Apple Sales Rise 12%; Tariff Refunds Pad EPS: Rapid Earnings Reaction
Key Points
iPhone and Services both set records, and Apple handed shareholders all $28 billion of its operating cash flow.
A one-time tariff refund lifted both gross margin and earnings per share.
A crowded holiday lineup, including the iPhone Duo and a new Siri, now faces a margin test.
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Apple (NASDAQ:AAPL) posted record September-quarter revenue of $114.5 billion for its fiscal 2026 fourth quarter, up 12% from a year ago. Shares were roughly flat in after-hours trading. The sales growth is real, but part of the profit gain is not. Tariff refunds added about a point of gross margin and $0.05 to earnings per share, and without them, earnings grew a bit slower than sales.
Key numbers
- Revenue: $114.5 billion, up 12% year over year.
- Diluted EPS: $2.10, up 14%, including $0.05 from tariff refunds.
- Gross margin: 47.9%, including about 1 percentage point from tariff refunds.
- Operating cash flow: $28 billion, with $28 billion returned to shareholders.
What it means
The refunds are a one-time item, so they belong outside the trend. Take them out, and EPS growth drops to about 11% by our math, a hair below sales growth. Apple's steady buybacks usually push per-share earnings ahead of sales. Trailing sales instead suggests underlying costs kept pace with revenue this quarter.
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The bigger test is the holiday quarter. Apple heads into December with the iPhone Duo, new home hardware, touch on the Mac, and a rebuilt Siri. A launch this broad can pull forward upgrades. But new designs often cost more to build early in their run, which can squeeze margin just as the refund help fades.
What to watch next
Watch gross margin next quarter without refunds. Holding near this quarter's underlying level of about 47% would show the new lineup isn't eating into profit. Also listen for December-quarter guidance on today's call, since the release gives none.
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David Kretzmann has positions in Apple. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
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