Apple Stock Drops Despite Record Fiscal Year Revenue and Earnings
Apple posted its best-ever fiscal year for revenue and earnings per share, driven by strong fourth-quarter sales for both the iPhone and Mac. iPhone revenue rose 17.5 percent from a year earlier to a September quarter record of $57.6 billion, while Mac revenue climbed 24 percent to $10.8 billion, its highest level in four years. Despite the record figures, Apple shares fell in premarket trading after the company warned that rising memory costs would squeeze profit margins in the holiday quarter.
CFO Kevan Parekh pointed to artificial intelligence during the earnings call as a primary vehicle for future sales growth. Parekh cited a wide range of ways the technology can contribute to revenue over time, noting that AI offers a compelling reason for customers to upgrade their devices. Executives mentioned AI and Apple Intelligence 45 times on the call, according to financial research platform AlphaSense, surpassing previous disclosures following the June 2024 unveiling of the revamped Siri.
Capital Spending Rises Marginally While Competitors Pour Billions Into Infrastructure
Apple spent $2.2 billion on capital expenditures last quarter, a total that remains a fraction of the spending reported by major competitors. Amazon reported $77.3 billion in capital expenditures, while Alphabet spent $51.4 billion. Apple’s operating expenses climbed 21 percent to $19.2 billion as the company increased research and development spending directed toward artificial intelligence.
The company relies on a hybrid approach that combines on-device processing, its own servers, and outside artificial intelligence technology. Siri AI utilizes models developed with Google’s Gemini technology, and Apple reportedly plans to let users choose among outside providers for features such as writing tools and image generation. Operating costs for Siri AI will appear under services cost of sales, and Parekh noted that it remains too early to predict how many user requests will ultimately require server-side processing rather than local device execution.
Mac Mini and Mac Studio Hardware Demand Surges for Local Processing
Hardware demand has climbed as customers seek ways to run artificial intelligence locally without incurring ongoing cloud token costs. John Ternus described the Mac lineup as having an “AI moment all its own” during his first earnings call as CEO. Gap is running artificial intelligence entirely on Mac Mini computers for loss prevention across hundreds of stores, while Christie’s uses local models on Mac Studio computers to improve pricing estimates and workflows.
The Mac Mini has attracted a new constituency among developers and hobbyists looking for a relatively affordable way to run models locally. Tim Cook said earlier in the year that customer recognition of Mac capabilities for artificial intelligence and agentic tools was happening faster than Apple had predicted, driving higher-than-expected demand for the hardware.
Subscription Fees and Monetization Plans for Future AI Capabilities
Apple plans to monetize advanced artificial intelligence features through usage tiers. Ternus stated that features relying on server-side models, including Siri AI and intelligent photo editing, will feature usage limits. Customers who require expanded capacity “will be able to purchase expanded access in the future,” he said, noting that iCloud tiers have gradually added broader capabilities and features.
Beyond its own hardware and services, Apple generates revenue when users subscribe to third-party artificial intelligence applications through the App Store. Analytics firm AppMagic estimated earlier in the year that Apple was on pace to bring in more than $1 billion in App Store commissions from generative artificial intelligence apps in 2026, as reported by The Wall Street Journal. That revenue stream faces potential friction as developers like OpenAI begin directing potential subscribers to pay through external websites to bypass App Store commissions.
Frequently Asked Questions About Apple Fiscal Year Results and AI Strategy
Why did Apple shares fall in premarket trading despite record revenue?
Shares dropped because executives warned that rising memory costs would squeeze profit margins during the holiday quarter, overshadowing the record fiscal year revenue and earnings per share.
Which third-party technology does Siri AI utilize for its models?
Siri AI utilizes models developed with Google’s Gemini technology, and Apple reportedly plans to offer users a choice among multiple outside providers for features like writing tools and image generation.