Apple’s services revenue reached $31.573 billion in its fiscal fourth quarter, up from $28.750 billion a year earlier, according to the earnings release it filed with the SEC on 2 November; the release headline says “Services revenue reaches new all-time high”. By our arithmetic the increase was 9.8%, the slowest year-over-year growth in the 13 quarters we computed from Apple’s releases since the September 2023 quarter. A year earlier services grew 15.1%.
Services were 27.6% of Apple’s $114.477 billion of revenue in the quarter but 43.7% of its $54.820 billion of gross margin, by our arithmetic from the statement of operations. Services gross margin was 76.0% of services revenue, against 37.2% for products.
Business Pill · Gross Margin
An evergreen Business Engineer explainer on gross margin. It teaches the general idea only and does not discuss Apple’s results.
The key insight: By our arithmetic, each $1 of Apple services revenue in the September quarter left $0.76 of gross margin after services cost of sales, against $0.37 for each $1 of products: that is how 27.6% of revenue became 43.7% of gross margin.
Update, 2 Nov: what Ternus said about Services and Siri AI. Ternus told CNBC: “We saw strong performance in many service categories, with all-time records in video, cloud services, payment services, and advertising, and a September quarter record in music.” CNBC described the updated Siri AI as a free upgrade and reported that Ternus said Apple has a “lot of opportunities” for monetization, adding: “One example is on the hardware side, right?” and “It offers a compelling reason for upgrading or switching.” CNBC’s report gives no Siri subscription or AI revenue figure. Apple guided total December-quarter revenue up 7% to 10%, CNBC reported (our piece).
Update, 2 Nov: Apple guides Services up 8% to 9% for the December quarter. Parekh said on the call, per the Six Colors transcript: “We expect Services revenue to grow between 8 and 9 percent year-over-year in the December quarter. This contemplates sequential headwinds primarily driven by third-party licensing and foreign exchange.” He also put Services gross margin at 76% in the September quarter, “up 40 basis points sequentially”, and Ternus cited “an installed base of more than 2.5 billion active devices”. Our piece on the outlook.
For the quarter ended 26 September, services cost of sales was $7.593 billion, up 6.9% from $7.106 billion, so services gross margin rose to $23.980 billion from $21.644 billion, up 10.8%, our arithmetic. Products gross margin rose 15.5% to $30.840 billion over the same period.
For fiscal 2026, services revenue was $123.301 billion, up 13.0% from $109.158 billion. Services produced 40.2% of the year’s $233.602 billion gross margin, against 42.2% in fiscal 2025, because products gross margin grew 23.7% while services gross margin grew 14.1%, all our arithmetic. The release does not split services revenue by business.
Year-over-year growth in Apple’s services net sales, September 2023 quarter to September 2026 quarter, our arithmetic from the services lines of its quarterly earnings releases (8-K Exhibit 99.1). The September 2026 quarter grew 9.8%, to $31.573 billion from $28.750 billion.Animated: year-over-year growth in Apple’s services net sales, September 2023 quarter to September 2026 quarter, our arithmetic from the services lines of its quarterly earnings releases.
Thirteen Quarters of Services Growth
Taking the services net sales line from each quarterly release since November 2023, year-over-year growth ran between 11.3% and 16.3% from the September 2023 quarter to the June 2026 quarter, our arithmetic. It was 16.3% in the March 2026 quarter, 12.1% in the June quarter and 9.8% now.
The June 2026 quarter was also the only one in the series in which services revenue fell from the quarter before: $30.739 billion against $30.976 billion in March, $237 million lower, our arithmetic. The July release headline said “iPhone, Mac and Services revenue set new June quarter records”; each of the other twelve releases called services an all-time high or all-time record.
What Apple’s Filings Name as the Drivers
In its fiscal 2025 annual report, Apple said services net sales grew primarily because of higher sales from “advertising, the App Store and cloud services”. Its 10-Q reports for the December 2025 and March 2026 quarters named the same three.
The 10-Q for the June 2026 quarter named two: “advertising and cloud services”. The fiscal 2026 10-K had not been filed when we read the release. The fiscal 2025 annual report says Apple’s advertising services “include third-party licensing arrangements” as well as its own platforms.
