Apple's fiscal third-quarter revenue and profit beat analyst estimates as iPhone sales climbed nearly 22% year on year, but shares slid 4% in after-hours trading after services revenue missed forecasts. Tariff refunds pushed gross margin above 50%, while chief executive Tim Cook flagged a global memory chip shortage that has already forced price increases on Macs and iPads. It is Cook's last earnings report before hardware chief John Ternus becomes CEO in September.
Apple reported stronger-than-expected fiscal third-quarter results on Thursday, as iPhone sales climbed nearly 22% year on year to $54.25 billion, above the $53.86 billion analysts had expected. The stock still slid 4% in extended trading after services revenue missed analyst estimates.
iPhone strength offsets a services miss
Revenue for the quarter reached $109.42 billion, above the $108.65 billion analysts had forecast. Earnings per share reached $2.02, not directly comparable with the $1.89 estimate, as net income rose to $29.79 billion from $24.43 billion a year earlier. Services revenue of $30.74 billion fell short of the $31.22 billion analysts had expected, a miss Apple attributed to foreign-exchange headwinds.
Cook, who will hand the CEO role to hardware chief John Ternus in September, said the company saw significant momentum on the iPhone since launch: "We just had significant momentum on the iPhone really since the launch." Revenue in Greater China rose 22% to $18.82 billion. Mac sales jumped nearly 29% to $10.35 billion, which Cook attributed to strong performance for the MacBook Neo, the low-cost laptop introduced in March. It was the third straight quarter of iPhone revenue growth above 20%, the first such streak since the pandemic-era upgrade cycle, according to Investing.com.
Apple shares closed at $333.43, down 1.4% during Thursday's regular session before the report. The pullback left the stock up about 23% for the year, after it briefly crossed a $5 trillion market capitalization for the first time this week.
Tariff refunds push margin to a record
Apple said tariff rebates added 11 cents per share to earnings, lifting gross margin two percentage points to 50.1%. According to the Financial Times, the rebates followed a US Supreme Court ruling that struck down some of President Trump's emergency tariffs, allowing companies to seek refunds.
Memory shortage clouds outlook for iPhone prices
Apple raised Mac and iPad prices 20% in June to offset the memory chip shortage, and it has not yet increased iPhone prices in most markets. Many analysts are expecting hikes as soon as this year. Memory chip prices jumped about 300% in the second quarter alone, according to the International Data Corporation, as demand from AI data-center builders absorbed available supply.
To soften the impact of any future increase, Apple this week struck a deal with buy-now, pay-later firm Klarna that lets US customers lease an iPhone starting at $17.99 a month. The company has also gained ground on rivals, with its smartphone market share rising to 20% this quarter from 17% a year earlier, even as global smartphone shipments fell 11%.
Sources: CNBC, Financial Times, Investing.com
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