Bernstein: Apple’s fiscal-quarter revenue beats expectations, but rising memory prices weigh on next-quarter gross margin guidance

What were the highlights and shortcomings of the fourth-quarter results?

Apple’s fourth-quarter revenue for fiscal 2026 was 114.5 billion dollars, up 12% year over year. It exceeded the company’s prior growth guidance of 9%–11% and was 1.6% and 0.9% above Bernstein’s forecast and market consensus, respectively. Diluted earnings per share were 2.10 dollars, 5% above market consensus.
Gross margin for the quarter was 47.9%, at the upper end of the company’s 47%–48% guidance range; operating margin was 31.1%, 44 basis points above market consensus.
Cash flow was weaker: adjusted free cash flow was 25.859 billion dollars, 8.5% above Bernstein’s forecast but 19.2% below market consensus.

iPhone revenue rose 17% year over year, slightly above the company’s previous outlook for growth of around 15%, providing important context for total revenue growth exceeding guidance.
Services revenue rose 10% year over year. Bernstein said exchange rates created an additional headwind of approximately 2.5 percentage points; growth excluding currency effects was approximately 12.5%, broadly consistent with 12% in the previous fiscal quarter.

Apple expects revenue to grow 7%–10% year over year in the December quarter, including services revenue growth of 8%–9%; the revenue guidance reflects ongoing supply constraints.
Gross margin guidance for the same period was 45%–46%, below Bernstein’s previous forecast of 46.2%, which was already below the market, and below market consensus of 46.7%. The firm had already incorporated a more favorable iPhone product mix and accelerating memory cost increases into its forecast.
Management identified rising memory costs as the main pressure on gross margin. Memory prices continue to rise beyond the December quarter, and the benefit from lower-cost inventory will diminish over time, so Bernstein expects near-term gross margin pressure to persist.
In a separate calculation, Bernstein estimated that, assuming no benefit from a premium product mix and availability of the base iPhone 18 model, gross margin for the December quarter could be approximately 30 basis points below current guidance.

Despite its caution on near-term margins, Bernstein reiterated its Outperform rating and 370 dollar price target for Apple. The firm believes Apple sits at the intersection of hardware, software and AI and, with a premium user base of more than 2.5 billion active devices, can become a gateway for consumers to use on-device intelligence.