Welcome to a new week.
Today’s update will conclude our Apple 4Q26 earnings review with a closer look at the earnings call.
Apple’s 4Q26 earnings call was not a memorable one in terms of analyst question quality. Several questions didn’t even make the cut of being discussed in today's update as they lacked relevancy.
Given how this was John Ternus’ first earnings call as CEO, CFO Kevan Parekh stepped up to answer more questions than usual. In addition, Apple made COO Sabih Khan available to answer questions regarding the supply chain. With more than 20 years of earnings calls under his belt, including handling calls while Steve Jobs was CEO, Tim Cook had mastered fielding and answering sell-side analyst questions. It takes time for an executive to get comfortable with earnings calls. While Apple selects which analysts can ask questions on the calls, management does not screen the questions.
Reading Between the Lines of Apple’s 4Q26 Earnings Q&A With Analysts
Let’s go beyond what was talked about on Apple’s earnings call with the 20th installment of Reading Between the Lines of Apple's earnings Q&A with analysts.
After recapping each question-and-answer exchange that occurred on the call between Apple and sell-side analysts, we will go over my response to the exchange.
NOTE: The following earnings call questions and answers have been cut, summarized, paraphrased, and rearranged for clarity. To read the full question and answer exchanges, a written transcript is available here.
Services
Goldman Sachs: What are you seeing on iCloud+? Are rising costs associated with iPhone storage and Apple’s push into home products tailwinds for iCloud+ attach rates?
Ternus: We had all-time revenue record for Cloud services. We have iCloud+ plans that include Apple TV and Apple Arcade. Given some usage limits on Apple Intelligence features, like Siri Ai and intelligent photo editing, that rely on server side models, iCloud+ tiers will include greater Apple Intelligence capacity.
My response: Some of Wall Street’s intrigue associated with iCloud+ ($0.99/month to $60/month plans) is found with Apple’s ability to turn the subscription into something more than just storage. As it stands now, additional iCloud+ features include HomeKit Secure Video recordings, full access to Apple Invites, iCloud Private Relay, Hide My Email, and Custom Email Domains. Based on Apple's disclosures, some usage-based Apple Intelligence capabilities will be coming to iCloud+.
Morgan Stanley: How should we think about the durability of Services revenue growth? Are there new services that can offset growth pressure seen with search and App Store?
Parekh: We saw all-time records in video, cloud services, payment services, and advertising (includes Apple Ads), and a September quarter record in music. We will have seen a 4.5 percent point headwind from FX on the year-over-year growth rate moving from the March to December quarters. Some factors have impacted App Store performance – which was similar to the prior year. Paid subscriptions for third-party apps grew double-digits during the September quarter. Headwinds were seen in mobile gaming while the U.S. court ruling is impacting link-out transactions.
Ternus: App Store saw a record nearly 1 billion average weekly visitors with a new high for the number of users paying for at least one service. Apple Pay recently launched in India. Apple Intelligence is another opportunity.
My response: The key disclosure came from
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