Earnings call transcript: Apple beats Q3 2025 forecasts, stock dips

Apple Inc., the $3.1 trillion market cap technology giant, reported its fiscal third-quarter earnings for 2025, surpassing analyst expectations with a revenue of $94 billion and an earnings per share (EPS) of $1.57. The company exceeded forecasts by 5.66% for revenue and 10.56% for EPS. Despite these strong results, Apple shares fell 0.71% in after-hours trading, closing at $208.27. According to InvestingPro, the company maintains a "GOOD" overall financial health score, reflecting its robust operational performance.

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Key Takeaways

• Apple achieved record June quarter revenue of $94 billion, up 10% year-over-year.
• EPS of $1.57 outperformed the forecast of $1.42.
• The stock fell 0.71% in after-hours trading despite the earnings beat.
• Services revenue grew by 13%, reaching $27.4 billion.
• Strong performance in emerging markets and Greater China.

Company Performance

Apple demonstrated robust performance in the third quarter of fiscal year 2025, with a 10% increase in revenue year-over-year. The company’s product lineup, particularly the iPhone 16 family, drove significant sales, contributing to the shipment of Apple’s 3 billionth iPhone. Additionally, the MacBook Air with the new M4 chip spurred growth in Apple’s computer segment. The company reported growth across all geographic segments, with emerging markets showing double-digit increases and Greater China achieving a 4% rise.

Financial Highlights

• Revenue: $94 billion, up 10% year-over-year
• EPS: $1.57, up 12% year-over-year
• Gross margin: 46.5%
• Services revenue: $27.4 billion, up 13%
• Products revenue: $66.6 billion, up 8%

Earnings vs. Forecast

Apple’s actual EPS of $1.57 surpassed the forecasted $1.42, marking a 10.56% surprise. Revenue came in at $94 billion, exceeding the expected $89 billion by 5.66%. This performance highlights Apple’s ability to outperform market expectations consistently, building on its historical trend of strong quarterly results.

Market Reaction

Despite the positive earnings report, Apple’s stock price declined by 0.71% to $208.27 in after-hours trading. This movement contrasts with the company’s record-setting financial performance and may reflect broader market trends or investor concerns about future challenges. The stock remains well within its 52-week range, with a high of $260.1 and a low of $169.21.

Outlook & Guidance

Looking ahead, Apple expects revenue growth in the mid to high single digits for the September quarter. Services revenue is projected to continue its 13% growth trend. The company anticipates a gross margin between 46% and 47%, with expected tariff-related costs of $1.1 billion for the upcoming quarter. Apple’s strategic focus will remain on AI development and integration across its platforms.

Executive Commentary

CEO Tim Cook emphasized the importance of AI, stating, "AI is one of the most profound technologies of our lifetime." He highlighted Apple’s commitment to embedding AI across devices and platforms. CFO Kevin Parekh noted, "We continue to see very positive trends in services," underscoring the growth potential in this segment.

Risks and Challenges

• Tariff-related costs: Apple anticipates $1.1 billion in costs for the next quarter, which could impact profitability.
• Supply chain disruptions: Expanding production in India and Vietnam aims to mitigate potential supply chain issues.
• Market saturation: Continued innovation is necessary to maintain growth in mature markets.
• Macroeconomic pressures: Global economic conditions could affect consumer spending.
• Competitive landscape: Maintaining leadership in AI integration is crucial as competitors advance.

Q&A

During the earnings call, analysts inquired about Apple’s tariff mitigation strategies and the impact of pull-forward demand in April, which accounted for approximately 1 percentage point of growth. Questions also focused on Apple’s AI strategy and the potential of edge devices, as well as the company’s ongoing approach to mergers and acquisitions for technology acceleration.

Full transcript - Apple Inc (AAPL) Q3 2025:

Suhasini Chandramali, Director of Investor Relations, Apple: Good afternoon, and welcome to the Apple q fiscal year twenty twenty five earnings conference call. My name is Suhasini Chandramali, Director of Investor Relations. Today’s call is being recorded. Speaking first today is Apple’s CEO, Tim Cook, and he’ll be followed by CFO, Kevin Parekh. After that, we’ll open the call to questions from analysts.

Please note that some of the information you’ll hear during our discussion today will consist of forward looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expense, taxes, capital allocation and future business outlook. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast, including risks related to the potential impact to the company’s business and results of operations from macroeconomic conditions, tariffs and other measures, and legal and regulatory proceedings. For more information, please refer to the risk factors discussed in Apple’s most recently filed reports on Form 10 Q and Form 10 ks and the Form eight ks filed with the SEC today along with the associated press release. Additional information will also be in our report on Form 10 Q for the quarter ended 06/28/2025 to be filed tomorrow and in other reports and filings we make with the SEC. Apple assumes no obligation to update any forward looking statements, which speak only as of the date they are made.

I’d now like to turn the call over to Tim for introductory remarks.

Tim Cook, CEO, Apple: Thank you, Suasini. Good afternoon, everyone, and thanks for joining the call. Today, we are proud to report a June revenue record of $94,000,000,000 up 10% from a year ago, which was better than we expected. EPS set a June record of $1.57 up 12% year over year. We saw an acceleration of growth around the world in the vast majority of markets we track, including Greater China and many emerging markets.

And we had June revenue records in more than two dozen countries and regions, including The US, Canada, Latin America, Western Europe, The Middle East, India, and South Asia. These results were driven by double digit growth across iPhone, Mac, and services. We set a June record for iPhone, which grew a strong 13% year over year. We saw iPhone growth in every geographic segment and double digit growth in emerging markets, including India, The Middle East, South Asia and Brazil. Mac continued to see excellent results with revenue up 15% year over year.

