Apple AAPL Q2 2026 Earnings Call Transcript

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DATE

Thursday, Apr. 30, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Timothy D. Cook
• Incoming Chief Executive Officer — John Ternus
• Chief Financial Officer — Kevan Parekh
• Director of Investor Relations — Suhasini Chandramouli

TAKEAWAYS

• CEO succession -- Timothy D. Cook will transition to executive chairman on September 1, with John Ternus becoming CEO; both cited confidence in strategic continuity and the company’s roadmap.
• Total revenue -- $111.2 billion, up 17%, setting a March record and exceeding the high end of guidance despite supply constraints.
• iPhone revenue -- $57 billion, up 22%, representing a March record; iPhone 17 family is the most popular lineup in company history since launch through March.
• Services revenue -- $31 billion, up 16%, hitting an all-time record; double-digit growth achieved in both developed and emerging markets, with all-time category records.
• Geographic performance -- Double-digit revenue growth in every region; Greater China revenue grew 28%, and India saw notable expansion in multiple segments.
• Mac revenue -- $8.4 billion, up 6%, driven by demand for MacBook Neo and new customer acquisition offset by continued supply constraints.
• iPad revenue -- $6.9 billion, up 8%; more than half of iPad buyers were new customers, especially in emerging markets.
• Wearables, home, and accessories revenue -- $7.9 billion, up 5%, with a record installed base and over half of Apple Watch buyers new to the product.
• Gross margin -- Company gross margin was 49.3%, up 110 basis points sequentially, above the high end of guidance; product gross margin decreased by 200 basis points, services margin rose by 20 basis points.
• Operating expenses -- $18.9 billion, rising 24%, slightly above guidance due to a one-time SG&A expense; R&D spend is growing faster than overall company expenses.
• Net income and EPS -- Net income was $29.6 billion and diluted EPS was $2.10, up 22%, both setting March records.
• Cash position -- $147 billion in cash and securities, $85 billion in debt, resulting in net cash of $62 billion at quarter-end.
• Shareholder return -- $15 billion returned, including $3.8 billion in dividends and $11 billion for 42 million share repurchases; new $100 billion buyback authorization and a 4% dividend increase to $0.27 per share.
• Capital structure update -- The company will no longer target net cash neutrality, instead evaluating cash and debt independently for flexibility.
• Guidance -- June quarter revenue expected to grow 14%-17% year over year; gross margin expected at 47.5%-48.5%; operating expenses forecast at $18.8-$19.1 billion; Services growth rate to be similar to the reported quarter after normalizing FX.
• Supply constraints -- March and June quarters impacted by supply constraints, primarily advanced node SoCs and Macs (Mac mini, Mac Studio, MacBook Neo); company expects Mac supply-demand imbalance to persist for several months.
• FX impact -- Foreign exchange provided a 2.5% tailwind to revenue growth; FX impact on Services was slightly more favorable; no sequential FX impact from Q1 to Q2 on gross margin.
• Product mix -- March records set for new Mac customers and iPhone upgraders; customer satisfaction for iPhone 17, Mac, iPad, and Apple Watch measured at 99%, 97%, 98%, and 96% respectively in the US.
• AI and Apple Intelligence integration -- Company emphasized on-device AI integration via Apple silicon and cited Mac as an industry leader for local AI and agentic AI development.
• Advertising within Services -- Year-over-year advertising revenue growth, driven by App Store ad expansion; Apple Maps to introduce ads during US and Canada search moments this summer.
• US manufacturing -- Announced Mac mini production moving to Houston, Texas, with a new factory, and four new participants in the American manufacturing initiative; company is on track to purchase over 100 million advanced chips from TSMC’s Arizona plant.
• Sustainability milestone -- 30% recycled content in all 2025-shipped products, 100% recycled cobalt in batteries, 100% recycled rare earths in magnets, and all products now in fiber-based packaging.
• Installed base -- Over 2.5 billion active devices, a new all-time high across all major categories and regions.

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RISKS

• Timothy D. Cook stated that “significantly higher memory costs” are expected to impact gross margin in the June quarter, with the effect likely to increase beyond June.
• Supply constraints affecting Mac mini and Mac Studio are anticipated to persist “several months” per Timothy D. Cook.
• Timothy D. Cook noted that operating expenses rose 24% year over year, exceeding guidance due to a one-time SG&A expense, with R&D “accelerating much higher than the company overall.”

