Apple FY2026 Earnings: Net Income Up 18%, Buybacks Down 5%, and Retained Earnings Back Above Zero

In fiscal 2026 Apple earned money faster than it handed it back. Net income rose 18% to $132.2 billion and free cash flow 38% to about $136 billion, while share repurchases fell 5% to $86.4 billion. The result shows up in a line most readers skip: Apple's retained earnings ended the year at a $13.7 billion surplus, the first fiscal year-end above zero since 2021, after four years in which buybacks ran ahead of what the company kept. Debt fell by $18.5 billion, and research and development grew 32%, twice as fast as revenue.

iPhone and Greater China carried a 15% year​

Net sales rose 15.1% to $478,834 million for the fiscal year ended September 26, 2026 (Form 10-K). iPhone revenue rose 21% to $254,098 million and Services 13% to $123,301 million; Mac grew 12.5%, while iPad and Wearables were flat. By region, Greater China grew fastest, 28% to $82,378 million.

Margins widened on both sides of the business. Gross margin rose to 48.8% from 46.9%; products gross margin to 39.3% from 36.8%, and services to 76.2% from 75.4%, by our computation from the 10-K's segment lines. Operating income rose 18.8% to $158,063 million, a 33.0% margin. In the fourth quarter alone, gross margin of 47.9% included "a favorable impact of approximately 1 percentage point from tariff refunds," per the earnings release, a benefit that will not repeat.

The treemap shows the fiscal year's costs: $245,232 million cost of sales, $45,765 million of research and development, $29,774 million of selling, general and administrative expense and $27,062 million of income tax. Revenue and the $1,174 million of net other income are credits, so they carry a minus sign in the list beneath.

R&D grew twice as fast as revenue​

Research and development rose 32.5% to $45,765 million, from 8.3% of revenue to 9.6%, while SG&A grew 7.9%. The 10-K does not break the increase down in the financial statements, but at that pace R&D is now one and a half times Apple's selling and administrative budget. Operating margin still rose a point, because gross margin expanded more than R&D grew as a share of sales.

The per-period income statements in the ledger put the step in context:

Each row is one fiscal year: revenue as a negative credit, R&D as a debit and Equity:Adjustments as net income. R&D grew 19.8% in FY2022, 14.0% in 2023, 4.9% in 2024 and 10.1% in 2025, by our computation, so FY2026's 32.5% is the fastest in the ledger.

Retained earnings turned positive because buybacks stopped outrunning earnings​

Retained earnings are what a company has earned and kept. Apple charges its share repurchases against them, along with dividends, and it has bought back shares so heavily that the balance spent most of the past five years below zero:

Equity is a credit, so in this view a surplus plots below zero and a deficit above it. The ledger records a $5,562 million surplus at the end of fiscal 2021, then deficits of $3,068 million in 2022, $214 million in 2023, $19,154 million in 2024 and $14,264 million in 2025, and a $13,700 million surplus at the end of fiscal 2026. The 10-K's statement of shareholders' equity shows the arithmetic for the year: $132,175 million of net income against $86,485 million charged for repurchases, $15,704 million of dividends declared and $2,022 million of shares withheld for employee taxes. The Q2 analysis caught the balance crossing zero mid-year; the annual figure confirms it stayed there.

The same pattern appears in the cash flow statement. Operating cash flow rose 30% to $145,097 million, and capital expenditure fell to $9,041 million from $12,715 million, leaving about $136,056 million of free cash flow by our computation. Apple returned $102,111 million of it through repurchases and dividends, about 75%, and used part of the rest to reduce commercial paper and term debt to $80,111 million from $98,657 million. Shares outstanding fell 1.6%.

For a business owner the lesson is about what a negative retained-earnings line does and does not mean. Apple's deficit years were not losses; the company was profitable throughout. They recorded owners being paid more than the business kept. When distributions fall below profit, the balance rebuilds, which is what happened in fiscal 2026.

What to watch in fiscal 2027​

• Tariff refunds. About a point of fourth-quarter gross margin and $0.05 of EPS came from refunds; margins in the December quarter will show how much of the expansion was underlying.
• Inventory. Inventories rose to $14,541 million from $5,718 million at the end of fiscal 2025, and vendor non-trade receivables to $39,896 million from $33,180 million. If that build does not convert into sales, it will show up as a drag on operating cash flow.
• The R&D trajectory. A second year of 30% R&D growth would test the margin expansion that absorbed it this year.
• Capital returns. With debt down and retained earnings positive, the size of the next buyback authorization tells whether Apple goes back to paying out more than it earns.