And we set another all time revenue record in services, which grew 13% with double digit growth in both developed and emerging markets. Last month, we hosted WWDC, an incredible event for our developer community with millions joining us online and more than 1,000 developers here in person at Apple Park. We shared some truly exciting updates, including a stunning new design crafted from a material we call liquid glass. It’s both beautiful and expressive. And for the first time ever, this design extends across all of our platforms.

We can’t wait for users everywhere to experience it this fall. And we were excited to share some updates across our AI work. We announced even more capabilities coming later this year, including live translation and WorkoutBuddy. In addition to those new features, we announced new support for a number of languages. And we opened up access to the on device foundation models at the core of Apple Intelligence, enabling developers to build a whole new experience for our users.

It’s wonderful to see great momentum building for our platforms. IOS 26, macOS 26 and iPadOS 26 are by far the most popular developer betas we’ve had. Taking a step back, we see AI as one of the most profound technologies of our lifetime. We are embedding it across our devices and platforms and across the company. We are also significantly growing our investments.

Apple has always been about taking the most advanced technologies and making them easy to use and accessible for everyone, and that’s at the heart of our AI strategy. With Apple Intelligence, we’re integrating AI features across our platforms in a way that is deeply personal, private, and seamless, right where users need them. We’ve already released more than 20 Apple Intelligence features, including visual intelligence, cleanup and powerful writing tools. We’re making good progress on a more personalized Siri. And as we’ve said before, we expect to release these features next year.

Apple Silicon is at the heart of all of these experiences, enabling powerful Apple intelligence features to run directly on device. For more advanced tasks, our servers, also powered by Apple Silicon, deliver even greater capabilities while preserving user privacy through our private cloud compute architecture. We believe our platforms offer the best way for users to experience the full potential of generative AI. Thanks to the exceptional performance of our systems, our users are able to run generative AI models right on their Mac, iPad and iPhone. We’re excited about the work we’re doing in this space, and it’s incredibly rewarding to see the strong momentum building.

Now let me turn to more details about our results for the quarter, starting with iPhone. IPhone revenue was $44,600,000,000 up 13% from a year ago, and we set a June record for upgraders. This strong broad based performance was driven by the incredible popularity of the iPhone 16 family, which was up strong double digits year over year as compared to the 15 family. We also recently marked a significant milestone. We shipped the three billionth iPhone since its launch in 02/2007.

From the Pro models with the powerhouse A18 Pro and innovative Pro camera features to the iPhone 16E with breakthrough battery life and a two in-one camera system, users are finding so many reasons to love the best iPhone lineup we’ve ever created. And iOS 26 will take that experience even further. In addition to the beautiful new design and powerful Apple intelligence features, it introduces a range of meaningful updates, like real time call screening and hold assist in the phone app, smarter messaging tools and new live translation features. It all adds up to a smarter, more personal iPhone experience that we can’t wait for users everywhere to enjoy this fall. In Mac, we had another strong quarter with revenue of $8,000,000,000 up 15% year over year, largely driven by the strength of the M4 MacBook Air.

We set a June record for upgraders on Mac, and we saw great performance in emerging markets with strong double digit growth on revenue as well as strong double digit growth on both upgraders and customers new to Mac. MacBook Air, the world’s most popular laptop, unlocks a whole new level of performance with the power of M4. MacBook Pro customers, meanwhile, continue to be drawn to its incredible power and the longest battery life we’ve ever had on a Mac. Customers are also loving the newest Mac Studio, which is the most powerful Mac we’ve ever made with next level capabilities to tackle even the most demanding AI workflows. At the same time, Mac Mini continues to win over customers by packing so much performance into an ultra compact design.

And with fantastic new updates in macOS Tahoe 26, from the phone app to live activities to our biggest ever update to Spotlight, Mac users across our entire lineup are going to find delightful new ways to stay connected and productive. For iPad, June revenue was $6,600,000,000 Our incredibly versatile iPad lineup brings together power and portability like never before, And users are already excited for our biggest iPad software update ever with the upcoming release of iPadOS 26. It starts with a new windowing system that’s remarkably intuitive, giving users more control than ever of their iPad experience. An enhanced Files app makes it easier than ever to stay organized. And that’s all on top of a beautiful new software design that brings these updates to life.

Turning to Wearables, Home and Accessories. Revenue was $7,400,000,000 and we saw a June record for upgraders to Apple Watch. During the quarter, we marked the ten year anniversary of Apple Watch, celebrating a decade of helping users navigate their health and fitness journeys. And with watchOS ’20 six, Apple Watch will be more intelligent than ever with smart updates to the workout app and smart stack along with a fresh new design that feels both dynamic and personal. We’re also thrilled about what’s coming to Apple Vision Pro with Vision OS 26, introducing spatial widgets that let users customize their digital space, more lifelike personas, and new enterprise APIs that empower companies to build their own spatial experiences.

And this fall, new features for our latest AirPods lineup will unlock even more possibilities from studio quality audio recording to using AirPods as a camera remote, giving users powerful new ways to capture content and stay connected. As we’re innovating across our lineup, we’re especially proud of the work we’re doing to help our users live healthier lives. Since we first launched our hearing health features for AirPods Pro two, I’ve received notes from people who are delighted to be able to connect more deeply with loved ones. Whether it’s with AirPods Pro two or Apple Watch or iPhone, it’s amazing to see the power of our health and safety features, from hearing tests to fall detection alerts to irregular rhythm notifications having such a profound impact. Turning to services.