SUMMARY

Apple (NASDAQ:AAPL) reported a major executive transition, with Timothy D. Cook set to become executive chairman and John Ternus named incoming CEO, as the company detailed robust double-digit revenue, EPS, and segment growth. Management signaled the end of a formal net cash neutrality target, increasing capital return flexibility while authorizing a new $100 billion buyback and raising the dividend. The quarter’s results included record Services revenue, broad customer acquisition, and material AI progress integrated across Apple silicon, as well as strong new-to-product metrics in emerging markets and a record installed base.

• John Ternus pledged to maintain Apple’s “discipline” in financial decision-making post-transition, emphasizing consistency with prior strategy.
• The Services segment announced the summer introduction of ads in Apple Maps (US/Canada), and new App Store ad inventory contributed to advertising revenue growth.
• MacBook Neo’s unexpected demand surge drove record acquisition of new Mac customers, leading to persistent supply shortages.
• Capital allocation strategy will now involve ongoing, independent evaluation of cash and debt with continued commitment to returning excess capital to shareholders.
• Apple is moving Mac mini production to its newly announced advanced manufacturing center in Houston, reflecting expanded US supply chain investment.
• On-device AI innovation, notably for agentic AI, has made Apple platforms the “preferred platform” for enterprise-grade autonomous agents, with a growing number of enterprise deployments cited.

INDUSTRY GLOSSARY

• Agentic AI: Artificial intelligence systems capable of autonomous task execution, planning, and decision-making, often integrated locally on devices rather than accessed via the cloud.
• Apple Intelligence: Company-branded term for advanced AI features built natively into Apple devices, leveraging custom Apple silicon for privacy-focused, on-device computation.
• A19 / A19 Pro: Proprietary Apple-designed system-on-chip (SoC) processors used in the iPhone 17 family, featuring neural accelerators for enhanced AI performance.
• M5, M5 Pro, M5 Max: Series of Apple’s proprietary ARM-based processors powering recent MacBook and iPad models, enabling advanced AI workloads on local hardware.
• SG&A: Selling, general, and administrative expenses, a standard accounting line representing operating costs not directly tied to production or R&D.

Full Conference Call Transcript

Timothy D. Cook: Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Before we get into the quarter, I wanted to take a moment to talk about the transition we recently announced. I just celebrated my 28th anniversary of being here at Apple Inc.—15 years as CEO. In fact, this will be my 89th earnings call. I will always be proud of the impact Apple Inc. has had on our users’ lives and I cannot begin to express how grateful I am for our amazing teams. It is because of them that there is no company like Apple Inc., and I truly believe there never will be.

This moment for the transition is the right one for a number of reasons. First, our business has been performing extremely well. The first half of this year was very strong, growing double digits year over year. Second, our roadmap is incredible. And most importantly, we have the right leader ready to step into the role. As I have said, there is no one on this planet I trust more to lead Apple Inc. into the future than John Ternus. John is a brilliant engineer, a deep thinker, a person of remarkable character, and a born leader.

I know he will push us to go further than we think is possible in order to deliver the greatest products and services for our users. I have been so proud to call him a colleague and a friend and I will be even more proud to call him Apple Inc.’s CEO. Over the coming months, John and I will be working closely together to make sure this transition is perfectly smooth. I very much look forward to stepping into the role of executive chairman on September 1. As I have told John, I will be here to support him in any way he needs and in any way I can.

I am incredibly optimistic about Apple Inc.’s future and I know we have the right team in place to deliver on the promise of this company. I also want to take just a moment to share my profound gratitude for our shareholders, especially our long-term shareholders, for believing in Apple Inc. and for your support over the years. It means a great deal to all of us. With that, I would like to bring John on the call for a moment to say a few words. John? Thanks, Tim, and thanks to everyone on the call.

