Apple Shares Fall 3% as Ternus Forecasts Lower Margins

Apple shares fell 3% in extended trading after the company reported its fiscal fourth-quarter results on November 2, 2026, beating revenue and earnings expectations but missing iPad sales estimates and issuing a weaker-than-expected gross margin forecast. The results marked the first earnings report under CEO John Ternus, who succeeded Tim Cook on September 1.

According to LSEG data, Apple posted earnings of $2.10 per share, exceeding the analyst consensus of $1.99. Revenue reached $114.48 billion, above the estimated $113.39 billion and up 12% from $102.5 billion a year earlier, according to the company's statement.

However, Apple's outlook disappointed investors. The company projected gross margins of 45% to 46% for the December quarter, below the 46.3% analyst average. Revenue growth is expected to reach between 7% and 10%, compared with the 6.1% consensus estimate.

iPhone revenue remained Apple's largest business, accounting for slightly more than half of quarterly sales. The segment increased more than 17%, although the reported figures included only eight days of iPhone 18 Pro sales. The iPhone Duo flagship did not reach stores until after the reporting period.

Ternus described the financial performance as a milestone for the company, despite challenges involving component availability and currency movements.

"best fiscal year ever" said Ternus, describing Apple's completed financial year in a company statement.

In an interview with CNBC's MacKenzie Sigalos, Ternus addressed the factors behind the company's growth, including supply limitations and foreign exchange pressures.

"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," Ternus said.

The company also faced higher memory expenses during the quarter. Apple confirmed that memory costs increased compared with the June quarter, while prices for iPhones had risen by $100 following broader price adjustments in June.

"reluctantly" was how Ternus characterized Apple's decision to increase prices, which helped offset rising component expenses.

Apple also reported that tariff refunds contributed 5 cents to earnings per share.

During his first quarterly earnings call as CEO, Ternus highlighted the company's recent product launches, including new iPhones, Home products and touchscreen laptops.

"This is an amazing time at Apple," Ternus said.

He also discussed the company's recent product development schedule and the scale of its hardware releases.

"We just completed one of the most prolific launch periods in our history."

Apple introduced an updated Siri AI during the quarter as a free software upgrade for compatible iPhones. Investors have been examining whether the company could generate additional revenue from artificial intelligence through subscriptions, services or hardware upgrades.

Ternus identified hardware sales as one potential source of commercial value from the company's AI developments.

"a lot of opportunities" was how Ternus described Apple's potential to monetize its artificial intelligence capabilities.

He pointed to the relationship between new software capabilities and demand for upgraded devices.

"One example is on the hardware side, right?" Ternus said.

He explained that new capabilities could encourage customers to purchase newer products or move to Apple's ecosystem.

"It offers a compelling reason for upgrading or switching."

Apple's services division also remained an important part of its business, although growth slowed below 10% during the September quarter. According to the reported results, this represented the segment's slowest expansion since 2022.

The division includes iCloud storage, App Store fees, AppleCare warranties and licensing revenue from Google for its search engine on Safari.

Ternus highlighted several areas of strength within the services business, including video, cloud services, payments, advertising and music.

"We saw strong performance in many service categories, with all-time records in video, cloud services, payment services, and advertising, and a September quarter record in music," Ternus told CNBC.

Meanwhile, Apple's capital expenditure remained relatively limited compared with major technology companies investing heavily in artificial intelligence infrastructure. The company reported $2.24 billion in capital expenditure, below the LSEG estimate of $3.33 billion.

Chief Financial Officer Kevan Parekh provided the December-quarter financial outlook during the earnings call. He projected revenue growth of 7% to 10% and services revenue growth of 8% to 9%, alongside the expected gross margin range of 45% to 46%.

Apple's recent expansion into connected home products also featured in its broader product strategy. In August, the company announced HomeView, an AI-powered display designed to provide personalized information for multiple household members.