Apple beats earnings estimates despite rising chip costs

Apple Inc. delivered financial results for the quarter ending 26 September 2026 that exceeded market expectations, primarily due to record sales of iPhones during the September period. Total revenue climbed 12% to $114.5 billion, up from $102.5 billion in the same period last year. Net income reached $30.71 billion, or $2.10 per share, marking a 12% increase from $27.47 billion, or $1.85 per share, in the comparable quarter of 2025.

Market analysts had projected earnings of $1.99 per share on revenue of $113.4 billion, according to FactSet estimates. Apple surpassed both figures. However, a portion of the earnings boost stemmed from tariff refunds, contributing an extra $0.05 per share and expanding the gross margin by roughly one percentage point to 47.9%.

iPhone Demand Fuels Performance

Revenue from iPhones surged 17.5% to $57.6 billion, while Mac sales grew nearly 24%. In contrast, iPad revenue declined by 10.4%, and sales of wearables, home products, and accessories dropped 7.9%. The reported figures covered only the initial days of iPhone 18 Pro sales. The company’s new foldable model, the iPhone Duo, launched during this quarter but was not reflected in these results.

This earnings report marks the first under CEO John Ternus, who assumed leadership on 1 September, replacing Tim Cook. Ternus noted a rebound in Greater China, where revenue increased 21% for the quarter and 28% year-over-year. He attributed the growth to stronger iPhone and Mac sales.

Upcoming Financial Pressures

Jesse Cohen, a senior analyst at Investing.com, observed that Apple’s revenue from China, wearables, and home products fell short of analyst projections. The company anticipates that rising memory chip costs and investments in Siri AI will reduce its gross margin to between 45% and 46% in the December quarter—below the 46.3% analysts had forecast. Memory price increases are the primary driver of this margin squeeze.

Despite these challenges, Apple forecasts revenue growth of 7% to 10% in the upcoming quarter, exceeding the 6.1% analysts had anticipated. The company has already adjusted prices on multiple products this year and is mitigating memory cost pressures by utilizing older inventory and cutting expenses on other components.

Strategic AI Investments

Apple is collaborating with external partners to enhance its services while maintaining restrained capital expenditures. This conservative approach to AI infrastructure spending has helped preserve cash flow, according to Jacob Bourne, an analyst with eMarketer. Strategic alliances, including one with Alphabet, may allow Apple to strengthen its AI capabilities without assuming the same financial risks as competitors.

In September, Apple confirmed that Google-powered models now drive its updated Siri, following a long-term agreement first revealed in January. The company’s total capital spending declined 29% to $9 billion for the fiscal year, though research and development expenditures rose 32% to $45.8 billion. Apple does not specify how much of these funds is allocated to AI initiatives.

By comparison, major tech rivals, Microsoft, Alphabet, Amazon, and Meta, are projected to invest over $700 billion in capital expenditures this year, with a significant portion directed toward AI infrastructure. Apple’s measured AI strategy will likely remain a key focus for investors and analysts in the months ahead.