Apple Stock Slips About 3% After Hours as Margin and Services Outlook Overshadow Earnings Beat

This article is for general information only and is not financial or investment advice.

Apple beat Wall Street’s estimates for its September quarter, but the stock still dropped in late trading Monday. Shares fell about 3% after hours once management gave its outlook for the holiday quarter, the CNBC Investing Club reported. Investors focused on weaker-than-expected gross margin and Services growth forecasts, not on the beat.

Regular trading resumes Tuesday morning, Nov. 3. After-hours moves can grow, shrink or reverse once the full market opens.

Why did Apple stock fall after earnings?

The quarter itself was solid. According to CNBC’s Investing Club:

• Revenue: $114.48 billion, up 12%, vs. about $113.39 billion expected (LSEG)
• EPS: $2.10, up 14%, vs. $1.99 expected (LSEG)
• iPhone: up 17.5%; Mac: up 24%
• Gross margin: 47.9%, ahead of the 47.5% consensus, including a 1-point boost from tariff refunds

The CNBC Club wrote that the stock was “unchanged for most of the evening” until the guidance came out. Three parts of the December-quarter outlook mattered most:

1. Gross margin of 45% to 46%, below the roughly 46.9% analysts expected. The CNBC Club said a heavier mix of lower-margin hardware and rising memory costs were the likely reasons, and noted Apple also called out higher inference costs tied to Siri AI.
2. Services growth of 8% to 9%, below the Street’s estimate of about 10%, per the CNBC Club.
3. Total revenue growth of 7% to 10%, which the CNBC Club and Markets Insider both called better than expected. Estimates for the quarter differed by source. FactSet’s consensus was 5.8%, per the CNBC Club, while CNBC’s live coverage cited an LSEG figure of about 11.4%. That gap helps explain why the stock’s first reaction looked mixed.

The valuation problem

Apple went into the report with high expectations. The CNBC Club said shares were up about 25% for the year entering Monday evening. Apple hit an all-time high in late October, even as other big tech stocks sold off over worries about AI spending. That run pushed the stock to more than 35 times forward earnings estimates, which the Club called its highest level in recent memory. The Club said the company “needed to report a picture-perfect quarter with a strong outlook to avoid profit-taking.”

Markets Insider noted that Palantir also fell nearly 3% after hours despite beating estimates. It pointed to a broader pullback in tech stocks.

What analysts are saying

• CNBC Investing Club raised its price target to $360 from $340 but kept its hold-equivalent rating, citing the stock’s run and valuation. It called memory costs a temporary problem and said Apple continues to gain share in smartphones and PCs.
• Analyst Daniel Ives kept an Outperform rating and a $400 target, according to Markets Insider. “In our view the December gross margin guide is the number that settles whether memory costs or pricing and mix win the margin argument into the holiday quarter,” he wrote.

The iPhone Duo factor

Apple’s foldable iPhone Duo went on sale Oct. 23, after the quarter ended, so it isn’t in these results. “iPhone Duo is constrained as of today,” COO Sabih Khan said on the call, according to the CNBC Club, adding that it’s “really hard to predict when supply and demand will be in balance.” The Club noted Apple did not address reports of cracked Duo screens on the call. The company had previously said the issue affected a “small number” of devices.

What to watch Tuesday

• Whether the after-hours drop holds once regular trading opens
• Any new analyst price-target changes
• The overall tech tone on Election Day

FAQ

Earlier coverage: Apple Earnings: Q4 Revenue Beats at $114.5 Billion in John Ternus' First Report, AAPL Stock Little Changed (Nov 2)