Driven by robust sales of iPhones and Macs, Apple Inc.'s fiscal third-quarter results exceeded market expectations. However, as the services segment performance and the fourth-quarter revenue guidance both fell short of analyst estimates, Apple shares declined approximately 6% in after-hours trading. On July 30, local time, Apple released its fiscal third-quarter earnings report for the period ending June 27, 2026. The data showed that quarterly revenue grew about 16% year-over-year to $109.417 billion, slightly above analyst projections, while earnings per share (EPS) rose approximately 29% year-over-year to $2.02, beating the market consensus by nearly 7%. The gross margin for the quarter stood at 50.1%. Apple CEO Tim Cook stated that the company achieved its strongest June quarter ever, with revenue from iPhone, Mac, and services all posting double-digit growth, and gains were recorded across all global regions. Apple forecasts fourth-quarter revenue growth of 9% to 11%, a guidance range that overall falls below the analyst expectation of 12.1%. Company executives highlighted that foreign exchange fluctuations and supply constraints are the two primary drag factors.
iPhone and Mac performance was strong, while the services segment slightly underperformed expectations. In terms of revenue structure, Apple's product revenue for the fiscal third quarter was $78.68 billion, above the analyst estimate of $77.25 billion, serving as the main driver of the quarterly revenue beat. By category, the iPhone remains Apple's core revenue pillar, contributing $54.25 billion in the fiscal third quarter, representing nearly half of total revenue, up 21.7% year-over-year and exceeding expectations by 1.2%. This indicates that the iPhone 17 series has garnered strong market reception, even amid a sluggish overall smartphone market. The Mac business saw a significant rebound this quarter, with revenue reaching $10.35 billion, up 28.7% year-over-year and exceeding estimates by $1.73 billion, a margin of about 20%, mainly benefiting from sales growth driven by AI-related demand. iPad revenue was $6.19 billion, down 5.9% year-over-year and approximately $700 million below market expectations. Revenue from the wearables, home, and accessories segment was $7.883 billion, up 6.5% year-over-year, largely in line with expectations. The services business (including App Store, Apple Music, iCloud, and Apple Pay) saw quarterly revenue of $30.7 billion, up 12.1% year-over-year, but fell short of the general market forecast of around $31.2 billion. In regional markets, revenue from the closely watched Greater China region was $18.82 billion, up 22% year-over-year, but approximately 4% below analyst projections, with growth not meeting expectations for a steady pace compared to the previous quarter.
Product sales in the fourth fiscal quarter will be impacted by supply constraints. The market is highly focused on the reasons for Apple's slowing growth in the fourth fiscal quarter. Apple CFO Kevan Parekh stated that the quarterly guidance was affected by supply constraints, with related product growth expected to fall into the double-digit range of around 15%. Excluding an approximately 2.5% foreign exchange impact, services business growth is projected to be roughly flat with the third quarter's 12%. He noted that the negative impact of supply constraints will "significantly intensify" in the fourth fiscal quarter, affecting the iPhone, Mac, and iPad product lines. When asked if this indicates a decline in demand, Cook explicitly refuted the idea. He said the core issue is insufficient capacity for system-on-chip (SOC) components built on advanced process nodes. Cook further explained that this is not a routine supply issue but rather a result of inaccurate demand forecasting—actual performance of iPhone and Mac significantly exceeded the company's expectations, while supply chain flexibility has decreased substantially compared to before. "We've been pulling forward supply, but at some point, there's a limit to that. So, we're heading into a quarter where we face pressure on the supply side," Cook said.
Rising storage costs drive product price increases. Regarding recent Apple product price hikes, when asked about the connection between pricing strategy and storage chip inflation, Cook responded: "We raised prices reluctantly. We did so because we are in a 'once-in-a-century' storage pricing environment, where storage costs are rising exponentially, and that's the reason for the price increase." Apple CFO Kevan Parekh provided specific data, noting that the gross margin for the third fiscal quarter, after accounting for tariff rebates, was 48.1%, and the company guided a fourth-quarter gross margin of approximately 46.5% after rebates. To address this situation, Cook said Apple is evaluating all possible solutions. At this year's Worldwide Developers Conference, Apple launched the new Apple Intelligence and the revamped Siri AI, which are seen as the biggest growth drivers for the future. Apple management indicated that feedback from early developers and the public beta version has been "extremely enthusiastic." Regarding whether AI will change Apple's capital intensity, Cook acknowledged that the company is increasing R&D and AI-related spending, adopting a hybrid model architecture (local processing + private cloud + third-party cloud). He also hinted at a future monetization path: "We do believe many people will want to use it extensively. Therefore, we will offer some kind of upgrade option on iCloud+, where users can purchase a more advanced iCloud+ service." In response to market concerns about when Apple Intelligence will launch in the EU and China, Cook said that Apple aims for a global simultaneous release but was unable to achieve this in the EU. The company is now in close communication with the European Commission, seeking a solution. Regarding China, initial functions of Apple Intelligence were approved for launch last week, and the company is pushing forward with their rollout, while the full launch of Siri AI still requires further preparation. Notably, this earnings call was also Cook's last as Apple CEO. John Ternus, currently 50 years old and Apple's senior vice president of Hardware Engineering, will succeed Cook as Apple CEO on September 1st.
Comments