Apple shares fell Monday evening after the iPhone maker delivered a better-than-expected quarter but offered mixed guidance due to a slowdown in services revenue growth and high memory costs eating into margins. Revenue in Apple’s fiscal 2026 fourth quarter ended Sept. 26 increased 12% to $114.48 billion, ahead of the $113.39 billion expected, according to LSEG. Earnings per share (EPS) grew 14% to $2.10, ahead of estimates of $1.99, according to LSEG. Bottom line We remain “own it, don’t trade it” on Apple stock. Shares entered the print on a tear year to date. During an October in which tech stocks were hammered by concerns over AI funding, Apple stood out, hitting a new all-time high late in the month. Apple has emerged as a relative winner in the market as the data center trade has come under pressure. AAPL YTD mountain Apple YTD Shares entered Monday evening up 25% year to date, outperforming Amazon , Alphabet , Meta Platforms , and Microsoft (all fellow Club holdings). While hyperscalers are burning through much of their free cash flow to fund AI investments, with Microsoft a notable exception, Apple continues to generate substantial positive FCF. That allowed Apple to repurchase $24 billion worth of stock in the quarter and $86 billion over the past 12 months. The rally pushed the stock’s valuation to over 35 times next 12 months’ EPS estimates, its highest level in recent memory. That meant the company needed to report a picture-perfect quarter with a strong outlook to avoid profit-taking. Unfortunately, that did not happen. However, Apple’s quarterly results were strong, with revenue, gross margin upside, and Services about in line. The figures were enough to keep the stock unchanged for most of the evening. However, when management provided guidance for the current quarter, the stock fell about 3% in after-hours trading due to downside in gross margins and Services revenue growth relative to Street expectations. The company’s overall revenue guide was better than expected. Apple has managed through rising memory costs for several quarters now, and prices aren’t easing anytime soon. December’s memory costs are expected to be higher than September’s, which was up from the June quarter. Memory costs are outside management’s control and won’t remain this high forever, so our focus is on how Apple is navigating the issue. One way they can offset these higher costs is by raising prices, as it did with Macs and iPads in June and iPhones in September. Apple is also pursuing lower costs on non-memory components. What is in the company’s control is the products and services it introduces, and it appears they have a hit with the launch of the foldable iPhone Duo. The new form factor sold out immediately on its launch date, a sign that there isn’t enough supply to meet the demand. “iPhone Duo is constrained as of today,” Apple COO Sabih Khan confirmed on the earnings call. “The ramp is going well, and we’re working hard to get this…
Read More: Apple’s quarter is not perfect. But with enough to like, we raised our