10-Q · May 1, 2026
In Q2 2026, Apple reported strong financial results with total revenue of $111.2 billion, exceeding expectations and marking a 17% increase from the previous year. Diluted EPS came in at $2.01, representing a…
Earnings analysis · 10-K
AAPL earnings analysis
Filed November 3, 2026 · Our reading of the company's report
The latest report
Apple delivered a strong fiscal 2026, with revenue up 15% to $478.834B, diluted EPS up to $8.98, gross margin expanding to 48.8% and approximately $136.056B of free cash flow. Growth broadened geographically, led by a…
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Apple delivered a strong fiscal 2026, with revenue up 15% to $478.834B, diluted EPS up to $8.98, gross margin expanding to 48.8% and approximately $136.056B of free cash flow. Growth broadened geographically, led by a 28% Greater China recovery, while iPhone and Services remained the principal product drivers. The outlook is strategically positive through continued iPhone, Services and AI investment, but rising memory costs, concentrated manufacturing, App Store regulation and substantial AI infrastructure spending create meaningful downside risks; the filing provides no quantitative forward guidance.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
Reported figures
- Earnings per share
- $8.98
What stood out
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Growth accelerated materially
Apple’s multi-year growth accelerated: revenue increased from $391.035B in 2024 to $416.161B in 2025 and $478.834B in 2026, while diluted EPS rose from $6.08 to $7.46 and $8.98. Fiscal 2026 revenue grew 15%, versus 6% in 2025.
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iPhone and Services led growth
iPhone remained the primary growth engine, with fiscal 2026 sales of $254.098B, up 21% year over year, driven by higher Pro-model sales. Services also expanded 13% to $123.301B, led primarily by advertising and cloud services.
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Margins expanded despite cost pressure
Profitability improved significantly: total gross margin increased to 48.8% in 2026 from 46.9% in 2025 and 46.2% in 2024, while operating income rose 19% to $158.063B. Product margin benefited from mix and tariff refunds, partly offset by higher costs including memory.
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Record cash generation funded returns
Operating cash flow reached $145.097B in 2026 versus $111.482B in 2025 and $118.254B in 2024; less $9.041B of property, plant and equipment purchases, this implies approximately $136.056B of free cash flow. Cash generation supported $85.8B of share repurchases and $15.7B of dividends during 2026.
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AI and hardware roadmap advanced
The product roadmap included iPhone 18 Pro Max and iPhone 18 Pro, iPhone Duo, Apple Watch Series 12, Apple Watch Ultra 4, AirPods 5 and Siri AI in fiscal 2026. R&D investment increased 32% to $45.765B, primarily due to infrastructure, artificial intelligence and headcount-related costs.
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China recovery broadened growth
All geographic regions grew in 2026, with the strongest increase in Greater China at 28% to $82.378B, followed by Rest of Asia Pacific at 18% and Europe at 15%. China’s recovery contrasts with its 4% decline in 2025, while iPad sales were flat at $27.929B and Wearables, Home and Accessories were flat at $35.577B.
What to watch
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Memory shortage threatens margins
Apple reports industry-wide supply constraints and rising costs for advanced semiconductors, memory and storage and expects these trends to intensify for memory and storage. Manufacturing purchase obligations totaled $89.7B as of September 26, 2026, including $82.7B payable within 12 months, creating exposure if component prices rise or demand changes.
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AI investment and compute risk
AI has become a larger cost, infrastructure and execution risk: R&D increased 32% to $45.765B, primarily due in part to AI infrastructure, while the Company has made significant AI investments and commitments to secure data-center capacity, components, equipment and energy resources. The filing warns that insufficient compute or storage could delay features or cause significantly higher costs.
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App Store regulation threatens Services
App Store regulatory exposure remains material and could directly affect Services economics. The European Commission previously imposed a €500M fine under the DMA, and a separate DMA investigation could result in fines of up to 10% of Apple’s annual worldwide net sales; U.S. restrictions on commissions for external-link purchases could also reduce revenue and gross margin.
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Geopolitical and tariff exposure
Apple remains exposed to concentrated international manufacturing and trade risk: substantially all hardware products are manufactured by outsourcing partners primarily in China mainland, India, Japan, South Korea, Taiwan and Vietnam. The 10-K states that tariffs or trade restrictions can increase component costs, limit availability and require supply-chain restructuring, while Apple’s international sales represent a majority of total net sales.
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China rebound may be vulnerable
Greater China’s strong recovery increases concentration sensitivity: regional sales rose 28% to $82.378B in 2026 after declining 4% in 2025, and China represented $82.378B of total sales. A reversal in Chinese demand, currency conditions or trade restrictions could therefore have a material effect on growth.
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Large uncertain tax positions
Tax uncertainty remains sizable: gross unrecognized tax benefits were $22.5B at September 26, 2026, of which $10.6B would affect the effective tax rate if recognized. The 2026 effective tax rate also increased to 17.0% from 15.6% in 2025.
Management's outlook
The 10-K provides no quantitative fiscal 2027 revenue or EPS guidance. Management states that memory and storage supply constraints and rising costs are expected to intensify; annual outlook was otherwise deferred to the earnings press release/call.
Earlier filings 1
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.