Apple slips 3% as Ternus's debut earnings bring a soft margin guide

Apple's first earnings report under new CEO John Ternus landed with a thud after hours. Revenue beat expectations for the fiscal fourth quarter, but iPad sales came up short and the company's margin forecast for the holiday quarter disappointed. The stock slid 3% in extended trading.

CFO Kevan Parekh told analysts on the call to expect December-quarter revenue growth of 7% to 10% year over year, ahead of the 6.1% analysts polled by LSEG were modeling. The problem was profitability: Apple guided gross margin to a range of 45% to 46%, below the 46.3% average estimate. Services sales, the company's profit engine, are expected to grow 8% to 9% — a sign of slowing momentum.

It's Ternus's first report since taking the helm on Sept. 1, succeeding Tim Cook. He kept the tone upbeat, calling it Apple's "best fiscal year ever" and telling CNBC's MacKenzie Sigalos that growth came despite supply constraints and foreign exchange headwinds. "I think at this point, with everything we've achieved, it just feels like we've never been more confident that the best is yet to come," he said. Ternus also acknowledged the company "reluctantly" raised prices — including a $100 bump on iPhones in June — which helped offset rising component costs amid a global memory crunch.

On the product side, the iPhone did the heavy lifting again, with sales jumping more than 17% and accounting for just over half of Apple's revenue. That quarter only captured eight days of iPhone 18 Pro sales, and the new flagship iPhone Duo didn't reach shelves until after the period closed. Mac was the standout grower, up nearly 24%, reaching $10.79 billion, which Ternus credited to the low-cost MacBook Neo and the MacBook Pro. iPad was the laggard, contracting more than 10% to $6.22 billion, while the home and accessories category — headphones, speakers, Apple TV gear — slipped nearly 8%, landing at $8.3 billion and missing the $9.06 billion analysts expected.

Gross margin came in at 47.9%, a sharp drop from last quarter's 50.1%, though it got roughly 1 percentage point of help from tariff refunds, which also added 5 cents to earnings per share. Services grew less than 10% during the September quarter — its slowest expansion since 2022 — even as Ternus pointed to all-time records in video, cloud, payments and advertising. Greater China revenue grew 21%, reaching $17.53 billion on the back of iPhone and Mac demand, and capital spending stayed lean at $2.24 billion, well under the $3.33 billion estimate.

Now the focus shifts to whether Apple can turn its AI push into money. The company shipped an updated Siri AI during the quarter as a free upgrade, and Ternus said there are a "lot of opportunities" to monetize it — including as a reason for people to upgrade hardware. Apple also has its new HomeView display device, announced in August, as a bet on the smart home. With memory costs climbing, Wall Street will be watching that margin guidance closely.