iPhone 17 prices by $100 and increased some MacBook prices, which Ternus said helped offset higher memory costs. Apple also said it had taken steps to lock in memory supplies.
Inventories more than doubled to $14.5 billion at the end of the fiscal year from $5.7 billion a year earlier, according to the company's balance sheet. Research and development spending rose 32% to $11.7 billion in the quarter.
The fourth-quarter gross margin included a benefit of about 1 percentage point from tariff refunds, which also added $0.05 to earnings per share, the company said. That benefit is not part of the December-quarter margin forecast.
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#Ternus Says iPhone Duo Supply Cannot Yet Meet Demand
Ternus's first months as chief executive brought Apple's first foldable phone, its first smart-home hub and its first touchscreen laptops. He told Reuters that a small share of iPhone Duo units had been returned for display issues and that Apple is replacing them.
"Duo is constrained as of today," Ternus said, adding that Apple cannot yet predict when supply and demand will be in balance.
Ternus also said Siri AI, Apple's revamped voice assistant, is now handling 2.5 billion requests a day.
Apple's filings list other risks to its business, including trade and international disputes, reliance on outside suppliers for components and manufacturing, and complex and changing laws and regulations.
Management projected December-quarter revenue growth of 7% to 10% with a gross margin of 45% to 46%, though rising memory chip costs, iPhone Duo supply constraints and slower services growth remain key risks to the outlook.