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Apple (NASDAQ:AAPL) reported fourth-quarter financial results on Monday. The transcript from the company’s fourth-quarter earnings call has been provided below.

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View the webcast at https://www.apple.com/investor/earnings-call/

Summary

Apple Inc reported $114.5 billion in revenue for Q4 FY2026, a 12% increase year-over-year, setting a September quarter record.

The company launched several new products, including the iPhone Duo, iPhone 18 Pro and Pro Max, and introduced Siri AI, marking significant advancements in AI and product design.

Apple experienced strong growth across its product segments, with iPhone revenue up 17% and Mac revenue up 24%, despite supply constraints.

Services revenue reached an all-time high of $31.6 billion, with growth in video, cloud services, and payment services.

Apple’s installed base now exceeds 2.5 billion active devices, providing a strong foundation for future growth.

Management highlighted challenges with memory cost inflation impacting margins and continued supply chain constraints.

The company expects Q1 FY2027 revenue growth between 7% and 10% year-over-year, projecting it to be the best quarter in company history.

Full Transcript

Suhasini Chandramali (Head of Investor Relations)

Good afternoon and welcome to the Apple Q4 fiscal year 2026 earnings conference call. My name is Suhasini Chandramali, Head of Investor Relations. Today’s call is being recorded. Speaking first today is Apple CEO John Ternus, and he’ll be followed by CFO Kevin Parek. After that, we’ll open the call to questions from analysts. Please note that some of the information you’ll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expense, taxes, and future business outlook. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast, including risks related to the potential impact to the company’s business and results of operations from macroeconomic conditions, tariffs and other measures, and legal and regulatory proceedings.

For more information, please refer to the risk factors discussed in Apple’s most recently filed reports on Form 10-Q and Form 10-K and the Form 8-K filed with the SEC today along with the associated press release. Additional information will also be in our report on Form 10-K for the year ended September 26, 2026, to be filed tomorrow, and in other reports and filings we make with the SEC. Apple assumes no obligation to update any forward-looking statements, which speak only as of the date they are made.

I’d now like to turn the call over to John for introductory remarks.

John (Chief Executive Officer)

Thank you, Suhasini, hello everyone and thanks for joining us. It’s a privilege to be with you for the first time as Apple CEO. I’m honored to represent our teams and the work they do every day. Today, Apple is pleased to report $114.5 billion in revenue, up 12% from a year ago and a September quarter record. These results helped Apple achieve its best ever fiscal year for revenue and EPS. This is an amazing time at Apple. We just completed one of the most prolific launch periods in our history.

It’s been a remarkable time for innovation across all of our categories. One of the greatest testaments to that is the all new iPhone Duo, the most transformational iPhone since the original. We’re also incredibly excited about iPhone 18 Pro and 18 Pro Max, which take massive leaps forward on camera, battery life, and performance features that our users care deeply about. Meanwhile, Touch has arrived on Mac for the first time with the all new MacBook Pro and we were excited to announce the new iMac and 14 inch MacBook Pro.

The all new iPad mini features a stunning new OLED display and brings a super thin design to the smallest member of the iPad family. Apple Watch now offers users the clearest window yet into their heart health. We introduced AirPods 5 which feature industry leading active noise cancellation in an open ear design and we’ve laid the foundation for an even more intelligent smart home with the all new Home View, Apple TV 4K and HomePod mini. On top of it all, we’re unlocking more powerful AI experiences across our lineup including with the all new Siri AI, a profoundly capable and deeply personal assistant seamlessly integrated across our platforms.

And like everything we make, Siri AI is built with essential privacy protections so no one can access users’ data, not even Apple. We launched Siri AI in beta for U.S. English users in September and expanded to French, Japanese, Korean, Portuguese and Spanish in October. We’re really excited to have rolled all these innovations out and there’s still so much more we plan to do. I’m feeling great about the opportunities ahead for Apple, from our product roadmap and broad range of services to promising areas like health, emerging markets, enterprise and education.

As one example, we recently secured our biggest education deal ever for Mac with the Department of Education in the Philippines. They’re going to deploy 170,000 MacBook NEOs to teachers and staff. Opportunities like this bring more users into our ecosystem and help fuel growth across our business. Apple is the greatest company in the world. We’ve assembled an extraordinary collection of talent, the best engineers, designers, developers and experts in every corner of our business, from our supply chain to our stores. Every day we bring the right people together with the best ideas to build products and services that change lives, guided by a foundational set of values and a belief that the best technology should make a better world. We do that by making products that are powerful and intuitive and meet Apple’s uncompromising standards for quality, performance, design and durability.

That’s the Apple experience customers love. And with our latest lineup, people have even more reasons than ever to upgrade or switch to an Apple product. At the same time, Apple services amplify the experience of every device, helping people work, play, listen, watch and stay connected to the world around them. I’m delighted with where our services business is today and where it’s going, and with an installed base of more than 2.5 billion active devices, I’m looking forward to expanding our offers and improving the lives of users around the world.

We see tremendous opportunity in AI as well. Siri AI marks a new chapter in AI at Apple. It is a completely reimagined assistant that is powerful, personal, private and deeply relevant to our users’ daily lives. Siri AI picks up what’s relevant to our users, understands what’s on their screen and holds a natural conversation all to help them with the things they do every day. It’s the Siri we’ve always wanted. We are very pleased with the reviews and feedback we’ve received and we’re so excited that more and more users are getting to experience it. iPhone remains at the center of our opportunity as the intelligent personal hub. It’s always with you and understands your personal context, from your messages to your photos, notes and apps to deliver powerful intelligence right when you need it. Then there’s Mac, which is having an AI moment all its own. Mac is what brought me to Apple and through the years it has opened a world of possibilities. More than 40 years after the first Mac, the category is having its biggest moment yet.

With every Mac in our latest lineup a powerful platform for AI, Mac mini and Mac Studio in particular are pushing the boundaries of local, private AI, giving users the ability to do things once considered impossible. From Mac to iPhone to iPad, we are proud that our products are the best platforms in the industry for AI, for both first party and third party applications, and we’re excited about the opportunities that creates. Ultimately, everything we do at Apple is for our users.