John Ternus: In my view, Tim is one of the greatest business leaders of all time. Stepping into the role of CEO is incredible, and it means a great deal to me to have Tim’s trust and confidence. I want to echo Tim’s sentiment about our shareholders, especially those who have been with us for many years. Thank you so much for your confidence in our company. As you know, one of the hallmarks of Tim’s tenure has been a deep thoughtfulness, deliberateness, and discipline when it comes to the financial decision-making of the company. And I want you to know that is something Kevan and I intend to continue when I transition into the role in September.

This is an especially exciting moment for Apple Inc. As Tim mentioned, we have an incredible roadmap ahead. And while you are not going to get me to talk about the details of that roadmap, suffice it to say, this is the most exciting time in my 25-year career at Apple Inc. to be building products and services. There are so many opportunities before us, and I could not be more optimistic about what is to come. For now, let me simply say I am deeply grateful to Tim, to the executive team, and to everyone at Apple Inc., and I look forward to all of the important work ahead.

And with that, let me turn it back over to Tim.

Timothy D. Cook: Thanks, John. Now let me turn to the quarter. Today, Apple Inc. is proud to report $111.2 billion in revenue, up 17% from a year ago and a March record, which was above the high end of our guidance range despite constraints. Customer enthusiasm for iPhone has been extraordinary, with revenue growing 22% year over year to achieve a March record. Services reached an all-time revenue record, growing 16% from a year ago, while EPS set a March record of $2.10, up 22% year over year. We set March revenue records and grew double digits in every geographic segment, including strong double-digit growth in Greater China and the rest of Asia Pacific.

We also achieved March revenue records in both developed and emerging markets and saw double-digit growth in nearly every emerging market we track, including India. We recently marked Apple Inc.’s 50th anniversary with celebrations in our retail stores and with users around the world. It was a special moment for us to reflect on the incredible journey we have shared with our users, to thank everyone who has been a part of it, and to look forward to writing the next chapter in our story of innovation. We have always believed that people who think different can change the world, and we have been proud to build tools and technologies that allow them to do just that.

In March, we put an amazing showcase of human creativity and ingenuity in action with updates across iPhone, iPad, and Mac. Through an unforgettable week of innovation, we also unveiled MacBook Neo, giving us an opportunity to bring the power of Mac to more people than ever before. I will have more to say on that and all the things we delivered for our customers over the last few months. Now let us take a closer look at results from across our product line, beginning with iPhone. As I mentioned earlier, iPhone had an excellent quarter with $57 billion in revenue, a March record despite supply constraints.

During the quarter, we welcomed iPhone 17e, the newest addition to what is already the strongest iPhone lineup we have ever had. It brings outstanding performance and core iPhone experiences at a remarkable value for everyone from enterprise teams to consumers. Across the lineup, this is the most powerful, capable, and versatile iPhone family we have ever created. That starts with the latest in Apple silicon for iPhone—A19 and A19 Pro—which include neural accelerators in the GPU to deliver a huge boost to AI performance. With incredible performance and battery life, and deep integration of Apple Intelligence, iPhone continues to set the standard for what a smartphone can be.

Customers are capturing stunning photos and videos with our most advanced camera system ever on iPhone 17 Pro and Pro Max, including an 8x optical-quality zoom and the all-new Center Stage front camera, unlocking entirely new ways to frame, create, and share their moments. In fact, during their recent mission, Artemis II astronauts captured some truly otherworldly images of Earth and space using iPhone 17 Pro Max. Meanwhile, iPhone Air users are tapping into the pro-level performance in our slimmest iPhone ever. And with iPhone 17, we are seeing a strong response not only from customers upgrading from previous generations, but also from people choosing iPhone for the very first time.

We have been enormously pleased with how the entire lineup has been received. In fact, the iPhone 17 family is now the most popular lineup in our history when looking at the launch through March. And according to IDC, we gained market share during the quarter. Mac revenue was $8.4 billion for March, up 6% from a year ago despite supply constraints driven by higher-than-expected levels of demand. We are delighted with the reception of what is the most advanced Mac lineup in our history. We set March records for upgraders and customers new to Mac. And according to IDC, we gained market share in the quarter.