Revenue for the June was $27,400,000,000 up 13% from a year ago and an all time record. Apple TV plus scored 81 nominations, a record for the platform across nearly every eligible category for this year’s Emmy Awards. Severance leads all Emmy nominees with 27 nominations, and the studio follows close behind with 23 nominations, more than any other freshman comedy series ever. It’s amazing to see how these and other Apple TV shows have captured the popular imagination. To date, Apple TV plus has earned more than 2,700 award nominations and five eighty five wins on the strength of the highest rated original content of any streaming network.

And we continue to see very positive trends in the June with TV plus viewership up strong double digits year over year. In June, we were also thrilled to release F1 in theaters around the world, one of the summer’s most unforgettable blockbusters. During the quarter, we celebrated a big anniversary with ten years of Apple Music. To mark the occasion, we launched an all new studio space in Los Angeles for artists to create content and connect with fans. And later this year, we’re bringing Apple Music users even more to love, from an enhanced listening experience with automix, which mixes songs like a DJ, to lyrics translation and more.

The App Store, meanwhile, continues to be the very best place to discover the latest apps from developers around the world in a safe and trusted way, and App Store revenue grew double digits year over year, setting a June record. In retail, we continue to find opportunities in emerging markets to connect with even more customers. We recently launched the Apple Store online in Saudi Arabia, and we couldn’t be more excited to open new stores in The UAE and India later this year. We were also delighted to welcome customers in Japan to a new location in the heart of Osaka. Across everything we do at Apple, we show up by leading with our values.

We feel strongly that the benefits of technology should be shared by everyone. That’s why we make technology for everyone. In May, to mark Global Accessibility Awareness Day, we announced updates to help users learn, connect and interact with their worlds, including Magnifier for Mac, a new braille experience and Accessibility Reader, a new system wide reading mode to make it easier to understand content. And we’re proud to introduce accessibility nutrition labels, giving users an understanding of accessibility features before they download an app while helping developers educate people on features their app support. This month, we also announced a $05,000,000,000 commitment with NP Materials to strengthen the supply of vital recycled rare earth materials in The U.

S. And support American industry. And in August, we’re opening our all new Apple Manufacturing Academy in Detroit to train and support American manufacturers. These investments are part of Apple’s largest ever spin commitment, which we announced earlier this year. Over the next four years, Apple is investing $500,000,000,000 in The U.

S, driving innovation and creating jobs in cutting edge fields like advanced manufacturing, silicon engineering, and artificial intelligence. We’re proud of this work and all that we’re doing to tap into American innovation and bring the best technology experiences to users across the globe. And we continue to look for further opportunities to do even more. Finally, the situation around tariffs is evolving, so let me provide some color there. For the June, we incurred approximately $800,000,000 of tariff related costs.

For the September, assuming the current global tariff rates policies and applications do not change for the balance of the quarter and no new tariffs are added, we estimate the impact to add about $1,100,000,000 to our costs. This estimate should not be used to make projections for future quarters as there are many factors that could change, including tariff rates. We’re really proud of our results for the June, and I want to thank our teams and our customers. In everything we do, we’re driven by transformative innovation, delivering the most exceptional products and services we’ve ever created, and we’re especially excited about what’s ahead. With that, I’ll turn it over to Kevin.

Kevin Parekh, CFO, Apple: Thanks, Tim, and good afternoon, everyone. Our revenue of $94,000,000,000 was up 10% year over year and is a new June record. We grew in every geographic segment and in the vast majority of the markets we track. Products revenue was $66,600,000,000 up 8% year over year, driven by growth across iPhone and Mac. And thanks to our high levels of customer satisfaction and strong loyalty, our installed base of active devices reached another all time high across all product categories and geographic segments.

Services revenue was $27,400,000,000 up 13% year over year and an all time record. We saw strength across the world with double digit growth in the majority of our markets. Company gross margin was 46.5%, at the high end of our guidance range and down 60 basis points sequentially, primarily driven by approximately $800,000,000 in tariff related costs Tim mentioned earlier. Products gross margin was 34.5%, down 140 basis points sequentially, driven by mix and tariff related costs, partly offset by cost savings. Services gross margin was 75.6%, down 10 basis points sequentially.

Operating expenses landed at $15,500,000,000 up 8% year over year. This strong business performance led to June records for both net income at $23,400,000,000 and diluted earnings per share of 1.57 which was up 12% year over year. Operating cash flow was also strong at $27,900,000,000 Now I’m going to provide some more details for each of our revenue categories. IPhone revenue was $44,600,000,000 up 13% year over year driven by the iPhone 16 family. As Tim noted, we saw iPhone growth in every geographic segment and double digit growth in many emerging markets.

The iPhone active installed base grew to an all time high in total and in every geographic segment, and we reached a June record for upgraders. According to a recent survey from World Panel, formerly of Kantar, iPhone was a top selling model in The U. S, urban China, The U. K, Australia, and Japan during the June. And we continue to see very high levels of customer satisfaction in The U.

S. At 98%, as measured by four fifty one Research. Mac revenue was $8,000,000,000 up 15% year over year, driven by continued strength across the portfolio, including MacBook Air, Mac Mini, and MacBook Pro. We grew in every geographic segment and saw double digit growth in Europe, Greater China, and the rest of Asia Pacific. The Mac installed base reached an all time high and we hit a June record for upgraders.

