Apple earnings beat expectations, but rising chip costs worry investors
Better-than-expected results from Apple for the last quarter of the company’s fiscal year 2026 were overshadowed by rising memory chip costs and a forecast for slower services growth.
Apple Inc. reported earnings that surpassed expectations for the three months ending on September 26, 2026, driven by a surge in iPhone sales. However, shares dropped around 3% in after-hours trading due to concerns over rising chip costs impacting profit margins. Revenue surged 12% to $114.5 billion ($102.1bn), with earnings per share reaching $2.10, up from $1.85 a year earlier.
Analysts had predicted $1.99 per share on revenue of $113.4 billion ($101.1bn). The profit boost was partly due to tariff refunds, increasing earnings by $0.05 per share and elevating the gross margin to 47.9%. This report covered only the early sales of premium iPhone 18 Pro models, while Apple's new foldable device, the iPhone Duo, launched during the quarter and wasn't included.
CEO John Ternus emphasized a recovery in Greater China, where revenue grew 21%, outperforming a year-over-year growth of 28%. Despite a dip in iPad sales and wearables/home device revenue, Ternus highlighted a robust iPhone and Mac sales contribution to the quarter's growth. However, a senior analyst at Investing.com cautioned that revenue from China, wearables, and home devices fell short of expectations.
Apple anticipates revenue growth of 7% to 10% for the upcoming December quarter, though services growth might slow to 8-9%, down from 9.8% during the previous quarter. Rising memory costs and AI expenses are expected to squeeze gross margins further, potentially to 45-46%, below the 46.3% forecast.
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