The success of every innovation is best measured by its impact on people’s lives, and that’s what drives us to keep building great products and to get them into the hands of people all around the world. Now let’s take a deeper dive into our results for the quarter. As I mentioned earlier, we had an excellent quarter at Apple. In addition to September quarter and fiscal year records in total company revenue, iPhone set a September quarter revenue record, capping its best fiscal year ever. Services achieved an all time record during the quarter to close out our best year ever there too. We grew in the vast majority of markets we track, setting September quarter records in the Americas, Europe, Greater China and the rest of Asia Pacific.

We also set September quarter revenue records in both developed and emerging markets, in addition to an all time record in India. Turning to our lineup, iPhone revenue was $57.6 billion for the September quarter, up 17% from a year ago. Despite supply constraints and foreign exchange headwinds, we grew strong double digits in the U.S. and Greater China to achieve September quarter revenue records. We also set a September quarter record for upgraders worldwide as well as in the U.S., China mainland and India, helping to deliver our best fiscal year ever for upgraders globally.

At the launch in September, we introduced the all new iPhone Duo. From the very beginning we knew what we wanted: to create a foldable form factor with a larger display that feels as natural and intuitive as iPad. We designed the hardware and software together to make it unmistakably iPhone while enabling entirely new ways to use it. The result is a series of remarkable innovations that we believe will redefine what a foldable phone can be. We’re so proud of what our teams have built.

Developers have been quickly adapting to this new form factor and we’re excited to see more and more apps optimized for iPhone Duo. We’ve been thrilled with the early response from reviewers and customers, and we are working hard to get iPhone Duo into customers’ hands as quickly as we can. We have also been thrilled with the response to iPhone 18 Pro and Pro Max. It’s easy to see why customers are embracing them. Our latest models feature a dramatically improved camera system with breakthrough upgrades like variable aperture and all new photographic styles. The A20 Pro and next generation vapor chamber together deliver the highest sustained performance in iPhone history. And iPhone 18 Pro Max delivers the biggest increase in battery life ever on an iPhone.

A20 Pro also features a new dual 16 core neural engine accelerating on device AI and computational photography. Turning to Mac, revenue was $10.8 billion, up 24% from a year ago. Despite supply constraints, we had double digit growth in the majority of markets we track and particularly strong performance in our emerging markets where we set a September quarter revenue record. We also set a September quarter record for customers new to the Mac. According to IDC, we gained share globally during the quarter for the full fiscal year and we have never sold more Macs in a fiscal year than we did this time, which is a truly remarkable testament to these incredible products.

Last week we introduced a whole new way for people to experience Mac: the all new MacBook Pro with Pro LED XDR brings touch to the Mac for the first time. It also is the best pro laptop display we have ever shipped, plus all day battery and our most immersive laptop audio, and it all comes together in a thinner and lighter design. We also brought the power of M6 to the new 14 inch MacBook Pro and the new iMac. This latest generation of Apple silicon includes the world’s fastest CPU core to speed up everyday tasks in addition to a dual 16 core neural engine to drive private on device AI tasks.

Now turning to iPad where revenue was $6.2 billion for the September quarter. Last week we introduced the all new iPad mini with an amazing new OLED display, super thin design and the power of 20 Pro. With the newest addition, our iPad lineup is more capable and versatile than ever before. Anywhere our users go, there’s a place for iPad, like a classroom where it helps students explore the world in amazing ways, or a design studio giving artists and creatives an expansive canvas to explore their ideas.

In wearables, home and accessories, revenue was $8.3 billion for the quarter. Apple Watch makes the simple act of wearing a watch a powerful way to help take care of your health. We were thrilled to introduce our all new Health Sensing system to help our users get the most out of health tracking. Paired with the S11 chip, Apple’s most powerful wearable chip, the Health Sensing system delivers the most accurate heart rate sensing in a wearable. We were also happy to unveil new features like HealthAge and Readiness, which will tell you when to push forward or hold back, as well as the all new Health app redesign.

And we’re excited for Audio Intelligence which will be coming in a future software update and will help you remember moments you might otherwise miss. Apple Watch Series 12 brings it all together in a beautifully light design, while Apple Watch Ultra 4 goes further with longer battery life compared to the previous generation and the most accurate on device GPS in a sports watch. Meanwhile, AirPods 5 offers best in class open ear active noise cancellation at an incredible price while improving sound quality, battery life and durability.

With iPhone and Apple Intelligence including Siri AI, AirPods allow users to do remarkable things like connect with someone who’s speaking another language with live translation or get answers with broad world knowledge entirely hands free. And just a few weeks ago we introduced a whole new generation of hardware for the home that includes Apple Home View, which was designed to be central to the home and personal to everyone in it, bringing entertainment, connection and home management together in one place.

We announced this alongside the new Apple TV 4K, now smarter with Apple Intelligence, the all new HomePod mini and Apple Home Collection, a new program that extends Apple Home beyond our own products through deep collaboration with key partners. All of it, as always, is built on Apple’s approach to privacy. Now let’s turn to services. Revenue was $31.6 billion, up 10% from a year ago and an all time record. We saw double digit growth in the majority of markets that we track and we set all time revenue records in the Americas and Europe as well as the September quarter record in the rest of Asia Pacific. The 78th Primetime Emmy Awards were a night to remember for Apple TV with our shows earning more awards than any other network. Widow’s Bay, the show of the summer, became the most awarded comedy ever in a single year with 14 wins.

We’re very excited about our programming, from fan favorites like Slow Horses and Ted Lasso to the upcoming film Being Human. To date, Apple TV productions have earned more than 900 wins and over 3,800 nominations. Turning to Apple Pay, we recently launched in India with Axis Bank, bringing a seamless, safe and secure way to pay in one of the biggest markets in the world. Today, Apple Pay is available in over 90 markets, giving customers around the world peace of mind built into every transaction.

