Apple’s gross profit rose $38.4 billion to $233.6 billion in fiscal 2026, and its products business, which covers iPhone, Mac, iPad and wearables, supplied $26.8 billion of that rise, or 70%, by our arithmetic from its statement of operations. Services supplied $11.6 billion, or 30%.
Research and development spending rose $11.2 billion in the same year, which by our arithmetic absorbed 29% of the gross profit gain. Operating income still rose $25.0 billion to $158.1 billion, an operating margin of 33.0%, the highest since fiscal 2012, by our arithmetic from Apple’s filings.
The September quarter ran the other way. Gross margin rose 0.7 of a point to 47.9%, but R&D rose to 10.2% of net sales from 8.7%, and operating margin slipped to 31.1% from 31.6%, our arithmetic. That was Apple’s first lower September-quarter operating margin since 2022.
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The key insight: By our arithmetic, Apple’s products business supplied $26.8 billion, or 70%, of the $38.4 billion rise in gross profit in fiscal 2026, and R&D absorbed 29% of it; in the September quarter R&D rose 32.3%, enough to lower operating margin to 31.1% even as gross margin rose to 47.9%.
Apple does not report profit for each device, but it splits net sales and cost of sales between products and services. Products net sales rose 15.8% to $355.5 billion in fiscal 2026, and products gross profit rose 23.7% to $139.7 billion, our arithmetic. Products gross margin rose to 39.3% from 36.8%.
By our arithmetic, about $17.8 billion of the products gain came from higher sales at the fiscal 2025 margin, and about $8.9 billion from the higher margin. Part of that margin rise came from tariff refunds, which we covered separately; on the call, Apple put their effect on fourth-quarter gross margin at approximately one percentage point.
Services gross profit rose 14.1% to $93.9 billion on 13.0% higher services net sales, and services gross margin edged up to 76.2% from 75.4%, our arithmetic. Because products grew faster, services’ share of gross profit fell to 40.2% from 42.2%, as we set out in our services piece.
Change in Apple’s operating income from fiscal 2025 to fiscal 2026, $ billion: products gross profit +$26.8 billion, services gross profit +$11.6 billion, R&D −$11.2 billion, selling, general and administrative −$2.2 billion. Changes and shares are our arithmetic from Apple’s Q4 FY2026 statement of operations (8-K Exhibit 99.1, 2 Nov 2026). Chart: FourWeekMBA.Animated: Apple’s operating margin, fiscal 2010 to fiscal 2026: operating income divided by net sales, our arithmetic from its 10-K figures (SEC XBRL company facts) and its Q4 fiscal 2026 statements. Fiscal 2026 was 33.0%, the highest since 35.3% in fiscal 2012. Values are computed from filed figures, not read from a chart. Chart: FourWeekMBA.
Where the Gross Profit Went
Operating expenses rose $13.4 billion to $75.5 billion. R&D rose 32.5% to $45.8 billion, or 9.6% of net sales against 8.3% a year earlier, and selling, general and administrative expense rose 7.9% to $29.8 billion, our arithmetic. We covered R&D against capital spending on results day.
Of each dollar of the extra gross profit, about 29 cents went to R&D, about 6 cents to selling, general and administrative expense, and about 65 cents reached operating income, by our arithmetic. Operating income rose 18.8%, against 15.1% for net sales.
Apple’s operating margin was 32.0% in fiscal 2025, 31.5% in fiscal 2024 and 29.8% in fiscal 2023, and it was last above 33.0% in fiscal 2012, at 35.3%, by our arithmetic from SEC XBRL data drawn from its annual reports.
The September-Quarter Bridge
In the fourth quarter, gross profit rose $6.5 billion to $54.8 billion. Products supplied $4.1 billion of it and services $2.3 billion, our arithmetic. R&D rose $2.9 billion, or 32.3%, to $11.7 billion, which by our arithmetic absorbed 44% of the quarter’s gross profit gain.
In margin points, by our arithmetic: gross margin added 0.7 of a point, R&D took away 1.6 points as it rose faster than sales, and selling, general and administrative expense added 0.4 of a point as it fell as a share of sales. Net, operating margin fell 0.5 of a point to 31.1%. Figures are rounded.
Chief financial officer Kevan Parekh said on the call that company and products gross margin “both included a benefit from tariff refunds, which had a favorable impact of approximately one percentage point in the September quarter”, according to the Six Colors transcript. Without that point, gross margin would have been about 46.9%, below the 47.2% of a year earlier, our arithmetic.