In The U. S, customer satisfaction was recently measured at 97%. IPad revenue was $6,600,000,000 down 8% year over year, which was expected given the difficult compare against the launch of the iPad Air and iPad Pro in the year ago quarter. At the same time, the iPad installed base reached another all time high and over half of the customers who purchased an iPad during the quarter were new to the product. And based on the latest reports from four fifty one Research, customer satisfaction was 98% in The U.

S. Wearables, Home and Accessories revenue was $7,400,000,000 down 9% year over year. This was driven by a difficult compare on accessories due to the prior year’s iPad launches that I just referred to. The Apple Watch installed base reached a new all time high with over half of customers purchasing an Apple Watch during the quarter being new to the product. We also set a quarterly record for upgraders on Apple Watch.

And the latest customer satisfaction for Watch in The U. S. Was reported at 97%. Our services revenue reached an all time high of $27,400,000,000 up 13% year over year. The performance in the June was broad based.

We saw a sequential acceleration across a majority of the categories, including cloud services where we reached an all time revenue record driven by the year over year growth of iCloud paying accounts. We saw strong momentum during the June, and the growth of our installed base of active devices gives us great opportunities for the future. Customer engagement across our services offerings also continued to grow. Both transacting and paid accounts reached new all time highs, with paid accounts growing double digits year over year. Paid subscriptions also grew double digits.

We have well over 1,000,000,000 paid subscriptions across the services on our platform. We continue to improve the quality and breadth of our service offerings, from the new Apple Games app to a continued expansion of tap to pay and Wallet. Turning to enterprise, organizations are continuing to invest in Apple products to drive employee innovation and productivity. With companies like PayPal and Roche deploying more Macs for their workforce, we had the best June ever for Mac and Enterprise. In Thailand, Siam Commercial Bank, one of the largest Thai banks, has deployed thousands of iPads across their branches to enhance the quality and efficiency of their banking operations from loan services to wealth management.

CAE, a leader in pilot training and simulation technology, is using Apple Vision Pro to enable pilots to become more familiar with aircraft procedures, leading to more productive in person flight simulator training outcomes. Let’s turn to our cash position and capital return program. We ended the quarter with $133,000,000,000 in cash and marketable securities. We had 5,700,000,000 of debt maturities, issued $4,500,000,000 of new debt and increased commercial paper by $4,000,000,000 resulting in $102,000,000,000 in total debt. Therefore, at the end of the quarter, net cash was $31,000,000,000 During the quarter, we returned over $27,000,000,000 to shareholders.

This included $3,900,000,000 in dividends and equivalents and $21,000,000,000 through open market repurchases of 104,000,000 Apple shares. As we move into the September, I’d like to review our outlook, which includes the types of forward looking information that Suhasim referred to. Importantly, the color we’re providing assumes that the global tariff rates, policies, and application remain in effect as of this call, the global macroeconomic outlook does not worsen from today, and the current revenue share agreement with Google continues. We expect our September total company revenue to grow mid to high single digits year over year. We expect services revenue to grow at a year over year rate similar to what we reported in the June.

We expect gross margin to be between 4647%, which includes the estimated impact of the $1,100,000,000 tariff related costs that Tim referred to earlier. We expect operating expenses to be between $15,600,000,000 and $15,800,000,000 We expect OI and E to be around negative $25,000,000 excluding any potential impact from the mark to market of minority investments and our tax rate to be around 17%. Finally, today our Board of Directors has declared a cash dividend of $0.26 per share of common stock payable on 08/14/2025, to shareholders of record as of 08/11/2025. With that, let’s open the call to questions.

Suhasini Chandramali, Director of Investor Relations, Apple: Thank you, Kevin. We ask that you limit yourself to two questions. Operator, may we have the first question please?

Operator: Certainly. We’ll go ahead and take our first question from Michael Ng with Goldman Sachs. Please go ahead.

Michael Ng, Analyst, Goldman Sachs: Hey, good afternoon. Thank you for the questions. I just have one on upgrade rates and one on CapEx. First, on the upgrade rates, it was encouraging to see the records on iPhone, Mac and Watch. I was wondering if you’re seeing strength in the upgrade rates?

Or is the records more a function of the growing installed base? What is your research showing that made upgrades particularly compelling this year? For example, is it product features, tariff pull forward, perhaps Apple Intelligence? And then I’ll give my follow-up on CapEx.

Tim Cook, CEO, Apple: You want to do CapEx first?

Kevin Parekh, CFO, Apple: Yes, let’s do CapEx first. Mike,

Michael Ng, Analyst, Goldman Sachs: the CapEx, it’s up notably year to date. Could you just comment on your capital spending plans this year and next and provide some qualitative color in terms of what’s driving that growth? Is it AI related or supply chain diversification, for instance? Thank you.

Kevin Parekh, CFO, Apple: Yeah, Mike. It’s it’s it’s a combination of factors. I would say a pretty significant driver, as Tim talked about, is the fact we are increasing our investment significantly in AI. So that is certainly a a component of it. As you know, we’ve been investing in private cloud compute, is also in our first party data centers.

The other piece, as you know, is we do have a hybrid strategy where in cases we do use third parties to make capital investments, and we also invest in our own. So you are going to see an increase in CapEx. We also from time to time have other investments in facilities, in tooling, but I would say a significant portion of the driver of growth that you’re seeing now is really driven by some of our AI related investments.

Tim Cook, CEO, Apple: On the upgrades, Michael, if you look at iPhone, the 16 family grew double digit as opposed to the 15 family from the year ago quarter. And so we did set an upgrade record. I think it directly is because of the strength of the product. Mac also set records on upgrade. And I think, you know, we continue to see a move to Apple Silicon and the performance of Apple Silicon is playing a very key role.