Apple Music was created to bring artists and fans closer together, and with the opening of Apple Music Hall, we have a beautiful new venue for intimate shows that bring them even closer. To celebrate the opening of the site in London, we hosted an unforgettable performance by Elton John. People love Apple products and services for the countless ways they make life easier, more enjoyable and just plain better. They also count on Apple to create technology responsibly, built the right way, not the easy way. That means building products with even more recycled content to take less from the earth and with even better durability so they last longer. It means developing intelligent capabilities like sound recognition on Apple Watch to alert users who are deaf or hard of hearing to what’s happening around them.

It means designing privacy protections like on device processing so personal data stays on a user’s device. And it means introducing new child safety features to make it easier for parents to manage when and how their kids can use their devices. We’re also pleased to be doing more and more manufacturing in the United States through our American Manufacturing program. We’re deepening partnerships with suppliers across the country, including Paramin, a titanium producer now supplying iPhone Duo, and Cunity Electronics, which is producing the camera technology behind iPhone 18 Pro’s new variable aperture system.

Nearly 100 components in our newest iPhones come from American companies in more than a dozen states. All told, Apple supports more than 450,000 American jobs with thousands of suppliers and partners across all 50 states. It’s all part of our $600 billion four year commitment to U.S. innovation and advanced manufacturing. I am proud of what we’ve accomplished this quarter and I’m excited for what’s ahead. We have everything we need to be extraordinarily successful. And with this team, this vision, this mission and these values, I have no doubt that we will. With that, I’ll hand it over to Kevin.

Kevan Parekh (Chief Financial Officer)

Thanks, John, and good afternoon everyone. Here’s a quick rundown of our key financial metrics. Our revenue of $114.5 billion was up 12% year over year, a September-quarter revenue record. This strong performance was despite sequential foreign exchange headwinds of nearly 2 percentage points as well as supply constraints on iPhone, Mac, and iPad. Products revenue was $82.9 billion, up 12% year over year, driven by strong double-digit growth on iPhone and Mac. Our installed base of over two and a half billion active devices has reached another all-time high across all major product categories and geographic segments.

Services revenue was $31.6 billion, up 10% year over year. We saw strong performance in many Services categories with all-time records in video, cloud services, payment services, and advertising, and a September-quarter record in music. Company gross margin was 47.9% and Products gross margin was 37.2%. These both included a benefit from tariff refunds, which had a favorable impact of approximately 1 percentage point in the September quarter. When you remove the tariff refunds from both the June and September quarter, both Company and Products gross margin would be down about 1 point sequentially, primarily driven by higher memory costs. As of the September quarter, we have received the vast majority of the refunds related to tariffs paid.

Services gross margin was 76%, up 40 basis points sequentially. Operating expenses came in at $19.2 billion, up 21% year over year as we continue to make investments in R&D. Net income was $30.7 billion. Diluted earnings per share was $2.10, up 14% year over year, and includes 5 cents of favorable impact from tariff refunds. Both net income and EPS set September-quarter records even when excluding the tariff refund benefit. Operating cash flow was also very strong at $28.1 billion.

This performance marked our best fiscal year yet with $478.8 billion in revenue, up 15% year over year, and a fiscal-year record for EPS of $8.98, up 20% year over year. Now I’m going to provide some more details for each of our revenue categories. iPhone revenue was $57.6 billion, up 17% year over year. Despite supply constraints, we grew double digits in the majority of markets we track, and we also reached September-quarter revenue records across both developed and emerging markets. As John mentioned, it was a record year for the total company, and we also had our best year ever for iPhone, both worldwide and in every geographic segment.

The iPhone active install base grew to an all-time high, and iPhone had a record year for upgraders globally and in several markets including the US, China, mainland India, and Japan. According to a recent survey from World Panel, iPhone was a top-selling model in the US, urban China, India, the UK, Germany, Australia, and Japan. Mac revenue was $10.8 billion, up 24% year over year despite supply constraints. This performance was driven by the strength of the MacBook Neo and MacBook Pro. We saw double-digit growth in both developed and emerging markets, with all-time records in markets like India. In Southeast Asia, emerging markets continued to see strong performance on Mac, resulting in Mac’s best fiscal year there, driven by record upgraders and customers new to the Mac. iPad revenue was $6.2 billion, down 10% year over year, driven by the supply constraints I mentioned earlier as well as a continued difficult compare against the launch of the A16-powered iPad in the prior year. The iPad install base reached an all-time high during the quarter, and over half of the customers who purchased an iPad were new to the product.

Wearables, Home and Accessories revenue was $8.3 billion, down 8% year over year as we face a difficult compare against the launch of the Watch SE3 and the AirPods Pro 3 in the prior year. The wearables install base reached a new all-time high, and over half of customers who bought an Apple Watch in the quarter were new to the product. Service revenue set an all-time record of $31.6 billion, up 10% year over year despite over one and a half points of sequential FX headwinds. We set all-time revenue records in the majority of markets we track, including several emerging markets, Latin America, and India. We are optimistic about the long-term future of our Services business. With our large install base of over 2.5 billion active devices, we have an incredibly strong foundation for growth opportunities.

Our services continue to attract more customers, and transacting and paid accounts reached new all-time highs in the quarter. We also have over one and a half billion paid subscriptions, which grew double digits during the quarter, reaching an all-time high. And we continue to improve and expand our service offerings, from iCloud Plus plans that now include Apple TV and Apple Arcade in more than 100 countries and regions, to Ads and Apple Maps now live in the US and Canada, which will give local businesses a new way to reach customers while respecting our users’ privacy.

Turning now to enterprise, organizations are continuing to expand their fleets of Apple devices to transform operations and drive productivity. Duke Health performed the first surgical procedure using Apple Vision Pro for hip arthroscopy with an FDA-authorized app from Stryker. American Airlines is deploying over 37,000 iPhone 17 devices to flight attendants for in-flight purchases with Tap to Pay, in addition to 25,000 iPads for pilots and mechanics.

