Apple Inc. Q3 FY26 Earnings Call | $AAPL | π΄ WATCH LIVE
Benzinga
Record June Quarter Revenue 5:25
Tim Cook opened by reporting revenue of 109.4 billion dollars, up 16 percent from a year ago and a June quarter record, achieved despite supply constraints and foreign exchange headwinds. iPhone revenue grew 22 percent to a June quarter record, Mac grew 29 percent to its best June quarter ever, and services also set a June quarter record at 30.7 billion dollars. Apple hit June quarter revenue records in every geographic segment, including the US, Latin America, Western Europe, India, mainland China, Japan, and Southeast Asia, with double digit growth in most emerging markets.
Siri AI and Child Safety Tools 9:32
At WWDC, Apple unveiled the all new Siri AI, described as profoundly capable, deeply personal, and integrated across platforms, with strong early feedback from developer and public betas. Cook tied this to Apple's philosophy that private, personal AI can genuinely improve how people find information and get things done. Apple also introduced child safety tools like Ask to Browse and time allowances, built with guidance from groups including the American Academy of Pediatrics, aimed at helping parents manage what kids see and how long they use devices.
iPhone, Mac, and iPad Results 10:30
iPhone revenue reached 54.3 billion dollars, up 22 percent, with records in every region and a record number of upgraders, helped by the A19 and A19 Pro chips across the iPhone 17 lineup. Mac revenue hit 10.4 billion dollars, up 29 percent despite supply constraints, led by MacBook Pro and the new MacBook Neo, with an all time revenue record in emerging markets and particular strength in greater China. iPad revenue was 6.2 billion dollars, with the new M4 powered iPad Air adding performance for productivity, learning, and creative work.
Wearables, Services, and Entertainment 14:00
Wearables, home, and accessories revenue was 7.9 billion dollars, up 6 percent, with a June quarter record for Apple Watch upgraders and continued health features plus AirPods improvements like live translation through Apple Intelligence. Services revenue of 30.7 billion dollars, up 12 percent, was driven partly by Apple TV, which added Tony Awards to its Emmy, Grammy, and Oscar wins and earned a record 89 Emmy nominations, with Widow's Bay as the year's most nominated new program with 19 nominations. Apple Sports expanded to more than 170 countries for the World Cup, and Apple Upgrade, a new hardware leasing program with CLA, launched for US customers.
Accessibility and US Manufacturing 19:30
For Global Accessibility Awareness Day, Apple added intelligent capabilities to VoiceOver, Magnifier, Voice Control, and Accessibility Reader, on device speech recognition for generating subtitles, and a Vision Pro feature letting power wheelchair users control drive systems with their eyes. On manufacturing, Apple reaffirmed its 600 billion dollar four year US investment commitment and announced a new multi year agreement with Broadcom worth more than 30 billion dollars to build custom silicon and wireless connectivity in the US, its largest American manufacturing program commitment yet. Apple is also opening an Advanced Manufacturing Center in Houston, where it will assemble AI servers and later Mac Mini units, and train workers in Apple's manufacturing processes.
Kevin Perk's Financial Detail 22:32
CFO Kevin Perk reported company gross margin of 50.1 percent, up 80 basis points sequentially, including a roughly 2 percentage point benefit from tariff refunds. Products gross margin was 40.1 percent while services gross margin was 75.6 percent. Operating expenses were 19.1 billion dollars, up 23 percent on R&D investment, net income was 29.8 billion dollars, diluted earnings per share was 22 dollars, up 29 percent, and operating cash flow was 34.4 billion dollars, all June quarter records even excluding tariff refund benefits. Services set records across every category, including all time highs in cloud services and payment services, and Apple's installed base topped two and a half billion active devices with more than one and a half billion paid subscriptions.
Enterprise, Education, and Cash Position 28:31
Perk highlighted enterprise and education wins, including Morgan Stanley deploying more than 20,000 iPhone 17 devices, Disney and Credit Agricole using Mac for on device AI workflows, and school districts in Florida, Washington, and Oklahoma moving tens of thousands of students from Windows or Chromebook devices to MacBook Neo. Apple ended the quarter with 147 billion dollars in cash and marketable securities against 84 billion dollars in debt, and returned 33 billion dollars to shareholders through dividends and buybacks. The board declared a 27 cent dividend, and Perk guided September quarter revenue growth of 9 to 11 percent, citing a 2.5 percentage point foreign exchange headwind and worsening supply constraints affecting iPhone, Mac, and iPad.
Leadership Transition and Q&A 33:00
Tim Cook confirmed this was his final earnings call, with John Turnis set to lead future calls as incoming CEO, and Cook expressed full confidence in the transition and in Apple's executive team. In the analyst question and answer session, Kevin Perk and Cook explained that the projected slowdown in September quarter growth stems mainly from a 2.5 point foreign exchange headwind and a significant sequential increase in supply constraints tied to limited flexibility in advanced chip manufacturing nodes, affecting iPhone, Mac, and iPad availability despite continued high customer demand.