From Mac mini to MacBook Pro and everything in between, Mac is the best platform for AI, with Apple silicon delivering exceptional performance, industry-leading efficiency, and the ability to run advanced models locally in ways that simply were not possible before. It is so exciting to see how strongly users are embracing on-Mac AI capabilities. There is tremendous enthusiasm for MacBook Neo, which made its debut during March, opening up an entirely new way to experience Mac at a breakthrough price. We have also further improved MacBook Air—already the world’s most popular laptop—with M5, making everyday tasks faster and more responsive than ever.

MacBook Pro reaches new heights with M5 Pro and M5 Max, delivering extraordinary performance and dramatically advancing what users can do with AI on a portable system. And for desktop users, Studio Display pairs beautifully with Mac, while the all-new Studio Display XDR takes things even further, bringing unmatched image quality and an extraordinarily immersive experience to pro workflows. Turning to iPad. Revenue was $6.9 billion, up 8% from a year ago. iPad continues to be a great choice for students, small business owners, artists, and so many others because it empowers entirely new ways to work, learn, create, and connect. It is not just about mobility.

It is about versatility, delivering a uniquely flexible experience that adapts to whatever users want to accomplish. Today, our iPad lineup is stronger than ever, led by the arrival of the M4-powered iPad Air. With a remarkable leap in performance, it raises the bar for what users can do on iPad—from advanced creative workflows to powerful productivity and immersive learning. And with the addition of our latest Apple silicon along with the N1 wireless networking chip and C1X modem, users can stay seamlessly connected wherever they are. Across Wearables, Home, and Accessories, revenue for March came in at $7.9 billion, up 5% from a year ago.

Apple Watch Ultra 3, Apple Watch Series 11, and Apple Watch SE continue to play an essential role in users’ lives, going far beyond fitness tracking to deliver meaningful insights and support for their health and well-being. From helping users stay active and reach their fitness goals to delivering powerful, science-backed health insights that can prompt meaningful conversations with care providers, Apple Watch is with them every step of the way. It is tremendously meaningful to see how Apple Watch continues to empower users to better understand their health, make more informed decisions, and in many cases change and even save lives.

During the quarter, we introduced customers to a new level of audio experience with AirPods Max 2, delivering stunning sound quality and our most advanced active noise cancellation yet. At the same time, AirPods Pro 3 combine an incredibly immersive listening experience with intelligent features that adapt to how users move, train, and live. And whether it is a call across town or a conversation across continents, AirPods make it effortless to stay connected. AirPods can bridge languages too, thanks to Live Translation powered by Apple Intelligence. In addition to Live Translation, Apple Intelligence brings together dozens of powerful capabilities—from Visual Intelligence to Cleanup in Photos—that are seamlessly integrated into the moments that matter most to our users every day.

And we look forward to bringing a more personalized Siri to users coming this year. What truly sets Apple Inc. apart is how Apple Intelligence is woven into the core of our platforms, powered by Apple silicon and designed from the ground up to deliver intelligence that is fast, personal, and private. This is not AI as a standalone feature, but AI as an essential, intuitive part of the experience across our devices. It builds on years of innovation—from the Neural Engine to advanced on-device processing—enabling capabilities that are not only incredibly powerful, but also respectful of user privacy.

Increasingly, that same foundation is drawing AI researchers to our products as powerful platforms for building and running agentic AI, thanks to the unique combination of performance, efficiency, and on-device capabilities. When you combine this level of integration with our relentless focus on the customer experience, it becomes clear why Apple Inc. platforms are the best place to experience AI. Now let us turn to Services, which set an all-time revenue record with $31 billion. We saw double-digit growth in both developed and emerging markets and set new all-time revenue records across most of the Services categories. There is no better place to find celebrated storytellers than Apple TV+.

Audiences are applauding the return of shows like Your Friends and Neighbors, Shrinking, and For All Mankind, while discovering new favorites like Widow’s Bay. Apple TV+ has also earned its place among the most decorated names in entertainment, with more than 800 wins and more than 3.4 thousand nominations in the six years since launch. This is a great time for sports fans on Apple TV+ too. Formula 1 season kicked off in March, and Apple TV+ subscribers in the US have one of the best views of the track. The new MLS season is also well underway, and subscribers in more than 100 countries and regions can watch every match with no blackouts.

