Apple Reports on 2 November: Gross Margin, Not iPhone Demand, Decides the Fiscal Fourth Quarter

Apple reports results for its fiscal fourth quarter, the three months to 27 September 2026, on Monday 2 November after the market close. The quarter carries only the first weeks of the new iPhone cycle, so the headline numbers will matter less than one line further down the income statement: gross margin. Apple has added almost four points of gross margin in a year, and the consensus EPS figure suggests the street expects some of that to slip.

What the street expects

Consensus calls for EPS of $1.99 on revenue of $113.39 billion. Against the same quarter last year, that is revenue growth of about 11% and EPS growth of under 8%.

The gap between those two growth rates is the first thing to notice. Apple's diluted share count fell from 14.86 billion in the September 2025 quarter to 14.71 billion in the June 2026 quarter, so buybacks alone should lift EPS faster than net income. For EPS to grow more slowly than revenue anyway, the consensus has to assume a thinner net margin. Simple arithmetic on the consensus and the June-quarter share count puts implied net income near $29.3 billion, a net margin of roughly 25.8%, against 26.8% in the year-ago quarter.

The track record

Apple has beaten the EPS consensus in each of the last four quarters, but the size of its revenue beats has varied a lot:

• Q3 FY2026 (June): EPS $2.02 vs $1.89 expected; revenue $109.42B vs $109.04B (+0.3%).
• Q2 FY2026 (March): EPS $2.01 vs $1.95; revenue $111.18B vs $109.46B (+1.6%).
• Q1 FY2026 (December): EPS $2.85 vs $2.67; revenue $143.76B vs $138.39B (+3.9%).
• Q4 FY2025 (September): EPS $1.85 vs $1.73; revenue $102.47B vs $102.23B (+0.2%).

The pattern is clear. The September and June quarters have come in close to the revenue consensus, and the EPS beats came from margin. Revenue growth has been steady: about 16% year on year in each of the last three reported quarters, led in June by iPhone sales of $54.25 billion (up 21.7%) and Services revenue of $30.74 billion (up 12.1%).

The line that decides the quarter

Gross margin has improved in every reported quarter of the past year, based on the filed income statements:

That run-up explains the EPS beats. It is also why the consensus now looks cautious: it appears to price in some of the gain reversing. Recent coverage has raised the risk directly. One 24/7 Wall St. piece set rising memory costs against Services growth as forces that could pull the stock in opposite directions, and a MarketBeat headline noted that the foldable iPhone sold out in minutes while Wall Street still had questions.

Operating costs are the second variable. In the June quarter, operating expenses rose 22.9% year on year to $19.08 billion. Research and development spending grew faster, up 32.3% to $11.73 billion, outpacing revenue growth of 16.4%. If gross margin holds near 50% and spending growth stays at that pace, operating margin would be roughly stable. A margin back in the 47% range, as in the year-ago quarter, would leave little room for the usual beat.

Services makes up a growing share of revenue and is the main structural support for the margin. The year-ago September quarter had $28.75 billion of Services revenue. How far that figure has grown will be the clearest sign of whether the margin gains last.

Valuation and the Maz Rating

At $347.10, Apple trades at about 39.7 times trailing earnings with a market value of $5.07 trillion, near its 52-week high of $351.73. The analyst price-target consensus is $340.14, slightly below the current price, with a median of $355 and a range of $245 to $400.

Apple carries a Maz Rating of 4.08 out of 5 (Strong Buy). The overall score hides a wide spread across factors: Profitability scores 4.97 and Momentum 4.27, while Financial Health is 3.23, Growth 2.68 and Valuation 1.34. In short, the rating credits Apple's returns and recent share-price strength and marks the stock down on price. That leaves the shares exposed to any sign that margins have peaked.

Bottom line

Revenue and iPhone volume will draw the headlines on 2 November, but the September quarter has historically come in close to consensus on sales. The real test is whether gross margin holds near the 50% reached in June. If it does, the modest 7.6% EPS growth in the consensus looks conservative. If it slips back toward last year's 47%, the consensus is roughly right and the track record of EPS beats is at risk. Rising operating costs, R&D in particular, decide how much of the gross margin reaches the bottom line.

This is a preview based on published consensus and filed accounts, not investment advice.