Search Licensing and App Store Rules in the Filings
The June-quarter 10-Q says Apple “earns revenue from licensing arrangements with Google LLC” and other companies to offer their search services on its platforms. It says a 2 September 2025 remedies order against Google was appealed by both the DOJ and Google, and that a reversal could bring remedies initially proposed by the DOJ, “such as those prohibiting Google from offering the Company commercial terms for search distribution”.
On the App Store, the same filing says Apple is subject to a US court order “preventing it from imposing any commission or fee on certain purchases that consumers make”, and that the Ninth Circuit has told the district court to amend the injunction to allow a commission. In the EU, Apple lists “new business terms and alternative fee structures” among its changes to comply with the Digital Markets Act.
The 10-Q also says DMA requirements may cause Apple not to launch products and features “such as Siri AI, in certain jurisdictions”. In the fourth-quarter release, chief executive John Ternus mentioned “the all-new Siri AI” alongside the new iPhones; the release gives no AI subscription or AI revenue figure within services.
As we read it, the record and the growth rate measure different things: services revenue was called an all-time high or record in 12 of the 13 releases since November 2023, while its year-over-year growth moved between 9.8% and 16.3%, by our arithmetic.
As we read it, the one change in Apple’s own wording on services is the list of drivers: the App Store was named in the fiscal 2025 10-K and in the 10-Qs for the December and March quarters, and not in the 10-Q for the June quarter.
As we read it, two of the revenue sources Apple’s filings describe, search licensing and App Store commissions, are also the ones its June-quarter 10-Q ties to court proceedings; the filings give neither amount.
John Ternus, Apple CEO, Q4 FY2026 earnings release
“with iPhone reaching a September quarter record and Services reaching an all-time high, capping off our best fiscal year ever”
Three Implications
FOR APP DEVELOPERS Apple’s June-quarter 10-Q says a US court order prevents it from imposing any commission or fee on certain purchases, and lists new business terms and alternative fee structures in the EU.
FOR SEARCH DISTRIBUTION The same 10-Q says that if the remedies order against Google is reversed on appeal, remedies initially proposed by the DOJ could be imposed, such as barring Google from offering Apple commercial terms for search distribution.
FOR INVESTORS IN APPLE’S MARGIN Services produced 43.7% of Apple’s gross margin in the September quarter and 40.2% in fiscal 2026, down from 42.2% in fiscal 2025, by our arithmetic.
The framework puts it this way: “Your product stops being the thing companies buy and becomes the thing other systems assume exists.”
As we read it, Apple’s services line earns from what its installed base connects to: search providers paying under licensing arrangements and developers paying App Store commissions, both described in its filings. The framework was published in December 2025 and does not discuss Apple’s results.
Apple’s releases do not break services into advertising, the App Store, cloud, payments or other lines, so this piece cannot say which part slowed. The filings do not give the amount Google pays Apple. The release does not say why services growth was lower, does not give guidance, and we had not heard the earnings call when this was written. Growth rates, shares and margins are our arithmetic from Apple’s reported figures.
This Week In The AI Supercycle
Anthropic’s Reality Check, The Capital Squeeze, & The New World Order
This week’s issue: for two years the AI build-out was priced as a growth story. This week it started being priced as a credit story.
Apple’s services revenue set a record of $31.573 billion in the September quarter, and it produced 43.7% of Apple’s gross margin on 27.6% of revenue, by our arithmetic. Year-over-year growth of 9.8% was the lowest in the 13 quarters we computed, and Apple’s latest 10-Q listed advertising and cloud, not the App Store, as the drivers.
95,000+ executives read Business Engineer for the AI strategy frameworks cited by ChatGPT, Claude, and Perplexity.
A note on sourcing. Every company figure comes from Apple’s 13 quarterly earnings releases from November 2023 to 2 November 2026, filed with the SEC as Exhibit 99.1 to its 8-K reports, and from its fiscal 2025 10-K and fiscal 2026 10-Q reports, read on EDGAR on 2 November. Growth rates, shares and margins are our arithmetic. We did not contact Apple.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
