Apple revenue, profits beat expectations on iPhone, Mac sales

Apple has posted financial results for its fiscal third quarter ended June 27, according to reporting by the New York Post, surpassing Wall Street expectations on the strength of robust iPhone and Mac sales. Yet despite beating profit and revenue forecasts for the period, the technology giant issued cautious forward guidance that rattled investors and sent shares tumbling in after-hours trading, reflecting lingering anxieties over supply chain constraints and slowing momentum in key business units.

For the quarter, reported the Globe and Mail, total sales rose 16.4 per cent to reach $109.42 billion, outperforming analyst estimates compiled by LSEG that had predicted a 15.5 per cent increase to $108.65 billion. Profits landed at $2.02 per share, a figure bolstered in part by 11 cents attributable to tariff refunds issued by the United States government. Even when stripping away those refunds, underlying profits still cleared Wall Street estimates of $1.89 per share. Gross margins came in at 50.1 per cent, or 48.1 per cent excluding the tariff benefit, which exceeded the midpoint of the company's own guidance and beat consensus expectations.

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The financial milestone arrives as Apple navigates a period of profound transition and competitive positioning, having recently reclaimed its throne as the world's most valuable company from artificial intelligence chip leader Nvidia. Bolstered by partnerships involving Alphabet's Google, Apple rolled out a revamped version of its Siri virtual assistant equipped with new AI features earlier in the year. This integration has driven both consumers and software developers toward Mac hardware capable of processing AI tasks locally on the device rather than absorbing recurring monthly subscription fees.

Hardware performance proved asymmetrical across categories. IPhone sales surged 21.7 per cent to hit $54.25 billion, marking the company's best-ever third-quarter performance for its signature device during a seasonal window when sales traditionally soften ahead of autumn hardware cycles. Chief Executive Officer Tim Cook pointed to soaring demand paired with a global crunch in memory chip supplies that has already forced price hikes across Macs and iPads. While Apple has temporarily shielded the iPhone from these price increases, analysts increasingly anticipate a price adjustment during the upcoming September product launches.

Mac sales performed even more dramatically, jumping 28.7 per cent to $10.35 billion to easily outpace analyst projections of $8.74 billion, driven by strength in the entry-level MacBook Neo and high-end MacBook Pro. Conversely, iPad sales dropped 5.9 per cent to $6.19 billion, missing expectations due to what Cook described as a difficult comparison against the prior year's launch of the budget-oriented A16 iPad. Wearable sales notched a modest 6.5 per cent increase to $7.88 billion, while revenue across all global regions climbed, including a 22.4 per cent boost in Greater China to $18.82 billion.

Not all metrics brought good news, however. The company's services division — incorporating the App Store, iCloud, and digital content offerings — rose 12.1 per cent to $30.74 billion, falling short of analyst targets of $31.22 billion. Market observers voiced unease over the deceleration. D.A. Davidson analyst Gil Luria noted that investors worry about a compounding slowdown if services growth cools further once iPhone sales normalize from their current buying surge.

Supply Constraints and Capital Strategy

Behind the hardware successes lie mounting operational bottlenecks. Cook revealed in an interview that the primary constraint during the quarter was an industry-wide shortage of advanced chipmaking technology required to produce Apple Silicon processors. If you look at the root causes behind those, it’s that we’re having an incredibly strong product cycle beyond our expectations, and the supply chain just fundamentally has less flexibility in it to meet the high levels of demand, Cook stated to Reuters. The hardware maker is also contending with a strained supply chain pressured by heavy industry spending on AI data centres, fostering a tense dynamic with long-standing memory supplier Micron.

Unlike major Big Tech competitors that have poured hundreds of billions of dollars into proprietary data centres, with Google notably generating negative free cash flow through aggressive infrastructure investments, Apple has maintained a more conservative expenditure strategy. Nevertheless, signals suggest future capital needs may be on the horizon, as Apple has effectively moved to end its long-standing corporate goal of returning all of its cash to shareholders.

Investor apprehension crystallised around the current quarter ending in September. Chief Financial Officer Kevan Parekh informed analysts that revenue growth is projected to land between 9 per cent and 11 per cent, trailing the 12 per cent expansion anticipated by Wall Street. Following the guidance, Apple shares dropped significantly in after-hours trading.

TECHnalysis Research chief analyst Bob O’Donnell suggested that the June quarter may have captured a forward-pulled purchasing wave driven by fear of upcoming price increases rather than sustainable long-term demand. I do think it’s possible people are going to continue to buy the existing phones, because of the price increases, O'Donnell observed, adding that market attention will now focus heavily on how Mac sales absorb fully realised price hikes in the upcoming period.

What to Watch Next

• The company's September product launch event, where Wall Street anticipates potential price adjustments for the upcoming iPhone lineup.
• Performance of Mac hardware shipments as new pricing models take full effect across the current quarter.
• The trajectory of the services division to determine whether decelerating growth is a temporary dip or a persistent trend.
• Developments in memory chip supply chains and Apple's management of advanced silicon components amid ongoing industry shortages.

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