In results announced on November 2, 2026, Apple reported July–September revenue of $114.477 billion, up 12% year over year and a record for a September quarter. What deserves more attention, however, is the outlook for the October–December quarter. Apple expects revenue to grow 7% to 10% year over year, but gross margin is guided to fall from 47.9% in the September quarter to 45% to 46%. Applying that guidance to the prior-year quarter implies gross profit growth of roughly zero to 5%. Apple has so far absorbed the rise in memory prices through components secured before prices climbed and through higher product prices. That cushion appears to be giving way to a period in which memory costs weigh on profit growth.
Revenue up 7–10%, but gross profit growth may be capped at 5%
The 47.9% gross margin in the September quarter includes a boost of about 1 point from tariff refunds. For the December quarter, CFO Kevan Parekh said on the earnings call that revenue should grow 7% to 10% year over year, gross margin should be 45% to 46%, and operating expenses should be $20.4 billion to $20.8 billion. The revenue outlook already factors in supply constraints, but Apple still expects its highest quarterly revenue ever.
We compared these figures with actual results for the prior-year quarter, which ended December 27, 2025. Revenue then was $143.756 billion and gross profit was $69.231 billion. Applying 7% to 10% growth puts December 2026 quarter revenue at roughly $153.8 billion to $158.1 billion. Multiplying by the low and high ends of the gross margin range, 45% and 46%, gives gross profit of about $69.2 billion to $72.7 billion. That is growth of roughly zero to 5% from the prior-year quarter.
| Item | Prior-year quarter (Dec. 2025) | Estimate based on Dec. 2026 quarter guidance |
|---|---|---|
| Revenue | $143.8B | $153.8B–$158.1B |
| Gross margin | 48.2% | 45%–46% |
| Gross profit | $69.2B | $69.2B–$72.7B |
| Operating expenses | $18.4B | $20.4B–$20.8B |
| Operating income | $50.9B | $48.4B–$52.3B |
Operating expenses are expected to rise about 11% to 13% year over year. Subtracting the top-end operating expense figure of $20.8 billion from the low-end gross profit of $69.2 billion yields operating income of about $48.4 billion. Subtracting the low-end operating expense figure of $20.4 billion from the high-end gross profit of $72.7 billion yields about $52.3 billion. Against $50.9 billion a year earlier, that is a range from a decline of about 5% to an increase of about 3%. In other words, some combinations produce operating income below last year's even with revenue up 7% to 10%.
The slowdown in profit growth is even clearer compared with the latest quarter. September-quarter gross profit was $54.82 billion, up 13.4% from $48.341 billion a year earlier. If December-quarter gross profit comes in as estimated here, growth of 0% to 5% would be less than half the September pace. These figures, however, are a mechanical pairing of the low ends and high ends of Apple's guidance ranges. Apple has not published specific forecasts for gross profit or operating income. Apple's outlook also assumes that tariff rates and trade policy remain unchanged from the time of the earnings call.
Memory costs pull down margin as the benefit of pre-secured inventory shrinks
According to Parekh, the September-quarter gross margin excluding the tariff refund fell about 1 point from the April–June quarter. The decline was similar at the company level and in products, and he said memory cost increases were the only cause. In reality, the drag from higher memory prices was larger than 1 point, but Apple was able to offset part of it by using components bought before prices rose, cutting costs on non-memory parts, and raising product prices.
The December-quarter outlook suggests the impact of rising memory prices will intensify. Excluding the roughly 1-point tariff refund benefit, the underlying September-quarter gross margin was about 46.9%. Against that, the midpoint of the December-quarter guidance is 45.5%, a decline of about 1.4 points. Across the full 45% to 46% range, the decline is about 0.9 to 1.9 points. Asked by an analyst about a drop of this size, Parekh acknowledged that the midpoint implies a similar decline and said most of it comes from higher memory costs. He also cited launch costs tied to Siri's AI features as another factor weighing on gross margin.
However, memory prices alone cannot explain the entire margin decline. The company attributes the roughly 1.4-point drop mainly to memory costs when moving from about 46.9% in the September quarter, excluding the refund, to the 45.5% guidance midpoint. Compared with 48.2% a year earlier, the December-quarter gross margin would be 2.2 to 3.2 points lower, and not all of that gap can be put down to rising memory prices.