And more companies are choosing Mac across a growing range of use cases, including for on-device AI. For example, APP Inc. is running AI entirely on Mac mini for loss prevention across hundreds of stores, eliminating cloud token costs. Christie’s, a world-leading auction house, is running local models on Mac Studio to improve core productivity workflows such as pricing estimates. Let’s turn to our cash position and capital return program. We ended the quarter with $137 billion in cash and marketable securities and $80 billion in total debt. During the quarter we returned $28 billion to shareholders. This included $3.9 billion in dividends and equivalents and $24 billion in share repurchases.

As we move ahead into the December quarter, I’d like to review our outlook, which includes the types of forward-looking information that Suhasini referred to. Importantly, the color we’re providing assumes that global tariff rates, policies, and their application remain in effect as of this call and the global macroeconomic outlook does not worsen from today. We expect our December-quarter total company revenue to grow between 7% and 10% year over year, which reflects our best view of constrained supply.

We expect this to be the best quarter for revenue in the history of the company. We expect Services revenue to grow between 8% and 9% year over year in the December quarter. This contemplates sequential headwinds primarily driven by third-party licensing and foreign exchange. We expect gross margin to be between 45% and 46%. This includes primarily the impact of higher memory costs as well as some costs related to the ramp of Siri AI. We expect operating expenses to be between $20.4 billion and $20.8 billion.

We expect OIE to be around $300 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 17%. Finally today, our board of directors has declared a cash dividend of $0.27 per share of common stock, payable on November 16, 2026 to shareholders of record as of November 12, 2026. With that, I’ll hand it back to John.

John (Chief Executive Officer)

Thanks, Kevin. Before we get into questions, I’d like to introduce Sabi Khan, Apple’s chief operating officer. Many of you know Sabi. He works with Worldwide Operations and Supply Chain, leading many important functions at Apple including manufacturing, AppleCare, environmental efforts, and supplier partnerships around the world. Sabi and his team are the reason we’re able to build and deliver products at a scale and of a caliber unlike anyone else out there.

I’ve asked Sabi to join Kevin and me on these calls as we take your questions.

Suhasini Chandramali (Head of Investor Relations)

Thank you, John. We ask that you limit yourselves to two questions. Operator, may we have the first question, please?

OPERATOR

Our first question is from Michael of Goldman Sachs. Please go ahead.

Michael (Analyst at Goldman Sachs)

Hey, good afternoon. Thank you for the questions. I have two. First, on the iPhone 18, the standard model was left out of the September lineup. I was just wondering if you could share some of the reasons why — whether there were some supply constraints and component-related things that led to that decision, or if it had to do with the launch of the Duo. Any color there would be helpful. And then I have a follow-up. Thank you.

John (Chief Executive Officer)

Yeah, thanks, Michael. Look, we were thrilled to introduce the iPhone Duo and 18 Pro earlier this year in September. And, you know, we have iPhone 17, iPhone Air, and 17e continuing to kind of round out this incredibly strong lineup for the holidays. So obviously we don’t make any comments about future roadmap, but we’re excited about where we’re at.

Michael (Analyst at Goldman Sachs)

Great, thank you. And then my second question is just around iCloud Plus. It seems like it’s becoming a more strategic product, just given the tie-in with home security as well as the potential monetization opportunity for Apple Intelligence. So I was just wondering, what are you seeing on iCloud Plus? Are there any tailwinds in terms of attach rates, just particularly given the rising cost for increased storage options on iPhone and the company’s push into home products?

Thank you.

John (Chief Executive Officer)

Yeah, thanks for the question. I think we just, in the September quarter, had an all-time record for our cloud services revenue, and you mentioned iCloud Plus. This is something we’re very excited about. We have these iCloud plans that now include Apple TV and Apple Arcade in more than 100 countries and regions, where we think we can really reach new potential subscribers. And then, as you mentioned, we think there’s good opportunities on Apple Intelligence.

There’s going to be some usage limits on features that rely on server-side models, which include Siri AI and intelligent photo editing, some other things like that. And so anyone who needs greater capacity will be able to purchase expanded access in the future. So to your point, in the beginning iCloud tiers were largely about storage, but we’ve been adding more capabilities and features to it.

Michael (Analyst at Goldman Sachs)

Thank you so much, John.

John (Chief Executive Officer)

Awesome. Thank you, Mike. Operator, could we get the next question, please?

OPERATOR

Our next question is from Eric Woodring from Morgan Stanley. Please go ahead.

Eric Woodring (Analyst at Morgan Stanley)

Hey guys, thank you for taking my questions. And John, congrats on your first quarter here. So, as the world of AI evolves from chatbots to consumer agents, it seems like there are growing opportunities for Apple. It also seems like there are risks. And John, I’d love to get your perspective on what role you want Apple and Siri AI to play in kind of this consumer, agentic AI landscape, and just how you look at any potential risks of some of these agents trying to encroach on your Services business.

And then a quick follow-up, please. Thank you.

John (Chief Executive Officer)

Sure. Thanks, Eric. Look, first and foremost we’re incredibly excited to launch Siri AI alongside, you know, the latest generation of Apple Intelligence features. Siri has long been popular with our users, with more than two and a half billion requests every day. And with Siri AI we really have the kind of the Siri that we always wanted. You know, it’s primarily request-based today, but as we talked about at WWDC, it’s built on a modern, orchestrator-driven architecture that gives us real room to expand its capabilities over time.

As far as agentic capabilities, you know, we think these are promising tools for users. We just want to make sure that users are aware of what they’re giving access to, make sure this is done in a way that protects security and privacy. So, you know, we’re pushing really hard on that with Siri AI, but we’re also really encouraged by the fact that Apple devices, we think, are the best places to use all forms of AI.

Eric Woodring (Analyst at Morgan Stanley)

Okay, awesome. I appreciate that, John. And then just quickly as a follow-up, how should we, if we take a big step back, how should we think about the durability of Services growth? Just, you know, I realize it was 10% in the September quarter. We’re a little bit below that in the December quarter. You know, as certain things like search evolve and regulatory changes impact App Store monetization, are there new services that we should be looking towards that you believe can become a more sizable offset to maybe take some pressure off these historically important revenue streams?