And so it was an incredible quarter. In terms of if you’re wondering about pull forward, we would estimate the pull forward of demand into April specifically to be about one point of the 10 points in terms of people buying because of discussions about tariffs.

Suhasini Chandramali, Director of Investor Relations, Apple: Alright. Thank you, Tom.

Michael Ng, Analyst, Goldman Sachs: Thank you, Kevin. Thanks,

Suhasini Chandramali, Director of Investor Relations, Apple: Mike. Operator, can we have the next question, please?

Operator: Our next question is from Eric Woodring with Morgan Stanley. Please go ahead.

Eric Woodring, Analyst, Morgan Stanley: Hey, good afternoon, guys. Thank you very much for taking my questions. I have two as well. Pip, maybe starting with You know, shortly after March earnings, there were some reports about searches on Safari declining in April for the first time, I think, in over two decades. Judging by your 13% services growth this quarter, it doesn’t seem to indicate that April trends necessarily played out through the remainder of the June quarter.

And so I’m I’m really just looking for a little bit more color on on really how the rest of the quarter played out and if you believe Apple products as kind of search access points are losing their strategic value as AI platforms become more valuable or popular or increasing in strategic value? And then I have a follow-up. Thank you.

Tim Cook, CEO, Apple: I think they continue to be very valuable. I think that consumers’ behaviors are evolving, and we’re monitoring it very closely.

Eric Woodring, Analyst, Morgan Stanley: Okay. I appreciate that color. Thanks, Tim. And then maybe second to that, I’d love if you could maybe elaborate a bit on what you’re seeing in China. I think in an interview earlier this afternoon, you alluded to some of the promotions being tailwinds.

But just bigger picture, if we take a step back in China, how would you characterize demand interest in the iPhone 16 and some of your other products? Is that shifting? Or maybe were some of the trends in the June maybe a bit more onetime and unique in nature? Yes.

Tim Cook, CEO, Apple: We did grow in Greater China by 4% during the quarter versus the previous quarter. It was driven by an acceleration by iPhone, although we also had substantial growth on the Mac year over year. From a as you know, the government has placed certain subsidies that affect some of our products, not all of them, but there are some of them. And I think that had some effect. It was the first full quarter of the subsidy playing out.

That it cut in during a portion of the previous quarter. The also the other things I would say are the that the installed base hit a record high in Greater China, and we set an all time record for the iPhone installed base. The iPhone upgraders in Mainland China set a record for the June. And according to World Panel, which was formerly known as Kantar, iPhone had the top three models in urban China, which is extraordinary. Also, you look at the other products, Mac, iPad, and Watch, the majority of customers that are buying in China Mainland were new to the product.

So lots of good things there. And the other thing I would point out, which is an interesting point, the MacBook Air was the top selling laptop model in all of China, and the Mac Mini was the top selling desktop model in in all of China. So overall, a positive very positive quarter.

Eric Woodring, Analyst, Morgan Stanley: Great. Thanks for the color, Tim. Good luck.

Suhasini Chandramali, Director of Investor Relations, Apple: Right. Thank you, Eric. Eric. Operator, can we have the next question, please?

Operator: Our next question is from Ben Reitsis with Melius Research. Please go ahead.

Ben Reitsis, Analyst, Melius Research: Yeah. Thanks. I I really appreciate it. I wanted to, ask about Siri, Tim, and just overall AI investment. There’s a perception that Siri is going to help drive other new products potentially that maybe where voice is quite needed.

And just wondering in your how’s your confidence towards launching that next year? Is there anything that’s been done internally to increase that confidence? Is it tied to the investment? I just think folks would love to know a little bit more about your confidence and how that’s going. And then I have a follow-up.

Thanks.

Tim Cook, CEO, Apple: Yes. Thanks for the question. We’re making good progress on a more personalized Siri, and we do expect to release the features next year as we had said earlier. Our focus from an AI point of view is on putting AI features across the platform that are deeply personal, private, and seamlessly integrated. And, of course, we’ve done that with more than 20 Apple intelligence features so far from visual intelligence to cleanup to writing tools and all the rest.

We are significantly growing our investment. We did during the June. We will again in the September. I’m not putting specific numbers behind that at this point, but you can probably tell in the guidance that things are moving up. We are also reallocating a fair number of people to focus on AI features within the company that are you know, we have great, great team, and we’re we’re putting all of our energy behind it.

Terms of products here. In terms of other products, I you know, I don’t want to really comment on specific other products, but we have an exciting road map ahead. And I could not be more excited about it.

Ben Reitsis, Analyst, Melius Research: That’s great, Tim. Thanks for the color. Just with regard to my second question, it’s about the overall revenue guide. And I appreciate that you guide the best you can see it, but I just wanted to challenge it from a different way is, why would it decelerate if services is staying the same at 13%? What is there a conservatism there?

I would think even currency is just as favorable, if not more favorable. So why would it decelerate to the higher single digits from where you were in the quarter? Or is it just being conservative? And if there’s something decelerating or a comp, do you mind just pointing that out? Thanks.

Kevin Parekh, CFO, Apple: Yeah, Ben, this is Kevin. Thanks for the question. I think when you look at the growth from Q3, which is reported to the mid to high single digit guide, I think you have to kind of keep in mind two components. The first is the effect of the tariff related pull ahead in demand that Tim referenced earlier, which we estimated to be about one point of the 10 points that we ended up doing in Q3. And then the other factor that I think you have to take into consideration is the fact that in September a year ago, we had the full quarter impact of the iPad launches, which also leads to a difficult compare this year.

