Apple Shakes Off iPhone Miss—Explosive Q1 Guide Sends Stock to Record High

Apple delivered a strong fiscal Q4 report that managed to turn early investor skepticism into optimism by the end of the session. While iPhone revenue came in slightly below expectations, upbeat guidance for the December quarter—driven by robust demand for the new iPhone 17 lineup—sent the stock surging to an all-time high of $285 before modest profit-taking trimmed gains. The results reaffirmed that Apple’s broad product ecosystem and services strength continue to offset temporary supply constraints and tariff headwinds, setting the stage for what CEO Tim Cook called “the best iPhone quarter ever .” The key narrative: modest Q4 noise, but a powerful setup for Q1 growth.

Apple reported Q4 EPS of $1.85, beating consensus of $1.78, on revenue of $102.5 billion, up 8.7% year-over-year and narrowly above expectations. The standout was gross margin of 47.2%, well ahead of estimates (46.4%), underscoring operational discipline and a favorable product mix. For fiscal 2025, Apple posted a record $416 billion in total revenue, with CFO Kevan Parekh highlighting double-digit EPS growth and record active device counts across every major category. The company declared a quarterly dividend of $0.26 per share.

Segment performance reflected both resilience and transition. iPhone revenue rose 6% to $49.0 billion, shy of the $50.3 billion consensus but constrained by supply issues affecting multiple iPhone 17 and legacy 16 models. Tim Cook emphasized that “demand was stronger than we anticipated” and that China’s 4% revenue dip to $14.5 billion was due primarily to a delayed iPhone Air launch. The outlook there is far more constructive, with Cook asserting confidence that the region “will return to growth in Q1” given strong store traffic and record interest in the 17 Pro. Mac revenue jumped 13% to $8.7 billion, powered by the M5 MacBook Pro refresh and a lower entry price on the MacBook Air, while iPad sales held steady at $6.95 billion ahead of October’s M5 iPad Pro launch.

The Services segment again stole the show, rising 15% to $28.8 billion, an all-time high driven by strength across App Store fees, iCloud, Apple Music, and advertising. Management noted the recurring-revenue business continues to be the company’s “most consistent engine,” contributing meaningfully to Apple’s expanding margin profile. Wearables, Home, and Accessories added $9.0 billion, up slightly year-over-year, buoyed by AirPods Pro 3 and Watch Ultra sales. Collectively, Products revenue reached $73.7 billion, up 5% YoY, while operating income climbed 9% to $27.5 billion, supported by efficiency gains and stable component costs.

Cook confirmed ongoing supply tightness on iPhone 17 models, stating, “We’re constrained today on several models, but it’s not a ramp issue—just very strong demand.” Apple also absorbed $1.1 billion in Q4 tariff costs, which are projected to rise to $1.4 billion in Q1. CFO Parekh said the company “held pricing steady” and absorbed tariffs within margins rather than passing them to consumers, a notable contrast to competitors that have adjusted pricing amid trade friction. The company’s proactive management of component costs—especially in memory and storage—helped maintain profitability despite these headwinds.

On the capital expenditure front, Apple remains an outlier among megacaps. While Amazon, Microsoft, Google, and Meta are each on track to spend over $100 billion in CapEx next year, Apple’s plan remains a fraction of that—about $12 billion in 2025 and $14 billion in 2026. Gene Munster characterized Apple’s strategy as a “hybrid model of first- and third-party capacity” that balances efficiency with flexibility, especially in AI infrastructure. This restrained CapEx profile underscores Apple’s differentiated approach: deploying capital surgically while leveraging partners for heavy cloud workloads, rather than competing head-on with hyperscaler-scale spending.

The company’s Q1 guidance was the highlight that flipped sentiment. Management forecast 10%–12% year-over-year revenue growth, implying sales between $136.7 billion and $139.2 billion, well above consensus expectations of $131.8 billion. More notably, iPhone revenue is expected to grow at double-digit rates, signaling an acceleration in unit momentum and average selling price. Gross margins are projected between 47% and 48%, despite higher tariffs and a modest uptick in R&D and AI-related operating expenses. Parekh acknowledged OpEx will rise to $18.1–18.5 billion as Apple invests in on-device AI integration and next-generation chip design, including the Siri overhaul and continued work with OpenAI on ChatGPT integration.

Tim Cook described the upcoming quarter as a “record December period,” pointing to “incredible customer enthusiasm” and record store traffic globally. Analysts largely agreed that the December guide more than offsets the Q4 iPhone miss. Gene Munster noted that over a two-quarter period (September + December), iPhone revenue is tracking roughly 2% above whisper expectations, equivalent to $126 billion—a sign that underlying demand remains robust.

Apple’s strategic narrative continues to hinge on the convergence of hardware, services, and AI. Cook reiterated that the company will “integrate with more models over time” as it rolls out Apple Intelligence in 2026, blending privacy-centric on-device learning with external AI partnerships. The company’s longer-term commitment to $600 billion in R&D and manufacturing investment over four years signals that Apple intends to deepen its hardware-software moat rather than chase cloud scale.

Market reaction mirrored that blend of short-term relief and long-term optimism. Shares initially fell nearly 2% after the iPhone miss hit the tape but reversed sharply once guidance was announced, climbing to a record intraday high of $285 before paring gains slightly. The stock’s ability to hold above the $269 close now serves as a near-term technical pivot. Traders view this level as key to sustaining bullish momentum into year-end, with Apple’s weighting in the S&P 500 and Nasdaq giving the move broad market implications.

In sum, Apple’s Q4 report was a masterclass in managing expectations. The company navigated supply headwinds and tariff pressures without sacrificing profitability, maintained industry-leading margins, and delivered guidance that reasserts its dominance heading into the holiday quarter. While CapEx discipline separates Apple from its hyperscaler peers, its AI and product strategy remain squarely focused on ecosystem value. If shares can sustain their breakout above $269, the market may be signaling that Apple’s next growth chapter—powered by AI and record iPhone demand—is already underway.