Apple Inc. (NASDAQ: AAPL) reported a profit of $109.42 billion in the third fiscal quarter, yet its stock fell more than 6% after the main trading session. Traders focused on the company's softer guidance for the current period, which forecasts sales growth of only 9-11%.
Apple attributed the weaker guidance to supply constraints. This reaction came despite quarterly revenue surpassing analysts' expectations. Analysts at London Stock Exchange (LON: LSEG) had forecast $108.65 billion.
Profit also exceeded analysts' expectations. Apple reported earnings per share of $2.02, higher than the forecasted $1.89. However, this is not a completely accurate comparison, as compensation for customs duties boosted EPS by 11 cents.
Apple's net profit reached $29.79 billion, up from $23.43 billion a year earlier. On a per-share basis, the year-ago result was $1.57. Apple's total revenue grew more than 15% for the third consecutive quarter, and the company's cash holdings stood at $146.52 billion.
Apple's Primary Sales Growth Driven by iPhone and Mac
iPhone sales brought in $54.25 billion, exceeding analyst forecasts of $53.86 billion. Phone sales increased nearly 22% compared to the same quarter last year. This growth occurred late in the iPhone 17 sales cycle, with the next model expected in September.
Mac sales revenue was $10.35 billion, significantly surpassing the forecasted $8.74 billion. This is almost 29% more than a year ago. Apple CEO Tim Cook linked this growth to demand for the MacBook Neo and MacBook Pro.
Neo is a more affordable laptop using a chip based on Apple's iPhone technology. It went on sale in March, shortly before the quarter began.
During the reporting period, Apple raised prices on many Mac models. One such model was the MacBook Neo. Shortages of memory chips and low processor manufacturing capacity led to increased costs and reduced component availability. According to Tim, this was a "challenging situation" that needed to be highlighted during the earnings call.
iPad sales were weaker this quarter. Revenue fell 6% year-over-year to $6.19 billion, missing the forecast of $6.92 billion. Apple stated that the year-over-year comparison was unusually tough because cheaper iPads boosted sales in that period.
Wearables revenue reached $7.88 billion, slightly above analyst expectations of $7.82 billion. Apple also reported that revenue from the wearables and home electronics division grew 6% to $4.9 billion, also exceeding forecasts.
China remained Apple's third-largest regional business. Revenue from this market grew 22% to $18.82 billion. Apple includes Mainland China, Hong Kong, and Taiwan in this regional figure.
Apple Expands Services While Supply Constraints Weaken Next Quarter Guidance
The Services division brought in $30.74 billion, below Wall Street's forecast of $31.22 billion. Nevertheless, revenue from this division grew 12% year-over-year. Apple stated that currency exchange rates outside the US reduced the final figure.
The division earned more money from advertising, the App Store, AppleCare plans, music, streaming video, online storage, and payment products. Tim said Apple now has 1.5 billion paid subscriptions. This figure includes iCloud accounts and subscriptions purchased through the App Store, where Apple takes a cut of each payment.
Gross margin was 50.1%, while analysts expected 47.9%. This figure was aided by refunds related to previously imposed US tariffs. These payments added about two percentage points, bringing the precise margin to a record 50.06%. Excluding the refunds, Apple's margin would have been closer to Wall Street's initial estimate.
The refunds occurred after the US Supreme Court overturned some tariffs imposed by the previous administration of President Donald Trump earlier this year. Under these emergency powers, Apple paid higher import duties on finished products as well as on individual components it brings into the country.
Apple is also preparing a new Siri system that will use technology from Google (NASDAQ: GOOGL, GOOG), part of Alphabet. The voice assistant is expected to launch alongside new iPhone models in September. Investors are questioning Apple's position in artificial intelligence as competing companies release new AI-based products at a faster pace.
"Today, Apple proudly reports a strong quarter ending in June, with double-digit revenue growth for iPhone, Mac, and Services, as well as across all geographic segments," he said. He also mentioned the Siri AI update, new software, and child protection tools introduced during WWDC26.
Apple's CFO Kevan Parekh stated, "We are very pleased with our record results for the quarter, which set new second-quarter records for both earnings per share and operating cash flow." Kevan added that the number of active Apple devices reached a new high across all major product categories and in all regions.
This was Tim's last earnings call as CEO before assuming the chairman role. John has worked at Apple for 25 years and currently heads the company's hardware division. He spoke only briefly during the call.
