Goldman Sachs: Strong Apple hardware growth, but memory costs and slowing services weigh on earnings outlook

Which businesses drove the fourth-quarter earnings beat?

Apple’s revenue in the fourth quarter of fiscal 2026 was 114.5 billion dollars, up 12% year over year and above the market consensus of 113.4 billion dollars. Earnings per share were 2.10 dollars, above the consensus of 1.99 dollars, including approximately 0.05 dollars from tariff refunds.
iPhone revenue was 57.6 billion dollars, up 17% year over year and above the consensus of 56.6 billion dollars. The number of customers upgrading worldwide reached a record, revenue grew by double digits in both the US and Greater China, and access to the latest AI features also drove upgrades.
Mac revenue was 10.8 billion dollars, up 24% year over year and above the consensus of 9.8 billion dollars. Demand for the MacBook Neo and Pro was strong, the number of customers new to Mac reached a record, and IDC data showed an increase in its global share.
Hardware performance was uneven: iPad revenue fell 10% year over year to 6.2 billion dollars, while revenue from wearables, home and accessories fell 8% to 8.3 billion dollars, both below consensus. A high comparison base from new products in the prior year and iPad supply constraints weighed on performance.

Apple’s guidance for total revenue growth in the first quarter of fiscal 2027 was above market consensus. Goldman Sachs believes the iPhone upgrade cycle and Mac share gains will continue to support product demand.
Supply remains a constraint. Apple expects the 2-nanometer process to help ease previous constraints on advanced-process chips, but memory supply remains a bottleneck. With demand exceeding expectations, Mac and iPad supply constraints will persist into the first quarter of fiscal 2027.

Fourth-quarter services revenue was 31.6 billion dollars, up 10% year over year and roughly in line with market consensus. Apple expects growth to slow to 8%–9% in the next quarter, affected by exchange rates, third-party licensing revenue and weakness in mobile games.
App Store revenue was flat year over year in the fourth quarter. In-app prompts directing users to external transactions in the US and a decline in revenue-sharing rates were also sources of pressure. Goldman Sachs expects iCloud+ to gradually help services revenue growth recover as Arcade and TV services are included in iCloud+ and demand for cloud storage and AI tokens grows.

Overall gross margin was 47.9% in the fourth quarter, with approximately 1 percentage point attributable to tariff refunds. Apple’s gross margin guidance for the first quarter of fiscal 2027 was 45%–46%; at the midpoint, that is approximately 1.4 percentage points below the fourth-quarter level excluding refunds.
The pressure mainly comes from rising memory costs and server-side inference costs associated with the launch of Siri AI. Lower-cost memory inventory, price declines for other components and recent product price increases can partly offset this, but management expects the gross margin benefit from lower-cost inventory to diminish over time.
Goldman Sachs raised its revenue forecasts for each of fiscal 2027–2029 by approximately 1%, while lowering its earnings-per-share forecasts for each year by approximately 2%. The bank maintained its buy rating but lowered its 12-month price target from 390 dollars to 380 dollars because of the lower earnings forecasts.