iPhone and Mac sales lead Apple’s best growth since 2021
Apple posted third-quarter earnings that beat Wall Street forecasts, driven by a surge in iPhone sales and robust growth in its Mac division. The tech giant reported $94.04 billion in revenue, up 10% year-over-year — its strongest quarterly revenue growth since December 2021. Net income rose 14% to $24.43 billion, or $1.57 per share, well above the expected $1.43.
iPhone revenue hit $44.58 billion, up 13% from a year earlier, fueled by strong demand for the iPhone 16. CEO Tim Cook noted “strong double-digit” sales growth compared to the iPhone 15, especially among existing users upgrading. Mac revenue grew nearly 15% to $8.05 billion, driven by refreshed MacBook Air models released at the start of the quarter.
Services and China sales boost performance
Apple’s services segment also performed strongly, reaching $27.42 billion in revenue — a 13% annual increase. This included growth in iCloud subscriptions and double-digit gains from App Store activity. China revenue, a concern in previous quarters, rebounded 4% to $15.37 billion, helped by government subsidies on select Apple devices.
Despite overall growth, iPad sales declined 8% to $6.58 billion, and revenue from wearables such as Apple Watch and AirPods also fell 8.6% to $7.4 billion. Gross margin stood at 46.5%, surpassing the 45.9% estimate. Apple’s after-hours stock gains reflected optimism about future performance despite mixed hardware results.
Tariffs weigh on costs, but future outlook remains positive
Apple incurred $800 million in tariff costs during the quarter, lower than the $900 million it had estimated in May. For the current quarter, the company projects about $1.1 billion in tariff-related costs. Cook said about 10% of the quarterly revenue growth was driven by consumers buying ahead of potential tariff hikes.
Looking forward, Apple expects revenue to grow at a mid- to high-single-digit rate in the September quarter, with services growth projected to remain at 13%. Gross margin guidance is between 46% and 47%, including tariff-related expenses.
Apple ramps up AI efforts while defending the iPhone
Though Apple’s AI announcements at its June WWDC event were seen as underwhelming, Cook reaffirmed the company’s commitment to AI, calling it “one of the most profound technologies of our lifetime.” He revealed that Apple has acquired around seven AI-focused firms this year and is investing heavily in embedding AI across its hardware, software, and internal processes.
Addressing concerns over AI devices potentially threatening iPhone sales, Cook dismissed the notion. “It’s difficult to see a world where iPhone is not living in it,” he told analysts, emphasizing that AI devices are more likely to complement rather than replace the iPhone. Apple ended the quarter with $133 billion in cash, positioning it for further investments or acquisitions.