So those two components are things you have to take into consideration as you think about the move from Q3 to Q4. I would say foreign exchange is a very minor tailwind going from Q3 to Q4, so not really a major factor.

Ben Reitsis, Analyst, Melius Research: Okay, thanks a lot.

Suhasini Chandramali, Director of Investor Relations, Apple: Awesome. Thank you, Ben. Operator, could we have the next question please?

Operator: Our next question is from Wamsi Mohan with Bank of America. Please go ahead.

Wamsi Mohan, Analyst, Bank of America: Hi, yes. Thank you so much. Tim, I know you said similar growth in services and that’s predicated with Google payments continuing. Is there any way for us to dimensionalize sort of or maybe just conceptually talk about maybe options if the counter were to happen, if the payments were not allowed in some way, what are some of the things that Apple could do given that it is a significant chunk of profitability? And I have a follow-up.

Tim Cook, CEO, Apple: Yeah. Wamsi, I don’t really want to speculate on the court ruling and how they would rule and what we would do as a consequence of it.

Wamsi Mohan, Analyst, Bank of America: Okay. Okay. I guess we’ll wait for that ruling to come out. I guess separately, Tim, at a high level, when you look at some of what is perceived fears of new form factors and ways to interact with devices, there was some worry that given some of the developments in AI that there could be a world where dependence on screen based devices significantly diminishes. And I’m kind of curious to get your thoughts on if do you think that would happen and and rate and pace in which, and and how do you think Apple is preparing in in in that case?

Tim Cook, CEO, Apple: Yeah. When you when you think about all the things an iPhone can do from connecting people to bringing app and game experiences to life, to taking photos and videos, to helping users explore the world and conduct their financial lives and pay for things and so much more. You know, it’s it’s difficult to see a world where iPhone’s not living in it. And that doesn’t mean that we are not thinking about other things as well. But I think that the devices are likely to be complementary devices, not substitution.

David Vo, Analyst, UBS: Okay. Thank you so much, Tim.

Tim Cook, CEO, Apple: Thank you.

Suhasini Chandramali, Director of Investor Relations, Apple: Thank you, Wamsi. Operator, could we have the next question, please?

Operator: Next question is from Amit Daryanani with Evercore. Please go ahead.

Amit Daryanani, Analyst, Evercore: Yes. Good afternoon. I guess to start with, Tim, the tariff assumption of $1,100,000,000 in the September, kind of saw I understand the uptick you folks are talking about. But can you just talk about assuming tariffs remain at these levels or even if they evolve under Section two thirty two, how do you eventually think about offsetting this headwind to your P and L? And when do you decide to execute on the levers to offset this headwind versus just looking at your bottom line?

Tim Cook, CEO, Apple: You know, right now, we’re just estimating the cost of it. And it’s up quarter over quarter because our volume is up quarter over quarter. And there was some build ahead in the previous quarter. And so that’s the primary reasons that it’s up. In terms of what we do to mitigate, we obviously try to optimize our supply chain.

And ultimately, we’re we will do more in The United States. We’ve committed 500,000,000,000 investment in The U. S. Over the next four years, and we’ve already building chips in Arizona. And in fact, we’re building semiconductors across 12 states and 24 factories and have a lot of other things in the works.

You probably saw the investment in MP Materials last week. And so we continue to explore these things and look for more that we can do, which I think ultimately is the objective.

Amit Daryanani, Analyst, Evercore: Got it. Super helpful. And then your services growth, I think, was extremely impressive at 13%, especially given all the fierce folks had. Can you just touch on did you see any impact that was notable from the Epic case and the steering dynamics that came after that? And maybe just touch on what does that appeals process looks like looks like for me as you go forward?

Thank you.

Kevin Parekh, CFO, Apple: Yeah. This is Kevin. Let let me take that one. In general, I think, just reminding, I think you just said we had a very strong services quarter. We had an all time record, had the $27,400,000,000 up 13%.

The one thing I would also say is our services performance is broad based. So we also saw strength in developed and emerging markets, both parts of the world had double digit growth. We also saw a sequential acceleration across the majority of our categories, including cloud services where I mentioned in the prepared remarks that we had an all time revenue record. As it relates to the Epic decision, you know, we keep in mind, we only just introduced the change required by the court in the June. And as you know, we don’t provide the level of detail, but but in general, I would say it was a very, very in in The US, we had a double digit growth for The US App Store, and we set an all time record.

And so we’ll continue to monitor the effects on our business, but we’ll continue to innovate and ensure that the App Store delivers the best experience for users and remains a great business opportunity for developers.

Suhasini Chandramali, Director of Investor Relations, Apple: All right. Thank you, Amit. Operator, could we have the next question, please?

Operator: Our next question is from David Vo with UBS. Please go ahead.

Tim Cook, CEO, Apple0: Great. Thanks, guys. And I have two questions as well. Maybe, Tim, just on the supply chain strategy. I know last quarter, talked about focusing production or assembly to India.

And I just want to get an update on how you’re thinking about the strategy holistically given sort of the tariff rates, I think, in India potentially are higher than I think anyone has expected. So I know you mentioned some U. S. Investments would love to kind of get your thoughts on how you’re thinking about China versus the rest of Southeast Asia and India going forward. And then I’ll give you my second question also.

So Kevin, I’m just trying to understand a little bit more about the demand drivers of iPhone in the quarter because obviously the 16 has been in the market for some time. I know there was some promotional activity, but seasonally, you generally don’t see this kind of strength in the June quarter. Maybe can you help us understand outside of maybe the promotional activity, what else were some of the drivers that led to what was looks like a pretty significant above seasonal strength in the June? Thanks.

