Apple Earnings Review: Revenue Beats Estimates as Memory Crunch Threatens Margins

Apple released its fiscal fourth-quarter earnings report on Nov. 2. Here’s Morningstar’s take on Apple’s earnings and stock.

Key Morningstar Metrics for Apple

• Fair Value Estimate: $290.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Apple’s Fiscal Q4 Earnings

Apple’s September-quarter revenue beat guidance, rising 12% year on year to $114 billion. Gross margin rose 70 basis points year on year to 47.9%, with a one-time tariff refund benefit. Revenue for iPhone rose 18% year on year. December revenue is guided to high-single-digit year-on-year growth.

Why it matters: Results were good, but the biggest stories are margins and supply. Margins are pressured by memory cost inflation, partially offset by Apple’s price increases. We expect price to lead revenue growth in 2027. Revenue is also constrained by limited supply of logic and memory chips.

• iPhone growth looks to be decelerating after 2026, but remaining positive. We expect unit sales to be flat in 2027, with an evolutionary iPhone 18 family and higher prices. We expect high-single-digit iPhone revenue growth in 2027, almost entirely from pricing.
• We like Apple’s artificial intelligence strategy, and agree with management that Apple devices are the premier place for consumers to use AI. We also like that the firm is foregoing the frontier model race to focus on integrating AI into features users will love. Still, we doubt AI can materially raise unit sales.

The bottom line: We maintain our $290 fair value estimate for wide-moat Apple, with our long-term thesis for moderate long-term growth and margin expansion intact. Shares are up 5% since earnings and, trading at record highs, appear moderately overvalued to us.

The following are excerpts from Morningstar’s company report on Apple.

Fair Value Estimate for Apple

With its 2-star rating, we believe Apple’s stock is moderately overvalued compared with our long-term fair value estimate of $290 per share. We project 8% compound annual revenue growth for Apple through fiscal 2030. The iPhone will be the most significant contributor to revenue over our forecast, and we project 8% growth in iPhone revenue over the next five years. Services are Apple’s next biggest revenue contributor over our forecast, and we forecast more than 10% services revenue growth over the next five years.

We forecast gross margins to rise past 50% in fiscal 2031, up from 49% in fiscal 2026. Operating margins rise with gross margins in our forecast, reaching 36% in fiscal 2031 from 33% in fiscal 2026.

Read more about Apple’s fair value estimate.

Economic Moat Rating

We assign Apple a wide economic moat, stemming from customer switching costs, intangible assets, and a network effect. In our view, Apple’s iOS ecosystem extends far-reaching, sticky tendrils into customers’ wallets, entrenching customers with software capabilities and integration across disparate devices such as the iPhone, Mac, iPad, Apple Watch, and more. We also see immense design prowess at Apple, most impressively in the deep integration of hardware, software, and semiconductors to create best-in-breed products. Finally, we see a virtuous cycle between Apple’s affluent customer base and vast ecosystem of developer partners. These moat sources elicit great profitability and returns on invested capital. In our view, Apple can leverage these moat sources into continued economic profits over the next 20 years, more likely than not.

Read more about Apple’s economic moat.

Financial Strength

We expect Apple to focus on using its immense cash flow to return capital to shareholders while increasing its net leverage over the medium term. Apple has a terrific balance sheet, with a net cash position of $57 billion as of September 2026. Apple supplements its strong balance sheet with impressive cash flow. Over the past five years, the firm has averaged more than $100 billion in free cash flow generation annually, and we forecast significant free cash flow growth over the forecast period.

Read more about Apple’s financial strength.

Risk and Uncertainty

We assign Apple a Medium Uncertainty Rating. We see the firm’s greatest risk as its reliance on consumer spending, for which there is great competition and cyclicality. Apple is at constant risk of disruption, just as the iPhone disrupted BlackBerry in the budding smartphone market. We view the firm defending against this risk, however, by introducing new form factors (like a watch and an augmented reality headset) and selling an ecosystem of software and services on top of hardware.

We also see geopolitical risk arising from Apple’s supply chain. It is heavily dependent on China’s Foxconn and Taiwan Semiconductor, or TSMC, for its assembly and chip production, respectively. Apple also faces regulatory scrutiny in the United States and the European Union.

Read more about Apple’s risk and uncertainty.

AAPL Bulls Say

• Apple offers an expansive ecosystem of tightly integrated hardware, software, and services that locks in customers and drives strong profitability.
• We like Apple’s move to in-house chip development, which we think has accelerated its product development and increased its differentiation.
• Apple has a stellar balance sheet and returns substantial cash flow to shareholders.

AAPL Bears Say

• Apple is prone to consumer spending and preferences, which creates cyclicality and opens the firm up to disruption.
• Apple’s supply chain is highly concentrated in China and Taiwan, which opens up the firm to geopolitical risk. Attempts to diversify into other regions may pressure profitability or efficiency.
• Regulators have a keen eye on Apple, and recent regulations have chipped away at parts of Apple’s sticky ecosystem.

This article was compiled by Colin Laidley.