Thanks so much.

Kevan Parekh (Chief Financial Officer)

Hey Eric, it’s Kevin. Thanks for the question. Let me take this one. Let me start by just talking through kind of what we talked about during the September quarter. Services grew by 10% year over year. And we look at that relative to the June quarter. You know, foreign exchange was the main driver in that change on year-on-year growth rate sequentially. You know, we saw, we continue to see strong performance in September in many of our service categories, all-time records in video, cloud services, payment services, and advertising, including our first-party Apple ads, and a September quarter record in music.

But I think it’s important to kind of step back also and look at the progression of what we’ve seen in our Services business over the last several quarters. I think it’s an important backdrop. And so we spoke about in the last call, you know, we expected foreign exchange to be the largest driver of the change in the year-on-year growth rate from the March to September quarter. This ended up being a significant headwind of about 4 percentage points, and we expect an additional sequential headwind of about another half of a percentage point for the Services business as we go into the December quarter.

We’ve also seen some factors impact the performance of the App Store. And during the September quarter, the performance on the App Store was similar to the prior year, and we had a record number of paid subscriptions with double-digit growth for third-party apps on the App Store. At the same time, we did see some headwinds in mobile gaming that we’ve talked about before and expect to see those continue into the December quarter. And keep in mind, we also made some changes to the business model in certain countries, and in the U.S. we continue to operate under a court ruling impacting the link-out transactions.

As we move ahead, we expect Services growth to be between 8 to 9% as I mentioned in prepared remarks in the December quarter. And this outlook contemplates our best estimates on sequential headwinds, primarily from third-party licensing and the additional half percentage point of foreign exchange I just mentioned. And I’ll turn it over to John to talk about some perspectives as we look ahead.

John (Chief Executive Officer)

Yeah, thanks. I guess I’d like to add to that, Eric. I think, you know, fundamentally we feel really good about the long-term opportunity that we have in our Services business. You know, we see continued growth in the install base of over 2.5 billion active devices, which is fundamentally the foundation for future growth as more customers are able to experience our products and services. You know, an example of this: during the September quarter, App Store saw a record number of average weekly visitors, and we saw growth in the number of users who are paying for at least one service, reaching an all-time high.

Another good example of this: in India we recently launched Apple Pay with Axis Bank, bringing, you know, the seamless, safe, secure way to pay to one of the biggest markets in the world. And then on top of all this, as we talked about, we think, you know, intelligence is going to be another opportunity as well. So overall we’re feeling really good about where we’re headed in the long term.

Eric Woodring (Analyst at Morgan Stanley)

Awesome guys, thanks so much for the color. Best of luck.

Suhasini Chandramali (Head of Investor Relations)

Thanks, Eric. Operator, could we take the next question, please?

OPERATOR

Our next question is from Amit Daryanani from Evercore. Please go ahead.

Amit Daryanani (Analyst at Evercore ISI)

Yep, thanks a lot and congrats John on your first earnings call here. John, you sort of described the iPhone as an intelligent hub in your opening comments. And as personal AI agents become more prominent, do you see the potential for the primary customer relationship to shift from the device to the agent over time? Really, given Apple’s integration of silicon, hardware, and software, where do you see the greatest opportunity to combine things like personal context and on-screen awareness into an agent that can perhaps move beyond answering questions?

And how far along do you think Siri is in bringing those pieces together right now?

John (Chief Executive Officer)

Yeah, thank you, Amit, for the question. As I said before and we said in our announcement, we really do think of the iPhone as the intelligent personal hub. I mean, if you think about it, so much of your personal data is on your iPhone, you know, whether it’s your contacts, your communications, health data, financial data, all of that. And Siri can tap into that and help you access it in a way that’s very secure and private and that nobody else has access to.

Even Apple doesn’t have access to it. And so we think that is a core kind of differentiator that we’re excited about, and we’re going to continue to push on that. And so I think this is an area that we feel really, really good about.

Amit Daryanani (Analyst at Evercore ISI)

Got it. And then, Kevin, the December quarter gross margin—I’m wondering if you’d spend a bit of time on that. I think if I exclude all the tariff refunds, you started implying gross margin will be down about 140 basis points sequentially at least. Can you separate how much of this is maybe commodity memory inflation vs. mix vs. you called out Siri AI RAM cost as well? Could you just talk about what the different moving parts are as you think about the sequential gross margin?

That would be helpful, thank you.

Kevan Parekh (Chief Financial Officer)

Yeah, sounds good. Let me try to address that for you. So as you alluded, for the December quarter we talked about a gross margin outlook of between 45 and 46%. As you said, when you remove the benefit of the tariff refunds in September, the midpoint of the range is a decline sequentially in the magnitude you mentioned. We expect most of that decline to be driven by higher memory costs. And I’ll give John the mic here to give you perspective on that, and then I’ll take the balance of your question.

John (Chief Executive Officer)

Yeah, let me give you an overall view on memory. What we’re seeing with memory pricing right now is unprecedented. And as we said earlier, in the September quarter we did see higher memory costs as compared to the June quarter, which were partly offset by the benefit of carry-in inventory and lower costs in certain non-memory components. Now for the December quarter, we expect even higher memory costs partly offset by a few factors. So as you know, we changed the price on many of our products, including Mac and iPad at the end of June and iPhone in September, and these price increases provided some offset.

We also expect to see some benefit from carry-in inventory in the December quarter as well, as well as lower costs on certain non-memory components. And looking beyond the December quarter, we see the pricing for memory purchases continuing to increase. As we said before, we do believe we’ll see a decreasing benefit from the carry-in inventory on memory over time. And there’s one more thing I wanted to add. As we work to improve supply, our manufacturing purchase obligations have increased by $33 billion from June to the September quarter, which you’ll see in our annual filing when it comes out tomorrow. Now back to Kevin for the other parts of it.

