According to CNBC, Apple reported fiscal Q1 2026 earnings on Thursday evening, with revenue soaring 16% year-over-year to $143.76 billion, handily beating estimates. iPhone sales were the engine, jumping 23% to $85.27 billion, while Greater China delivered a massive 38% revenue surge. Earnings per share came in at $2.84, also above expectations. The company issued a strong outlook for the March quarter, guiding for revenue growth of 13% to 16%, which is better than the Street anticipated. Despite all this, Apple’s stock price saw only a marginal increase in after-hours trading, continuing a trend of eight consecutive weeks of losses prior to the report.
The China Surprise and Memory Headache
Look, the China number is staggering. A 38% jump? That’s the best iPhone quarter ever in the region. It completely flips the narrative that Apple was losing ground there. Enthusiasm for the iPhone 17, record upgraders, and switchers from Android made it happen. So that’s a huge, immediate worry off the table. But here’s the thing the market is now laser-focused on: memory costs. It was the most popular topic on the earnings call. CEO Tim Cook said it had a “little impact” last quarter and expects a “little more” this quarter, but that it’s baked into their bullish gross margin guide of 48% to 49%. The market hears “skyrocketing memory prices” and gets nervous. They won’t relax until those prices actually come down. It’s a classic “good news, but…” scenario.
Apple’s AI Game Is Different
While everyone else is burning cash on training massive AI models, Apple is playing a different game. They’re partnering with Google, using Alphabet’s foundation models to power “Apple Intelligence.” This is a capital-preservation strategy. It let them generate a monstrous $51.5 billion in free cash flow last quarter—dwarfing Meta and Microsoft—and use $24.7 billion of it to buy back stock. Basically, they’re outsourcing the expensive R&D heavy-lifting. But it raises questions. What are the terms of that Google deal? How much control does Apple cede? Cook says they picked Google because it’s “the most capable,” but for a company that prides itself on vertical integration, this is a notable shift. The bet is that they can innovate on top of someone else’s AI core. We’ll see.
The Hold Rating and Why It Matters
So why is the stock stuck? The report itself was fantastic. iPhone cycle is strong, services are humming, margins are expanding. But the stock had been in a rut for eight weeks, and even this beat only got a shrug. The analysis from CNBC’s Investing Club pins it on those lingering concerns: memory costs and the need to see the AI partnership actually deliver products. They’re keeping a “Hold-equivalent” rating but suggest the pullback might be a chance to “nibble.” I think that’s the real takeaway. For a company executing this well, the hesitation feels like the market is waiting for the next chapter—the AI chapter—to be written. Until then, it’s a cash-generating machine with a cloud of uncertainty over two key inputs: component costs and its next big platform shift.