He added: “When you remove the tariff refunds from both the June and September quarter, both company and products gross margin would be down about one point sequentially, primarily driven by higher memory costs”. On spending, he said: “Operating expenses came in at $19.2 billion, up 21% year-over-year, as we continue to make investments in R&D”.
R&D at 10.2% of net sales was the highest share for any September quarter since at least fiscal 2009, by our arithmetic from Apple’s XBRL data, where the September quarter is the full year minus the first three quarters.
Tax Took a Larger Share for the Year
Apple’s provision for income taxes was $27.1 billion on pre-tax income of $159.2 billion in fiscal 2026, an effective rate of 17.0%, against 15.6% in fiscal 2025, our arithmetic. Pre-tax income rose 20.0% and net income 18.0%, to $132.2 billion.
At fiscal 2025’s rate, the year’s tax charge would have been about $2.2 billion lower, by our arithmetic. In the September quarter the rate went the other way, to 15.0% from 16.3%. For the December quarter, Parekh said Apple expects “our tax rate to be around 17%”. He guided gross margin to between 45% and 46%, as we reported.
The Structural Read
As we read it, the year’s profitgrowth came mainly from devices rather than services: products gross margin rose 2.5 points to 39.3%, while services gross margin rose less than a point.
As we read it, R&D is now the largest operating-expense claim on Apple’s extra gross profit: it took 29 cents of each added dollar for the year and 44 cents in the September quarter, by our arithmetic.
As we read it, the September-quarter gross margin rise leaned on tariff refunds: without the approximately one point Apple cited, gross margin would have been about 46.9%, below a year earlier, and Parekh tied the underlying sequential decline primarily to higher memory costs.
Kevan Parekh, Apple CFO, Q4 FY2026 earnings call, 2 November 2026 (Six Colors transcript)
“When you remove the tariff refunds from both the June and September quarter, both company and products gross margin would be down about one point sequentially, primarily driven by higher memory costs”
Three Implications
FOR APPLE’S PROFIT MIX Products supplied 70% of the fiscal 2026 gross profit gain and services 30%, by our arithmetic, and services’ share of gross profit fell to 40.2% from 42.2%.
FOR OPERATING MARGIN Operating margin reached 33.0% for the year, the highest since fiscal 2012 by our arithmetic, but fell to 31.1% in the September quarter as R&D reached 10.2% of net sales.
FOR THE DECEMBER QUARTER Parekh guided gross margin to between 45% and 46%, citing primarily higher memory costs and some costs related to the ramp of Siri AI, and a tax rate of around 17%.
The framework says: “Memory is becoming the new compute.”
As we read it, that pressure now reaches device makers: Apple’s CFO said higher memory costs were the main driver of the underlying sequential gross margin decline. The framework was written about high-bandwidth memory for AI data centres and does not discuss Apple.
Apple does not report gross profit for iPhone or any other device, so “hardware” here means its products segment as a whole. It gave the tariff-refund effect only as approximately one point of fourth-quarter gross margin; the 46.9% figure assumes exactly one point. Apple does not split R&D by project, so the share spent on AI is not known.
Apple’s annual report for fiscal 2026 was not yet on EDGAR when we wrote, so the reasons for the higher tax rate are not yet disclosed. All shares, margins, growth rates and the volume-and-margin split are our arithmetic from the statements; the history is from SEC XBRL data. We did not contact Apple.
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Apple’s products business supplied 70% of its $38.4 billion gross profit gain in fiscal 2026, by our arithmetic, as products gross margin rose to 39.3%. R&D absorbed 29% of the gain, operating margin reached 33.0%, and in the September quarter faster R&D growth pushed operating margin down to 31.1% even as gross margin rose.
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A note on sourcing. Every dollar figure is from Apple’s condensed consolidated statements for the fourth quarter of fiscal 2026 (8-K Exhibit 99.1, 2 November 2026). Margins, shares, growth rates and bridges are our arithmetic: segment gross profit is net sales minus cost of sales; margins are divided by net sales; the effective tax rate is the provision divided by pre-tax income. Fiscal-year history is from SEC XBRL data; September-quarter history is the full year minus the first three quarters. The chief financial officer’s remarks are from the Six Colors transcript of the 2 November call. 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.