Kevan Parekh (Chief Financial Officer)

Yeah, you mentioned Siri AI and what I alluded to in the prepared remarks. So as we continue to roll out Siri to more customers, the associated cloud costs will be recognized through Services cost of sales, and consistent with how we’ve always accounted for Maps, Siri, and iCloud, for the devices we sell that include these bundled services, we defer a portion of the revenue recognized over the life of the device. So our hardware deferrals as of the December quarter will reflect the addition of Siri AI.

Both of these items will have an impact on the gross margin. But as always, we look to continue the investments necessary to support the business, and we also see a wide range of ways that AI can contribute to revenue growth over time. So on the product side, we feel AI offers a compelling reason for customers to upgrade and switch in order to get the latest capabilities. And we also feel there’s opportunities across third-party apps and partnerships as well as first-party opportunities, as John highlighted earlier, with the expanded access to server-side features of Siri AI and Apple Intelligence features as well.

Amit Daryanani (Analyst at Evercore ISI)

Really helpful. Thank you.

Suhasini Chandramali (Head of Investor Relations)

Thank you, Amit. Operator, could we have the next question, please?

OPERATOR

Our next question is from Ben Reitzes from Melius Research. Please go ahead.

Ben Reitzes (Analyst at Melius Research)

Thanks. Hey John, my first question, I wanted to ask you about your cash-neutral policy. On one of the previous calls, you guys said that you weren’t going to focus on that anymore and that was no longer the policy. Under your leadership, what do you mean by that? Do you mean, like, you may go to net debt to buy back stock or do some M&A, or go the opposite way and hoard some cash? Again, your thoughts on that would be welcome. Thanks.

Kevan Parekh (Chief Financial Officer)

Yeah, hey Ben, it’s Kevin. Let me take that one. As you know, we did talk about the fact that we were no longer using net cash neutral as a target. I think as we explained on the last call, the last time we talked about that was the fact that we think it makes sense to evaluate our cash and debt position independently and making sure we can optimize that and giving us the right flexibility. We remain committed to our capital allocation philosophy, which is we’re going to invest everything we need to invest in our business and return excess cash to shareholders.

And so we continue to maintain that discipline. And we do think this removal of net cash gives us flexibility to optimize so we can make the right investments for the company.

Ben Reitzes (Analyst at Melius Research)

All right, thanks. And then I wanted to ask about Services. I realize you only guide one quarter at a time, but, you know, from the 8 to 9% when you think long term, I was wondering if you’re willing to say you think whether it can accelerate from there and whether AI could help you launch new services we haven’t thought of yet that are accretive to the growth rate there. Thanks.

Kevan Parekh (Chief Financial Officer)

Yeah, I think, Ben, on that one, you know, I think you heard John talk about a lot of the long-term attributes that we really, you know, feel give us optimism about the long-term opportunity in our Services business. Again, we talked about things like the install base of over half billion active devices. You know, we obviously saw a record number of weekly visitors in the App Store in the September quarter. We also continue to see growth in users who are paying for at least one service, reaching all-time highs in both transacting and paid accounts.

We’re excited about emerging markets. We talked about the launch of Apple Pay in India. We continue to see good momentum in emerging markets in our Services business where we had double-digit growth. And so we continue to feel really bullish about all the different elements as we look ahead over the longer arc of time. And I think as John mentioned, we are continuing to improve the features and reach of existing and new services as well. The example was the expansion of iCloud plans to include Apple TV and Arcade, obviously reaching a lot of new potential subscribers. Apple One Family is another example of that. And so we continue to look for opportunities to grow our Services business.

Ben Reitzes (Analyst at Melius Research)

Thank you.

Suhasini Chandramali (Head of Investor Relations)

All right, thank you, Ben. Operator, could we have the next question, please?

OPERATOR

Our next question is from Wamsi Mohan from Bank of America. Please go ahead.

Wamsi Mohan (Analyst)

Yes, thank you so much. And John, great to have you on the call as CEO. I appreciate the comments on memory. Clearly you’re now competing for memory versus historically from pretty well-capitalized companies who are citing long-term agreements. So my question is, is Apple changing anything in the way that you are procuring memory? How do you think about the progression of memory over time? And if it continues to be headwinds, is pricing also going to remain dynamic and potentially move higher?

And I will follow up.

Sabih Khan (Senior Vice President, Operations)

Good afternoon, Wamsi, this is Sabi. Let me take that one. So, as you know, we have worked with many of our suppliers for decades, and we deeply value their partnership over the years. We know our products would simply not be possible without them, and we look forward to continuing our work together. We’re always working hard to improve supply and, as John said earlier, our manufacturing purchase obligations have increased by 33 billion from the June to the September quarter.

Kevan Parekh (Chief Financial Officer)

And Wamsi, maybe I’ll add here because you asked the question about pricing and how we’re managing it. So look, we’re trying to manage through this with a number of actions. You heard us talk about the fact we’re continuing to pursue lower-cost and non-memory components. John mentioned the fact that we have some benefit of carry-in inventory, and we did reluctantly make the decision to change pricing on a number of our products, starting with the iPad and Mac in the June timeframe and then iPhone more recently in September.

I think what we try to do is evaluate—in doing all that, we evaluate the units, revenue, margin—and we’re really being thoughtful and deliberate at evaluating the short-term and long-term considerations, and we really believe we’re balancing this well.

Wamsi Mohan (Analyst)

Okay. Thanks, Kevin. Thanks, Abby. And I guess my follow-up is on Siri AI in the early days of launching this. Can you give us some sense of how the token consumption associated with Siri AI is being done on device versus Private Cloud Compute versus GCP? And have you started to see any acceleration of usage and, if it does accelerate really fast globally, would it change your outlook on what you spend for compute? Thank you so much.

