Apple CEO John Ternus gets his first report card, and one number is hard to ignore

Apple CEO John Ternus displays the iPhone Duo on Wednesday, Sept. 9, 2026, on the Apple campus in Cupertino, Calif. (AP Photo/Jeff Chiu)

John Ternus’ first report card as Apple CEO beats Wall Street’s numbers, but the holiday quarter looks pricier to deliver. Apple’s revenue for the September quarter, the fourth of fiscal 2026, was $114.5 billion, up 12 percent and ahead of the $113.4 billion analysts expected.

Earnings per share rose 14 percent to $2.10.The good mood lasted until Apple started talking about December. It expects gross margin of 45 to 46 percent, down from 47.9 percent, because memory chips keep getting more expensive, and it guided services growth at 8 to 9 percent, below what analysts wanted. Shares barely moved after the results, fell about 4 percent while the call was on, and settled around 2 percent lower.Ternus took over from Tim Cook on September 1, so this was his first call with analysts, and he did not do it alone. CFO Kevan Parekh was there, and so was COO Sabih Khan, a rare face on an Apple earnings call. Apple closed fiscal 2026 with record revenue of $478.8 billion, up 15 percent, and earnings per share of $8.98.

iPhone sales hit a September-quarter record without a standard iPhone 18

iPhone revenue came in at $57.58 billion, up 17 percent and about $1 billion above estimates. Apple got there with only the iPhone 18 Pro and Pro Max as new models, while the iPhone 17, iPhone Air and 17e filled out the lower end.

So where was the standard iPhone 18? Ternus was asked exactly that and sidestepped it, saying Apple does not comment on future roadmaps.Apple also set September-quarter records for people upgrading their iPhones in the US, mainland China and India.

iPhone Duo demand is running well ahead of supply

Apple’s first foldable went on sale in October, so none of its sales show up in these results. It still took up much of the call. The Duo sold out online within hours, and delivery dates now stretch into next year.

If you did not queue up on day one, you are waiting.Khan told analysts the Duo is “constrained as of today” and that it is hard to predict when supply and demand will balance. Ternus added that a very small percentage of units have come back over display issues, and Apple is replacing them. To widen supply, Apple is deepening its partnership with Perryman, the US titanium producer now supplying the phone.

Siri AI costs money to run, so usage limits are coming

Apple rolled out Siri AI in beta for US English users in September and added French, Japanese, Korean, Portuguese and Spanish in October.

On-device requests cost Apple almost nothing, Parekh said, but server-side requests carry inference costs that land in services cost of sales.Ternus said features that rely on server-side models, including Siri AI and intelligent photo editing, will have usage caps. People who need more will be able to buy expanded access, tied to iCloud+ plans. Apple has not shared pricing or the caps for each plan yet. Ternus also pitched privacy as Apple’s edge, noting that even Apple cannot see the personal data Siri taps into.

Memory costs are now the biggest drag on Apple’s margins

Ternus called current memory pricing “unprecedented.” The 47.9 percent gross margin carried a boost of roughly one percentage point from tariff refunds. Strip that out and margin fell about a point from the June quarter, a drop Apple attributes entirely to memory.It gets harder from here. Parekh said memory costs will keep rising beyond December. Apple raised Mac and iPad prices at the end of June and iPhone prices in September, a move Parekh described as reluctant, and its manufacturing purchase obligations rose by $33 billion in the quarter.The December quarter will feel it. Mac and iPad supply will stay tight because of memory, with demand running higher than Apple expected.

Services set a record, but growth is set to cool

Services revenue rose 10 percent to $31.57 billion, an all-time high and in line with estimates. The App Store drew nearly a billion average weekly visitors, a record, and Apple now counts more than 1.5 billion paid subscriptions.The guidance is where it cools. Apple expects services growth of 8 to 9 percent in the December quarter, below the roughly 11 percent analysts expected.

Parekh pointed to currency headwinds, third-party licensing, weak mobile gaming and a US court ruling that affects link-out transactions on the App Store.

Mac had its best year ever

Mac revenue rose 24 percent to $10.79 billion, driven by the MacBook Neo and MacBook Pro, and Apple says it has never sold more Macs in a fiscal year. Full-year Mac revenue came to $37.9 billion, up from $33.7 billion. Apple also set a September-quarter record for people new to the Mac.The touchscreen MacBook Pro was only introduced last week, so it is not part of these numbers. Asked whether touch means iOS and macOS are heading toward one operating system, Ternus said no fundamentally different changes are planned, and that Apple would not talk about them anyway.Not every product kept up. iPad slipped 10 percent to $6.23 billion and wearables fell 8 percent to $8.3 billion, both against tough comparisons with last year’s product releases.

India keeps setting records for Apple

India set an all-time revenue record for Apple, with the Mac also hitting all-time highs there. Apple Pay recently went live in the country with Axis Bank, which Ternus cited as an example of where services can still grow.Greater China told a more mixed story. Revenue grew 21 percent to $17.54 billion, a quarterly record, but that was about $1 billion short of what analysts had estimated. Parekh said supply constraints played a part.So Ternus walks into the holiday quarter with record sales behind him and memory costs ahead. Apple expects December to be its biggest quarter ever, with revenue up 7 to 10 percent, but higher chip prices will trim gross margin to 45 to 46 percent, and Mac, iPad and iPhone Duo supply will stay tight while demand runs ahead.