Tim Cook, CEO, Apple: Yeah. In terms of the tariff situation and country of origin and so forth, one thing I would say just to remind everyone is keep in mind that the vast majority of our products are covered under the Section two thirty two investigation. And so the today, or I should say last quarter, the bulk of the tariffs that we paid were the IEEPA tariffs that hit early in

Ben Reitsis, Analyst, Melius Research: the

Tim Cook, CEO, Apple: year related to China. And so that’s just a reminder of where things are and what we assumed as we calculated the projection of $1,100,000,000 that’s in our outlook color. In terms of the country of origin, it’s the same as I referenced last quarter. There hasn’t been a change to that, which is the vast majority of the iPhones sold in The US, or the majority, I should say, have a country of origin of India. And the the vast majority of the products other products, the Mac and the iPad and the Watch, have a country of origin of Vietnam that are sold in The United States.

Still, the products for other international countries, the vast majority of them are coming from China. And so that hopefully gives you a flavor of the of where things are. But I would I would stress again that we do a lot in this country, in The United States, and we’ve committed $500,000,000,000 and we’re always looking to do more. And you could kind of see that in the most recent announcements, whether it’s MP Materials or our manufacturing academy that we’re standing up in Detroit in a couple weeks or so. And and so we’re gonna be doing we’re doing more in this country, and that’s on top of having roughly 19,000,000,000 chips coming out of

Eric Woodring, Analyst, Morgan Stanley: The

Tim Cook, CEO, Apple: US now, and we’re we will do more. And, of course, glass from iPhone and the face ID module. And so there’s there’s loads of different things that are done in in The United States.

Wamsi Mohan, Analyst, Bank of America: And then, David, as as And then

Tim Cook, CEO, Apple1: on the and then on the iPhone activity?

Kevin Parekh, CFO, Apple: Yeah. So I was gonna mention the iPhone activity. You asked if there’s any kind of unique characteristics this quarter. I would just say, as Tim outlined, we really believe that the strong upgrade performance, which was a, you know, a June record, was really driven by the strength of the product lineup. You know, the iPhone 16 family has done incredibly well compared to the iPhone 15 family.

And we also, as you recall, you know, recently introduced the 16 e as well, which also continued to, you know, impact the success of the overall iPhone 16 lineup.

Tim Cook, CEO, Apple0: Great. Thanks, guys. Thank you.

Suhasini Chandramali, Director of Investor Relations, Apple: Great. Thank you, David. Operator, could we have the next question, please?

Operator: Our next question is from Krish Sankar with TD Cowen.

Tim Cook, CEO, Apple2: I have two of The first one is for Kevin. Just on the previous question, do you think there was any pull in of iPhones in the June that led to some of the upside? And how to think about channel inventory in June and how it looks in September relative to seasonal trends? And then I had a longer term follow-up for Tim.

Tim Cook, CEO, Apple: Let me see if can answer the channel inventory question or what I think is the channel inventory question. If you look at iPhone channel inventory from the beginning of the quarter to the end of the quarter, we reduced it and it ended toward the low end of our targeted range. And so that’s the answer on the inventory piece of it.

Kevin Parekh, CFO, Apple: And then I think you also asked about the pull ahead impact. I think we referenced that earlier. Just to be clear on what we believe we saw on the June, we did, you know, we did see some obvious signs of pull ahead really in the April time frame around the tariff related, you know, discussions that were out in the marketplace. And so we felt that that was, from what we saw, about a one point impact of the 10 points at a total company level of growth. And so that was the the limited impact that we really we saw for the quarter.

Tim Cook, CEO, Apple2: Got it. Very helpful. I know I just had like a a long term follow-up for Tim. Tim, I was kinda curious about your thoughts on AI for edge devices. You know, there’s, like, some people who think that LLM could be a commodity in the future.

Do you think do you see a scenario where LLM become a core part of your iOS? Or is the SLM the way to go? And how to think about evolution of edge devices in a futuristic AI world, and is smartphone gonna be the choice of device? Just curious your thoughts on it, broadly speaking. Thank you.

Tim Cook, CEO, Apple: I the way that we look at AI is that it’s one of the most profound technologies of our lifetime. And I think it will affect all devices in a significant way. What pieces of the chain are commoditized and not commoditized, I wouldn’t want to really talk about today because that gives away some things on our strategy. But I think it’s a good question.

Tim Cook, CEO, Apple2: Thanks, Jim.

Tim Cook, CEO, Apple: Yeah.

Suhasini Chandramali, Director of Investor Relations, Apple: Thank you, Krish. Operator, could we have the next question, please?

Operator: Our next question is from Samik Chatterjee with JPMorgan. Please go ahead.

David Vo, Analyst, UBS: Hi. Thanks for taking my questions. Tim, maybe if I can start with your remarks about the pull ahead being about a one percentage point benefit here. Anything to share in terms of how what’s underlying that estimate in terms of what you’re seeing for? Is it a pull ahead largely on iPhones?

Or is it across the board? And is it primarily in The US or, again, sort of across multiple regions? Any color there would be helpful in terms of how you’re sort of getting to that assumption there. And I have a follow-up.

Tim Cook, CEO, Apple: It was principally on iPhone and Mac. And it was pretty you know, it was obvious evidence of it. It was an unusual buying pattern there and that largely occurred in April toward the beginning of the quarter. And it was really we believe it was largely United States.