Kevan Parekh (Chief Financial Officer)

Wamsi, I can take that one as well. So we do envision Siri to have queries that are managed on device and also in the Private Cloud Compute environment that we’ve outlined. The mix of that is still very early days, and so it’s hard to predict exactly what the mix of those costs are going to look like. Obviously, on device it’s very, very efficient—no real costs associated with that. On the server side, we would have some inference costs, and that’s really the connection of the Siri AI–related costs that I mentioned that would be recognized within Services cost of sales.

But I think, again, we’ve just recently launched it and made it available to more users, and so we’re in very, very early stages of understanding the mix of those costs as well as any further requirements we might have on the commitment side.

Wamsi Mohan (Analyst)

Thanks, Kevin.

Suhasini Chandramali (Head of Investor Relations)

Thank you, Wamsi. Operator, could we have the next question, please?

OPERATOR

Our next question is from Somik Chatterjee from JP Morgan. Please go ahead.

Somik Chatterjee (Analyst at JP Morgan)

Hi, thanks for taking my question. And John, Sabi, good to get a chance to talk to you guys, and Kevin, same there. Maybe on the Duo, can I just ask in terms of your thoughts in terms of learnings from the launch of the Duo and the demand that you’ve seen on that front, and what are the sort of supply chain–related issues that you’re facing right now that you probably need to iron out if you’re trying to meet demand on that front any more visibly there?

And when you reach supply–demand balance on the Duo as well will be helpful. And I have a quick follow-up. Thank you.

Sabih Khan (Senior Vice President, Operations)

Hi, Somik, this is Sabi. Let me start with that question. So we’re thrilled with the initial response on the iPhone Duo. iPhone Duo is constrained as of today. The ramp is going well, and we’re working hard to get this revolutionary new product into the hands of our customers as quickly as possible. But at this time, it’s really hard to predict when supply and demand will be in balance.

Somik Chatterjee (Analyst at JP Morgan)

Okay, okay, good. And then maybe, Kevin, for you—just in terms of you have mentioned supply chain constraints impacting September quarter and going into December—but any way to help us think about whether those are getting overall for the company? Are those increasing in terms of magnitude related to the impact on revenue? And if you are willing to quantify those impacts for September and December.

Sabih Khan (Senior Vice President, Operations)

Yeah, let me start with that. This is Sabi. So during the September quarter we experienced supply constraints on iPhone, Mac, and iPad, and this was driven by the high levels of demand. And as we said before, we’re seeing less flexibility in the supply chain than normal. The Q4 constraints were primarily driven by the availability of the advanced nodes our SoCs are produced on. But as we have transitioned more of our lineup to the latest 2-nanometer technology nodes, our constraints on advanced nodes are easing.

And for the December quarter, we expect constraints on Mac and iPad, primarily driven by memory, as demand has been higher than what we expected.

Suhasini Chandramali (Head of Investor Relations)

Thank you. Thank you, Somik. Operator, could we take the next question, please?

OPERATOR

Our next question is from Krish Sankar from TD Cowan. Please go ahead.

Krish Sankar (Analyst at TD Cowen)

Yeah, hi, thanks for taking my question. First one is for Kevin or Sabi. I understand the memory price inflation, Kevin. It seems like it’s probably like one to one and a half or two percentage points. A, is that true? And Sabi, I’m just wondering, is there an availability issue with memory? Are you signing LTAs with memory suppliers so that availability is not an issue even though pricing could still be an issue down the road? And then I had a quick follow-up.

Sabih Khan (Senior Vice President, Operations)

Yeah, thanks, Krish. So as we said earlier, we are continuing to work to improve supply, and you’ll see that our manufacturing purchase obligations have increased by 33 billion from the June to the September quarter.

Krish Sankar (Analyst at TD Cowen)

Got it, got it. And any comments on the margin impact to think about going forward, Kevin?

Kevan Parekh (Chief Financial Officer)

Krish, let me maybe take that one. I know you’d asked about it. So when we look at the margin change from the June quarter to September quarter, and you remove the impact of the tariffs from both the June quarter and September quarter, we saw about a one-point sequential change in margin, and that was driven entirely by memory impacts. Now, we did have some offsets because the gross memory impact was larger than that, but we had some offsets that John talked about earlier driven by the benefit of carry-in inventory, some offsets from non-memory costs, as well as some of the benefits of pricing.

And so, as we talked about, we expect the memory costs to continue to be a challenge for us as we look in the December quarter, and our guide contemplates that right now. If you look at the midpoint, most of the sequential decline we’re expecting for the December quarter we expect to be driven by higher memory costs.

Krish Sankar (Analyst at TD Cowen)

Gotcha. Just a quick follow-up for John. And John, congrats on the first call. It seems like the consumer AI agent space is seeing increasing competition with several app-based options. I’m just wondering, when you look at the agent capability of Siri built into the OS-class platform versus AI agents that are confined within an app architecture, how do you see that evolving?

John (Chief Executive Officer)

Yeah, thanks, Krish. I think, as I said before, Siri right now is primarily request-based, and, as we talked about before, it is built on a modern orchestrator-driven architecture. So we see opportunity to expand its capabilities over time. We think, finally, what’s most important to us is that we’re giving people these capabilities that are private and secure, and we’re really focused on protecting people’s data.

Krish Sankar (Analyst at TD Cowen)

Thanks, John.

Suhasini Chandramali (Head of Investor Relations)

Thank you, Krish. Aubrey, could we take the next question, please?

OPERATOR

Our next question is from David from ues. Please go ahead.

David (Analyst)

Great. Thanks, guys, for taking my questions. And congrats, John. And maybe one to start with, Kevin: if I kind of unpack the comments around supply chain, about availability of components and your outlook for the December quarter, can you help us understand the difference or maybe the delta of quantity versus price across the product lineup? Because it certainly looks like you’re looking at double-digit growth across the iPhone and the Mac business.

And we all know, I think in the industry, that there’s been pretty strong price inflation across the PC/Mac ecosystem, and you guys mentioned that you reluctantly take it as well. So can you help us understand what’s the driving dynamics in that market? And then I have a follow-up.

