Apple Inc. (AAPL Quick QuoteAAPL - Free Report) executives outlined a cautious outlook for margins despite strong product demand during the fourth-quarter fiscal 2026 earnings call. Rising memory costs, supply constraints and artificial intelligence investments dominated management commentary.

New chief executive officer (CEO) John Ternus emphasized product innovation and artificial intelligence (AI) integration, while the chief financial officer (CFO) Kevan Parekh detailed profitability pressures and the company's expectations for the December quarter.

AAPL Projects Record December Quarter Revenue

Kevan Parekh expects December-quarter revenue to grow 7% to 10% year over year, reflecting supply constraints. Management anticipates the highest quarterly revenue in Apple's history.

Services revenues are projected to increase 8% to 9%, while gross margin is expected to be between 45% and 46%. Operating expenses are forecast at $20.4 billion to $20.8 billion.

The outlook assumes unchanged tariff policies and no deterioration in global macroeconomic conditions. Apple's September-quarter revenues reached $114.5 billion, exceeding the Zacks Consensus Estimate of $112.95 billion. Earnings per share of $2.05 also surpassed the Zacks Consensus Estimate of $1.98.

Apple Inc. Price, Consensus and EPS Surprise

Apple Inc. price-consensus-eps-surprise-chart | Apple Inc. Quote

Apple Faces Rising Memory Costs and Margin Pressure

Memory inflation emerged as a central concern during the call. The CEO described current memory pricing as unprecedented and expects further increases beyond December.

During the September quarter, gross margin reached 47.9%, benefiting approximately 1 percentage point from tariff refunds. Parekh attributed most of the anticipated December-quarter sequential margin decline to higher memory costs.

Management has raised prices across several product categories, including Mac, iPad and iPhone, to offset component inflation. Inventory acquired at lower costs and savings on non-memory components provide additional relief, although Ternus expects inventory benefits to diminish.

AAPL Highlights iPhone Demand Amid Supply Constraints

Ternus highlighted strong customer interest in the newly introduced iPhone Duo and iPhone 18 Pro lineup. September-quarter iPhone revenues increased 17% year over year to $57.6 billion.

During the analyst discussion, JPMorgan questioned iPhone Duo availability and production challenges. Chief operating officer Sabih Khan confirmed that supply remains constrained, although production is progressing. Management offered no timeline for achieving supply-demand balance.

Khan explained that September-quarter constraints primarily involved advanced semiconductor manufacturing capacity. These restrictions are easing as Apple transitions products to 2-nanometer technology. However, memory availability is expected to constrain Mac and iPad production during December.

Apple Expands Siri AI Capabilities and Monetization

Ternus positioned Siri AI as a strategic component of Apple's ecosystem, emphasizing personalized assistance and privacy protections. The company introduced Siri AI in September and subsequently expanded language availability.

During questions from Goldman Sachs, Ternus explained that expanded access to server-based AI features will eventually become available for purchase. These capabilities include Siri AI and intelligent photo editing.

Kevan Parekh acknowledged that server-based AI processing introduces additional costs recognized within services cost of sales. Management also expects Siri AI-related revenue deferrals to affect margins. The company continues increasing research and development investment, particularly in AI.

AAPL Services Growth Faces Regulatory and FX Headwinds

Services revenues increased 10% year over year to a record $31.6 billion, supported by growth across cloud, payments, advertising and video offerings.

During Morgan Stanley's questioning about services durability, Parekh identified foreign exchange, third-party licensing and mobile gaming as pressure points. He also discussed App Store business-model changes and an existing U.S. court ruling affecting external transactions.

Ternus emphasized Apple's installed base exceeding 2.5 billion active devices as a foundation for expansion. Paid subscriptions exceeded 1.5 billion, while services initiatives include expanded iCloud+ offerings and Apple Pay's introduction in India.

Apple Maintains Investment and Capital Allocation Focus

Management's overall message balanced confidence in customer demand with caution around costs and product availability. Ternus reiterated Apple's commitment to its product roadmap and AI development.

CFO Kevan Parekh reaffirmed the strategy of funding business investments and returning excess cash to its shareholders. The company returned $28 billion during the quarter and no longer targets a net cash-neutral position, allowing greater capital allocation flexibility.

What AAPL's Zacks Rank and Style Scores Indicate

AAPL currently carries a Zacks Rank #3 (Hold), indicating a neutral near-term outlook based on earnings estimate revisions. Its Growth Score of B and Momentum Score of B reflect favorable characteristics in those respective investment styles.

However, the Value Score of F indicates weak valuation attractiveness, while the VGM Score of C reflects a less compelling combined profile. The stock does not currently meet the preferred combination of a Zacks Rank #1 (Strong Buy) or 2 (Buy) with an A or B Style Score. Its Zacks Rank could change as analysts revise earnings estimates following the latest results.

You can see the complete list of today’s Zacks #1 Rank stocks here.