Memory cost pressures mount 37:31
A questioner asks whether Apple's search for more flexible memory sourcing is about securing supply or protecting the value it offers customers. Tim Cook explains that Apple paid more for memory in the March quarter than in December, significantly more in June than in March, and expects to pay even higher memory costs in September. Carry-in inventory and lower costs on some non-memory components are partially offsetting this, but that carry-in benefit is expected to shrink over time. Beyond September, market pricing for memory is expected to keep rising. Cook notes the DRAM market has only three suppliers, and while more suppliers could help with supply, it is unclear whether it would help pricing.
Apple upgrade program details 40:30
Asked about the Apple upgrade leasing program, Cook says it is meant to make it easier for customers to get the latest products through a leasing plan suited to them, helped by the fact that Apple products hold higher residual value than much of the competition. The program is currently offered only in US retail stores, not across all channels, so its reach is still limited. Early customer feedback has been positive, though it is too soon to know broader uptake or whether it will shorten replacement cycles for iPhone, Mac, or iPad.
Siri AI reception and compute costs 42:30
Cook describes being extremely excited about Siri AI, citing a strong reception at WWDC, positive developer feedback after the immediate developer beta release, and continued positive response since the public beta launched a few weeks earlier. He calls private, personally contextual AI integrated across the operating system a very big idea. On compute costs, he says it is early, and while Apple expects heavy usage from some users, it plans upgrade options within iCloud Plus so people can buy more storage and capability as needed, though how that uptake unfolds remains uncertain.
Supply constraints tied to demand 45:03
Cook clarifies that the main supply constraint is advanced semiconductor nodes used for Apple's chips, and this is a demand forecasting issue rather than a typical supply problem. iPhone grew 22 percent and Mac 29 percent in the quarter, with iPhone up 22 percent year to date, far exceeding even Apple's already-high expectations, leaving the supply chain less flexible than normal after months of pulling supply forward. Kevin Yates adds that these dynamics, combined with sequential foreign exchange impact, are built into the 9 to 11 percent September revenue growth guidance, with no color offered beyond that quarter. Cook also notes Arizona now sources over one hundred million components for Apple this year, part of its $600 billion US commitment.
Pricing philosophy and product margins 50:00
Cook says Apple reluctantly raised prices, describing the situation as a hundred-year flood in memory pricing with exponential increases. He explains that pricing decisions weigh units, revenue, and margin together and involve business judgment rather than a fixed formula favoring dollars or percentage margins, viewed over the long term rather than a ninety-day window.
Services growth deceleration explained 51:32
Kevin walks through why services growth slowed from 16 percent to 12 percent year over year, pointing mainly to foreign exchange, the absence of a theatrical release like last year's F1 film, softness in mobile gaming, app store business model changes in certain countries, and the ongoing US court ruling on linkout transactions, though Apple is pleased the Supreme Court will hear its appeal. Despite this, the App Store set a June quarter revenue record, with records also set in advertising, Apple Care, music, video, cloud services, and payment services, and paid subscriptions surpassing one and a half billion. Foreign exchange is expected to be a continuing headwind, driving roughly a five percentage point drag from March to September and a further two and a half point sequential headwind into the September guide.
Demand pull-forward and AI's future reach 55:31
Asked whether strong demand reflects pull-forward buying, Cook says the sustained 22 percent iPhone growth rate makes that unclear in the data, though it is still early to judge price elasticity effects from recent iPad and Mac price increases since channel and consumer responses take time to show up. Looking ahead, he says AI offers enormous opportunities for Apple, citing Siri AI's trajectory and the strategic and competitive value of running a meaningful share of requests on-device.
Capital intensity and competitive landscape 58:32
Wamsi Mohan asks whether Siri AI will change Apple's capital intensity given its hybrid model of on-device, first-party data center, and third-party cloud compute. Cook confirms opex spending on AI has grown substantially, with related costs also appearing elsewhere on the P&L such as cost of goods sold, though the balance remains uncertain, partly offset by potential iCloud plan upgrades. On competitive threats from companies like OpenAI or SpaceX potentially building AI-enabled devices, incoming CFO John says Apple sees plenty of opportunity ahead and remains focused on its own plans.
Regional rollout and margin breakdown 1:01:31
On Siri AI's rollout, Cook says Apple is working closely with the European Commission to find a path forward, since EU regulations do not cover Mac the way they cover iPhone and iPad, and in China Apple recently received approval to ship original Apple Intelligence features like cleanup, with more work needed before Siri AI can follow. On gross margin, Kevin explains that more than the entire 120 basis point sequential decline from March to June, and more than the entire 160 basis point decline expected into September, is explained by memory cost increases, partially offset by carry-in inventory benefits, lower non-memory component costs, and favorable mix, with foreign exchange playing only a minimal role.
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