Following the market close on January 29, Apple released its financial results for the first quarter of fiscal year 2026, which ended on December 27, 2025. The report revealed that Apple achieved total revenue of $143.756 billion for the quarter, a 16% increase compared to $124.3 billion in the same period last year. Net profit reached $42.097 billion, marking a 15.9% year-over-year growth. Diluted earnings per share stood at $2.84, surging 18.3% annually. These core financial metrics not only comprehensively exceeded Wall Street expectations but also set a new all-time high for the company's single-quarter performance.
Driven by robust demand for the iPhone 17 series, revenue from Apple's smartphone business soared to $85.269 billion, a substantial 23% year-over-year increase, with its contribution to total revenue rebounding to nearly 60%. Apple's CEO, Tim Cook, stated during the earnings call that the company had achieved its best quarterly performance ever. He emphasized that unprecedented market demand propelled iPhone revenue to record levels across all major global markets, and the company's active installed base of devices has now surpassed 2.5 billion units.
However, as iPhone sales surged beyond expectations, bottlenecks in advanced process chip production capacity emerged. Combined with the persistent rise in memory chip prices, the market is concerned that Apple will face a dual challenge of supply constraints and increasing costs in the upcoming second fiscal quarter.
Cook acknowledged that demand significantly exceeded internal forecasts, resulting in channel inventory being at an extremely low level, and the company is currently in a state of ramping up supply.
Concurrently, Apple's strategic path in the artificial intelligence (AI) domain is becoming clearer. The emerging partnership with Google's Gemini signifies that the tech giant has found a new equilibrium between its closed ecosystem and open collaboration.
A major highlight in Apple's quarterly report was the notable rebound in performance in Greater China. Financial results show that first-quarter revenue in Greater China reached $25.526 billion, a significant 38% increase from $18.513 billion in the prior-year period. This growth rate not only led all major global markets but also dispelled the gloom of growth乏力 experienced over previous quarters.
"Our performance this quarter was outstanding. The installed base of users hit a new record high in Greater China, and the number of users upgrading from older devices also reached a historic peak; simultaneously, the number of switchers [from other platforms] also achieved strong double-digit growth," Cook said. He attributed this to the competitiveness of iPhone products and positive consumer feedback, noting that the iPhone has returned to the top three in sales rankings in urban areas of China, and store traffic in China saw double-digit percentage growth last quarter. "I am extremely pleased with the recovery momentum in the Chinese market and the outstanding performance this quarter."
According to data from market research firm IDC, smartphone shipments in the Chinese market for the fourth quarter of 2025 were approximately 75.64 million units, a slight decrease of 0.9% year-over-year. Among these, Apple shipped 16 million iPhones, ranking first with a 21.5% year-over-year increase.
It's not just the iPhone; Apple's other hardware products also performed well in the Chinese market. Cook stated that in urban areas of China, the iPad remains the best-selling tablet computer, with half of its purchasers being first-time buyers, demonstrating the continued appeal of the Apple ecosystem to new users. Although Mac sales globally declined by 7% year-over-year due to a high base, in China, the MacBook Air and Mac Mini remained the best-selling models in their respective categories.
Beyond the strong recovery in Greater China, emerging markets have also become new growth engines for Apple. Last quarter, Apple recorded double-digit revenue growth in the Indian market, reaching a historical high. Cook expressed optimism about the Indian market's prospects, noting that as the world's second-largest smartphone market, Apple's current market share there remains relatively low.
Meanwhile, Apple's Services business, encompassing the App Store, iCloud, Apple Music, and payment services, demonstrated steady performance. Last quarter, Services revenue surpassed the $30 billion mark for the first time, reaching $30.013 billion, a 14% increase year-over-year, accounting for 20.88% of total revenue. With a gross margin as high as 76.5%, far exceeding that of hardware, the Services business has become a crucial pillar of Apple's profits.
The financial report indicated that Apple's overall gross margin for the last quarter reached 48.2%, at the high end of the guidance range, improving by 100 basis points sequentially. The gross margin for product hardware saw a significant sequential increase of 450 basis points to 40.7%. This was primarily driven by a higher mix of premium iPhone 17 Pro series models and scale benefits from sales growth, which offset the negative impact of rising component costs.
Despite the excellent earnings report, Apple's guidance for the next quarter remained cautious. Supply chain constraints coupled with cost pressures from rising memory chip prices have become a core risk focal point for the market.
The bottleneck is primarily concentrated in the production capacity of advanced process chips. The A-series chips powering the iPhone 17 series and the M-series chips used in Macs and iPads all rely on TSMC's advanced 3-nanometer process technology. Cook revealed that supply chain flexibility is constrained in the short term, and particularly, the shortage of advanced process capacity will directly limit product supply in the second fiscal quarter.
"We are indeed facing supply constraints currently, and it's difficult to judge at this stage when supply and demand will rebalance," Cook stated. "The issues we face now mainly stem from capacity constraints for our custom chips at advanced process nodes; simultaneously, due to the previously mentioned significant demand surge, current supply chain flexibility is also lower than normal levels."
Beyond capacity limitations, the pressure from rising costs cannot be ignored. The continuous increase in memory chip (DRAM and NAND Flash) prices has begun to squeeze Apple's profits. Apple's CFO, Kevan Parekh, mentioned on the call that while the impact of memory price hikes on the Q1 gross margin was minimal, a larger impact on the Q2 gross margin is anticipated.
To address future cost pressures, Apple's management stated they would evaluate a range of long-term response strategies. Although Cook did not disclose specific details, this typically implies that Apple will leverage its bargaining power in the supply chain to secure long-term orders or adjust product pricing strategies to pass on costs. However, management did not provide a clear response to external concerns about whether price increases would be used to maintain profit margins.
In a research note dated January 28, Ming-Chi Kuo, an analyst at TF International Securities, predicted that Apple would absorb the impact of rising costs internally. Kuo expects that Apple will not raise prices for next year's iPhone 18 series but will instead endure a hit to its gross margin.
Kuo also suggested that rising memory quotes would affect iPhone margins, but Apple's strategy is to leverage its advantage in securing supply and absorbing costs during market turbulence to increase market share, subsequently recouping profits through its Services business.
Regarding capital expenditure, Apple continues to maintain its own pace. Amid the global AI arms race, Apple has not aggressively ramped up capital spending on data center construction like other tech giants, instead adopting a "hybrid model." Parekh explained that Apple's capital expenditure includes various items such as tooling, facilities, retail investments, and data centers. Currently, Apple utilizes a combination of its own capacity and third-party capacity for data centers, resulting in relatively smooth fluctuations in the company's capital expenditures.
Earlier last month, Apple announced a multi-year strategic cooperation agreement with Google. Apple stated it would collaborate with Google to advance next-generation foundational models and plans to integrate Gemini capabilities for a more personalized Siri upgrade. During the earnings call, Cook mentioned the partnership with Google, noting that Apple will continue to independently develop certain foundational models, particularly for on-device AI and private cloud computing, to ensure user privacy and data security.
For the second quarter of fiscal year 2026, Apple provided a revenue growth forecast ranging from 13% to 16% year-over-year. While this growth rate represents a deceleration compared to the first quarter, Parekh also projected that the Q2 gross margin would remain high, between 48% and 49%, and Services revenue would continue to achieve double-digit growth.
Due to investor concerns over rising costs, Apple's stock was relatively flat in after-hours trading. Following the market close on January 29, Apple's stock dipped 0.6% to $256.44 per share. On January 30, the stock edged up 0.46% during the regular session but turned negative again in after-hours trading, falling 0.19% to $258.99 per share.
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