David Vo, Analyst, UBS: Okay. Okay. Got it. And maybe on the tariff front, when you gave the estimate of $900,000,000 last quarter, which came in at 800,000,000 you did highlight it was there were some unique factors in the quarter. When I take the $1,100,000,000 that you’re now sort of expecting for the September quarter, and as we start to think about December, would is there anything unique in the December quarter in terms of sourcing from regions, etcetera, that would uniquely impact December just given sort of that you had highlighted that quarter to quarter or so there would be unique things?

Just curious if December looks very different from September because of any unique factors.

Tim Cook, CEO, Apple: I would be careful about projecting based on the numbers from Q2 and Q3 because, one, we’re uncertain of what the rates will be, and so the rates may change. Two, in particularly in last quarter, we had some build ahead inventory that we were that we had within the company and within our supplier within our supply chain. And so those two are a little unique. Also, as you know from following us for so long, Q1 is generally a higher volume quarter. The tariffs are currently are pretty linear with volume.

David Vo, Analyst, UBS: Okay. No, understood. Thank you. Yeah. Thanks for taking my questions.

Suhasini Chandramali, Director of Investor Relations, Apple: All right. Thank you, Samik. Operator, could we have the next question, please?

Operator: Our next question is from Aaron Rakers from Wells Fargo. Please go ahead. Yeah.

Tim Cook, CEO, Apple3: Thanks for taking the question. I’ve I’ve got two as well, and and I’ll just ask them together. I I guess the first one is just more housekeeping. Kevin, when we think about, you know, currency impact, how much of a benefit was currency this quarter? And I guess across the business and in particular, maybe on the services segment?

And on a year on year basis, how much currency benefit should we be thinking about embedded in the guidance into the September? And then the second quick question is CapEx is clearly moving higher. I know you guys don’t guide specifically to that number. But just kind of qualitatively, should we as you lean in more on AI, should we really start to see that CapEx, which is running close to about $4,000,000,000 annualized today, really start to move appreciably higher? Any color on that would be helpful.

Kevin Parekh, CFO, Apple: Great, Aaron. Thanks for the questions. Let me answer the first one, first around foreign exchange. For Q3, we really had no impact from a foreign exchange standpoint on the year on year results. And so when we look at both the revenue growth as well as the gross margin, there was really, you know, virtually no impact from foreign exchange.

As we look at going from Q3 to June to the September, again, very, very, as I mentioned earlier, a very small tailwind going from Q3 to Q4 from a foreign exchange standpoint on both revenue as well as gross margin. And then on the second question, sure, on the CapEx side, think I we talked about the fact that we are and Tim mentioned the fact that we are increasing our investments significantly in AI. You are going to continue to see our CapEx grow. It’s not going to be exponential growth, but it is going to grow substantially. And a lot of that’s a function of the investments we’re making in AI.

As we mentioned, we also have other items that fall into that category, facilities and some of our retail store investments. But I would say a lot of the growth is really being driven by AI. I would remind you that we do have a hybrid model though where we also leverage third party infrastructure in addition to investing in our own first party infrastructure.

Tim Cook, CEO, Apple3: Yeah. Thank you.

Kevin Parekh, CFO, Apple: Thank you.

Suhasini Chandramali, Director of Investor Relations, Apple: Thank you, Aaron. Operator, may we have the next question please?

Operator: Our next question is from Atas Malik with Citi. Please go ahead.

Tim Cook, CEO, Apple1: Hi. Thank you for taking my question. Tim, at the WWDC earlier in the quarter, you showed impressive updates on VisionPRO with the use of widgets, facial scenes, persona and new ways to create content. Appears like Meta and Xiaomi are seeing strong momentum on their AI glasses. So is the focus still around enterprises on VisionPRO, or are you thinking of broadening the use cases and maybe tying it to to to more of your devices?

Any thoughts on VisionPro as it did not get enough airtime in the prepared remarks?

Tim Cook, CEO, Apple: Yeah. Thanks thanks for bringing it up. I was thrilled with the release from the team on VisionOS 26. It includes many things in it like spatial widgets to enable users to customize their digital space. The personas took a huge increase with they’re much more lifelike.

And, of course, there’s new enterprise APIs for companies as well. And we’re seeing, as Kevin talked about in his opening remarks, we’re seeing those things resonate out with CAE and other customers. And so we continue to be very focused on it. And I don’t want to get into the road map on it, but this is an area that we really believe in.

Tim Cook, CEO, Apple1: Great. And Kevin, historically, guys have not done much big M and A. Do you feel like you need to accelerate your AI roadmap or just keep the organic focus?

Tim Cook, CEO, Apple: Let me take that one as well. We’ve acquired around seven companies this year, and that’s companies from all walks of life, not all AI oriented. And so we’re doing one think of it as one every several weeks. We’re very open to M and A that accelerates our road map. We are not stuck on a certain size company, although the ones that we have acquired thus far this year are small in nature.

But we basically ask ourselves whether a company can help us accelerate a road map. If they do, then we’re interested, but we don’t have anything to share specifically today.

Suhasini Chandramali, Director of Investor Relations, Apple: Alright. Thank you, Atif. A replay of today’s call will be available for two weeks on Apple Podcasts, as a webcast on apple.com/investor, and via telephone. The number for the telephone replay is (866) 583-1035. Please enter confirmation code 6287473 followed by the pound sign.

These replays will be available by approximately 5PM Pacific time today. Members of the press with additional questions can contact Josh Rosenstock at (408) 862-1142, And financial analysts can contact me, Suhasini Chandramali, with additional questions at (408) 974-3123. Thanks again for joining us

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