One factor that has softened the impact of higher memory prices is carry-in inventory, meaning components secured before prices rose. While Apple builds products from this inventory, its cost of sales is lower than if it bought parts at current market prices. CEO John Ternus said the cost-containment benefit from carry-in inventory will remain in the December quarter. But memory purchase prices are expected to keep rising beyond that quarter, and he explained that the benefit of pre-secured inventory will diminish over time.
Apple's inventories have in fact grown sharply. At the end of September, inventories were $14.541 billion, about 2.5 times the $5.718 billion of a year earlier. Dividing inventories by quarterly cost of sales and multiplying by 91 days gives estimated days of inventory that rose from 9.6 days a year earlier to 22.2 days. However, this figure is calculated from total inventories, including components and finished goods, and does not show the volume or days of memory inventory alone. Apple does not disclose a breakdown of its memory inventory.
Manufacturing-related purchase obligations also rose by $33 billion from the June quarter to the September quarter. The earnings call did not say how much of that corresponds to memory procurement. Apple said it plans to file its annual report on Form 10-K the day after the call, so whether it discloses additional information on procurement is also worth watching.
The key point is that the 45% to 46% gross margin outlook for the December quarter was issued while the cost benefit from carry-in inventory still remains. Apple itself says memory purchase prices will keep rising and the benefit of pre-secured inventory will gradually fade. Whether the current gross margin can be maintained beyond the December quarter will therefore have to be checked against the next quarter's outlook.
Is Apple's guidance conservative? The focus is December-quarter gross margin
The strongest counterargument to this view is that Apple's guidance may be set more conservatively than actual results. In July, Apple guided September-quarter revenue growth of 9% to 11% and gross margin of 47% to 48%. Actual revenue growth was 12%, above the top of the company's range. Gross margin landed at 47.9%, near the top of the range. A similar upside surprise in the December quarter is quite possible.
Still, even if revenue beats guidance, a lower gross margin will limit gross profit growth. Suppose December-quarter revenue growth reaches 12%, the same as the September quarter, but gross margin stays at the top of Apple's range, 46%. Gross profit would then be about $74.1 billion. That is an increase of about 7% from the prior-year quarter, below the 12% revenue growth rate. In short, even if sales grow faster than expected, the pattern in which a lower gross margin holds back profit growth does not change.
On the other hand, an improvement in the products gross margin should not be overlooked when assessing Apple's earnings power. The products gross margin in the September quarter was 37.2%, above the 36.2% calculated from the prior-year quarter's results. However, the 37.2% includes a boost of about 1 point from the tariff refund, so excluding it the figure is roughly in line with a year earlier. That result is consistent with the company's explanation that it has absorbed the impact of higher memory prices through higher product prices and pre-secured inventory.
Future results could overturn this view. Specifically, if the December-quarter gross margin exceeds the top of Apple's 46% range and the outlook for the March quarter also holds at 46% or higher, the view that memory price increases are starting to squeeze profit growth would weaken. The prior-year December-quarter results were announced on January 29, so if the usual schedule holds, the first chance to test this will come around late January 2027.
Trends in the Japanese market are also worth watching. Revenue in Japan in the July–September quarter was $6.54 billion, down 1.4% from $6.636 billion a year earlier. Of the five regions Apple reports, Japan was the only one with a revenue decline. Greater China grew 21.0% and Rest of Asia Pacific grew 15.0%. These are dollar-denominated figures, and neither the earnings materials nor the call transcript gives a specific explanation for the decline in Japan. Whether Japan returns to year-over-year growth in the December quarter is another item to check in the next results.
Apple says it increased manufacturing-related purchase obligations by $33 billion to improve supply. If this procurement eases supply constraints and reduces lost sales opportunities, gross profit could exceed the upper end of the estimate here. Conversely, if gross margin approaches the 45% low end of the guidance, that would support the view that memory price increases are squeezing profit more. Going forward, not only revenue growth but also the trend in gross margin and how long inventory-driven cost containment lasts will be key indicators for judging Apple's earnings power.