Kevan Parekh (Chief Financial Officer)

Yeah, David, thanks for the question. This is Kevin. You know, we don’t normally provide that level of detail or color as we look at the outlook, other than to say, you know, again we did guide to the 7 to 10% year on year. And again, just as a reminder, that is on top of a phenomenal December quarter last year where revenue grew 16%. And so, you know, we don’t provide the level of detail, but I would say it’s early to really read price elasticity at this point in time.

You know, the iPhone and Mac were constrained since we made those adjustments, and again, we just recently adjusted the price on iPhone, so it’s really early to assess any elasticity impact at this stage.

David (Analyst)

Great. And then maybe just as a follow-up, going back to the investment cycle, whether it’s agentic, CRE-related—you know, it looks like you guys have, you’re coming off of a year of very aggressive investments in R&D to fund the business going forward and to grow the business. If I just think about the commentary Q1 of fiscal ’27, it certainly sounds like that spending is moderating a little bit. Can you maybe walk through some of the puts and takes in terms of what’s driving that moderation in spend across the operating line items?

Kevan Parekh (Chief Financial Officer)

Yeah, David, again here we don’t break out detail on our outlook, but I would reiterate the fact that for December we do expect OPEX to grow between 11 and 13% year over year, which is driven by increased continued investment in R&D, in particular AI. This growth rate is coming down, as you alluded, from the levels of growth we had in FY26. But, you know, as we’ve said before, we continue to significantly increase our overall investments in AI while continuing to invest in the product roadmap, and our December guide is a continued reflection of that.

John (Chief Executive Officer)

Yeah. And I’ll just add we feel confident that we’re spending to achieve our roadmap.

Suhasini Chandramali (Head of Investor Relations)

Thanks, John. Awesome. Thank you, David. Operator, can we have the next question, please?

OPERATOR

Our next question is from Richard Kramer from Arete Research. Go ahead.

Richard Kramer (Analyst at Arete Research)

Thanks very much, John. Your latest MacBook Pros included more iOS features like touch and Dynamic Island as well as, obviously, Siri AI. Should we anticipate further close linking of macOS and iOS features, maybe even pointing at some point to a single unified OS, either for simplicity or to reduce costs? Thanks.

John (Chief Executive Officer)

Yeah, thanks for the question, Richard. Look, we are very proud of both the Mac and the iPad. And I think what you’ve seen over the years is we’ve really enjoyed the ability to bring features and capabilities across the ecosystem and create really compelling features that span things between Handoff, between iPhone and Mac and iPad. And so when we design the product, we’re looking at how can we make the best version of each and every product. And if you look at what we just did last week with the MacBook Pro, we took a huge leap forward.

These MacBook Pros are better in every way than the ones that came before them, and we’re really proud of that. And so we don’t have any fundamentally different changes that we’re planning right now, nor would we talk about it anyway.

Richard Kramer (Analyst at Arete Research)

Okay, thanks. And then we saw two years of declines in China sales. And then this year, Apple obviously grew a very healthy 28% in FY26. Can you talk through to what you attribute that recovery and whether you think Greater China can sustain these sort of elevated levels of growth which are really leading the company regionally now? Thanks.

Kevan Parekh (Chief Financial Officer)

Yeah, let me give you some color on China. We were very pleased with the performance in Greater China. Right. Revenue was up 21% during the September quarter, which was a quarterly record. The performance was primarily driven by iPhone, where we set a September quarter record, and by Mac, where we saw very strong double-digit growth. And taking a step back, Greater China was up 28% for the full year. Tim and Xavi were just in China meeting with customers and developer partners and it has been wonderful to see the customer reaction to our latest lineup of products, including iPhone Duo.

Our installed base of active devices has reached an all-time high and we had a record year for iPhone upgraders in mainland China. According to a survey from Worldpanel, iPhone models were the top three selling smartphones in urban China. And we think we gained share on iPhone and Mac. You know, a couple other really compelling things. On Mac, we had a record year for both upgraders and customers new to the product. And according to Counterpoint, MacBook Air and MacBook Neo were the top two selling laptop models and Mac mini was the top selling desktop model in the September quarter. So I guess to answer, we think, you know, the success comes from having really great products.

Richard Kramer (Analyst at Arete Research)

Okay, super. Thank you.

Suhasini Chandramali (Head of Investor Relations)

Thank you, Richard. Operator, may we have our last question, please?

OPERATOR

We will now go to Ben Bolling of Cleveland Research. Please go ahead.

Ben Bolling (Analyst at Cleveland Research)

Good evening, everyone. Thanks for getting me in. John, I’m interested in your thoughts with higher device prices, how you think about the environment around affordability programs and the importance to volumes with respect to trade-ins and other options and what Apple can do to encourage more of that independently of funding it yourselves.

John (Chief Executive Officer)

Yeah, look, you know, when we’re building products and then when we’re pricing them, we’re always focused on, you know, building the best products and services in the world and delivering incredible value to our customers. Obviously, as we talked about, you know, these memory prices are unprecedented and that has put pressure on our prices. But it’s been great to see the success of the products. And, you know, we have been investing in programs like the Apple Upgrade Program, which is a great way to help affordability.

And so these affordability programs are definitely an important, important factor.

Ben Bolling (Analyst at Cleveland Research)

And the last one for me would be, when you look at, I guess, the level of supply-demand balance, could you speak to where you see that at? Not necessarily where it is, where you’d like it to be, and how you’re thinking about the opportunity to get there across the portfolio?

Sabih Khan (Senior Vice President, Operations)

Yeah, let me take that one. Ben, this is Sabih. So for the December quarter, we expect constraints on Mac and iPad, and it’s primarily driven by memory. And because the demand has been higher than what we expected and beyond December quarter, we’re not providing an outlook.

Suhasini Chandramali (Head of Investor Relations)

All right, thank you, Ben. A replay of today’s call will be available on Apple Podcasts and at apple.com/investor. Thanks again for joining us today, everyone.

OPERATOR

Once again, this does conclude today’s conference. We do appreciate your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.