Fourth-quarter revenue rose 12% to $114.5bn ($113.4bn expected). iPhone sales led the growth, rising 17% to $57.6bn, and Mac revenue was up 24% to $10.8bn. Services revenue rose 10% to $31.6bn.
Operating profit rose 10% to $35.6bn ($34.6bn expected), helped by strong revenue growth. Gross margin was 47.9%, which included a boost of around 1 percentage point from tariff refunds.
Free cash flow for the full year rose to $136.1bn, up from $98.8bn last year, and supported $86.4bn of share buybacks. Net cash, including longer-term securities, stood at $56.8bn.
For the coming quarter, Apple expects revenue growth of 7-10%, with Services growth of 8-9%, and gross margin between 45-46%.
The shares were down 2.8% in after-hours trading.
Our view
Apple ended a record year with a strong fourth quarter, and its revenue outlook beat expectations. iPhone and Mac are doing most of the work, and demand looks healthy despite ongoing supply shortages. But rising memory costs are now clearly squeezing margins, and Services growth is slowing. The next few quarters look tougher for profits than for sales.
The iPhone cycle remains the key story, and it has little to do with AI. The last major upgrade cycle was in 2021, so this sales boost was overdue. Apple's brand and ecosystem are strong enough that loyal customers keep upgrading. Supply shortages are limiting how much Apple can sell, and stock levels with retailers ended the quarter below target. That adds another positive demand single.
On AI, we like that Apple is focusing on how people use it on its devices rather than racing to build leading models. Hardware sales are strong because of a fiercely loyal customer base, not a compelling AI offering. Still, missing out on consumer AI agents would be a lost opportunity, and the new Siri already looks dated next to some of the agents now available.
The debate has now moved to margins. Memory prices are rising sharply. Apple is passing some of that on through price rises and absorbing the rest itself. That's why it expects gross margin of 45-46% next quarter, down from a peak of 50% a couple of quarters ago. The market expects this to partly reverse in 2028, assuming memory prices ease, though we’re not so sure and see continued pressure for several years.
Services are still a key profit driver, with much higher margins than devices. But growth slowed to 10% and is expected to be 8-9% next quarter. App Store pressures, lower licensing income (including payments from Google) and currency moves are holding it back. A large and growing user base should support growth over the long term, but a recovery may take time.
All in, Apple's main attraction right now is its financial strength. Mammoth free cash flows and no major AI spending plans mean buybacks are continuing at pace (though not guaranteed). Ironically, not having a transformational AI plan has become a positive in the eyes of investors, as big tech peers pour cash into AI infrastructure.
Still, margin pressure lies ahead, and at around 35 times expected earnings, well above the long-term average, the valuation looks fairly full. We think the balance of risk and reward is even.
Environmental, social and governance (ESG) risk
The technology industry is low-risk in terms of ESG, though some segments like Electronic Components are more exposed to environmental risks. Business ethics tends to be a material risk within the tech sector with everything from anti-competitive practices to intellectual property rights weighing. Historically the sector has flown under the radar when it comes to regulatory oversight, but more recently we’ve seen regulators keen to get involved given the high-profile of some of the “big tech” names. Other key risk drivers include labour relations, data privacy, product governance and resource use.
According to Sustainalytics, Apple’s management of ESG risk is strong.
Apple is facing legal pressure on multiple fronts, with lawsuits and investigations over antitrust practices tied to the App Store, Apple Pay, and developer restrictions. That’s led to billions in fines across the EU, UK, and US, while prompting policy changes like lowering fees and allowing third-party app stores in Europe.
Apple key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.