Revenue surged 17% year-over-year to $111.2 billion, surpassing the $109.7 billion consensus estimate. Earnings per share saw a notable jump of 22% to $2.01, exceeding the projected $1.95. These figures represent Apple’s best-ever March quarter performance. In after-hours trading, Apple’s stock reacted positively, climbing 4% to approximately $282, nearing its December record high.
The incoming CEO, Jon Ternus, is set to inherit a formidable business. All product categories, including the highly lucrative services segment, exceeded expectations. Services, in particular, demonstrated accelerated sequential growth and contributed significantly to Apple’s margin expansion. The company also reported an all-time high installed base of over 2.5 billion active devices globally. This vast ecosystem is critical as Apple navigates the burgeoning generative AI landscape, with CEO Tim Cook affirming that a “more personalized Siri” is slated for release this year. While Apple has partnered with Google for AI advancements, Cook also emphasized ongoing independent development efforts. The substantial installed base serves as a vital gateway for Apple’s high-margin services, expanding its total addressable market.
Furthermore, Apple reinforced its commitment to shareholder returns by authorizing an additional $100 billion in share repurchases and increasing its quarterly cash dividend by 4%. CFO Kevan Parekh indicated a shift in the company’s capital allocation strategy, moving away from the formal “net cash neutral” target to a more flexible approach of evaluating cash and debt independently after necessary business investments. This strategic adjustment is unlikely to diminish shareholder value creation, as management continues to prioritize share repurchases.
Apple’s enduring strength lies in its synergistic hardware and high-margin services businesses, creating a powerful competitive moat and numerous bundling opportunities. Despite headwinds such as potential tariffs, energy price fluctuations, and rising memory costs, the company’s management has adeptly navigated these challenges. While memory costs are expected to remain a material factor, confidence remains high in Apple’s ability to manage the environment effectively. With an anticipated AI update later this year, the stage appears set for Apple’s stock to reach new all-time highs. Analysts reiterate a positive outlook, maintaining a target price of $300 and a hold-equivalent rating.
Regarding the CEO transition, Tim Cook stated that the timing was opportune due to the company’s exceptional business performance, a compelling product roadmap, and the readiness of John Ternus to assume leadership. Cook expressed deep trust in Ternus’s technical acumen, strategic thinking, and leadership capabilities, envisioning him as the ideal successor to guide Apple into its next chapter. Cook will transition to the role of executive chairman on September 1st, working closely with Ternus to ensure a seamless handover.
Ternus echoed Cook’s confidence, highlighting the deep thoughtfulness and discipline that have characterized Apple’s financial decision-making, a philosophy he and CFO Parekh intend to uphold. He expressed excitement about the company’s future, describing the current period as the most exhilarating in his 25-year tenure, with an “incredible roadmap ahead.”
Digging deeper into the quarterly performance, product revenue grew 16.7% year-over-year to $80.21 billion, surpassing the $78.21 billion estimate. The iPhone segment was a primary driver, with sales increasing nearly 22% to $56.99 billion, marking a March quarter record, even amidst reported supply constraints. This robust iPhone performance, alongside growth in Mac, iPad, and Wearables, Home & Accessories, underscores broad-based hardware strength. The introduction of the MacBook Neo, a more affordable laptop targeting Windows and Chromebook users, contributed to a 5.7% increase in Mac sales. Product gross margins also showed a significant improvement, rising 276 basis points to 38.7%, exceeding projections.
The services division achieved record revenue, with growth accelerating to just over 16% in fiscal Q2, up from approximately 14% in the prior quarter, resulting in a $600 million beat. This segment, encompassing revenue from Apple TV, advertising, cloud services, music, payments, and the App Store, saw its gross margins expand to 76.7%, surpassing estimates.
Looking ahead, Apple’s revenue outlook for the June quarter (fiscal 2026 third quarter) exceeded consensus, with an expected year-over-year increase of 14% to 17%, significantly outperforming the estimated 9% growth. This guidance implies revenues between $107.2 billion and $110.02 billion, compared to the LSEG consensus of $102.93 billion. Services revenue is projected to maintain a similar growth trajectory, excluding foreign exchange impacts. Companywide gross margins for the June quarter are anticipated to fall between 47.5% and 48.5%, also exceeding expectations.
This consistent best-in-class performance solidifies Apple’s position as a long-term investment. The company’s diversified revenue streams, strong ecosystem, and strategic financial management provide a compelling case for sustained growth and shareholder value creation.
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