And Friday Night Baseball returned for its fifth year on Apple TV+ with a full season of marquee matchups. In Retail, we had a March revenue record and saw very high levels of store traffic throughout the quarter. From New York to Chengdu to Paris, it was wonderful to see stores around the world at the center of Apple Inc.’s 50th anniversary celebrations. We were also thrilled to open the doors to our sixth store in India. It has been wonderful to see how we have continued to grow in India in recent years, part of our larger efforts to connect with even more customers in emerging markets all over the world.

At Apple Inc., we believe powerful innovation and uncompromising quality can go hand in hand with sustainability. Over the last year, we have reached new milestones in the environment, including the use of recycled content in 30% of the materials in all of our products shipped in 2025, the most we have ever had. That includes the use of 100% recycled cobalt in all Apple-designed batteries and 100% recycled rare earth elements in all magnets. We have also achieved our goal of removing plastic from packaging, with every Apple Inc. product now shipping in fiber-based packaging. All of this is a testament to the outstanding, forward-thinking, and innovative work of our teams.

We are also making great progress in advancing American supply chain innovation, as part of our $600 billion commitment to the US. We were pleased to share recently that Mac mini production is coming to America later this year, expanding our factory operations in Houston with a brand new facility. In March, we were thrilled to welcome four new companies to our American manufacturing program to help manufacture essential materials and components for Apple Inc. products sold worldwide. These include sensors that support key iPhone features like camera stabilization and integrated circuits essential for features like crash detection and activity tracking.

These efforts build on the progress we have made in the American program, including the work we are doing to advance an end-to-end silicon supply chain across the US. At TSMC’s Arizona facility, for example, Apple Inc. is on track to purchase well over 100 million advanced chips. As we are accelerating our long-standing support for US innovation, we are also investing in America’s workforce. We are looking forward to opening the doors to an all-new advanced manufacturing center in Houston later this year, which will provide hands-on training led by Apple Inc. experts and tailor-made for students, supplier employees, and American businesses.

Whether around the world or in our own backyard, we are proud of the difference Apple Inc. has made to enrich lives and support the communities we serve. Looking ahead, we are delighted to welcome developers back to Apple Park for WWDC 2026. We cannot wait to share what we have been working on. From AI advancements to exciting new software and developer tools, it is going to be an incredible week. As always, we remain in relentless pursuit of even more powerful innovations, guided by our North Star—our users. As we celebrated 50 years of Apple Inc., we are even more excited and more optimistic about the next 50 years and beyond.

With that, I will turn it over to Kevan. Thanks, Tim.

Kevan Parekh: Good afternoon, everyone. Our revenue of $111.2 billion was up 17% year over year, a March revenue record. We saw strong performance around the world, with March revenue records in every geographic segment. Foreign exchange was about a 2.5 percentage point tailwind to the March growth rate. We also faced supply constraints on iPhone and, to a lesser extent, on Mac. We believe if we remove the favorable benefit from foreign exchange and add back the unfavorable impact from supply constraints, we would have had a higher growth rate for total company revenue for the quarter. Products revenue was $80.2 billion, up 17% year over year, driven by double-digit growth on iPhone, setting a new March record.

Our installed base of over 2.5 billion active devices has reached another all-time high across all major product categories and geographic segments. Services revenue was $31 billion, up 16% year over year. We saw strong performance across the board, with double-digit growth in the vast majority of the markets we track. Company gross margin was 49.3%, above the high end of our guidance range, and up 110 basis points sequentially. Products gross margin was 38.7%, down 200 basis points sequentially. Services gross margin was 76.7%, up 20 basis points sequentially. Operating expenses landed at $18.9 billion, up 24% year over year. This was slightly above the high end of our guidance range due to a one-time expense in SG&A.

Net income was $29.6 billion and diluted earnings per share was $2.10, up 22% year over year. Both net income and diluted EPS achieved March records and drove a very strong level of operating cash flow at $28.7 billion. Now I am going to provide some more details for each of our revenue lines. iPhone revenue was $57 billion, up 22% year over year, driven by the iPhone 17 family. iPhone grew double digits in the majority of markets we track, including the US, Latin America, Greater China, Western Europe, India, Japan, and Southeast Asia. The iPhone active installed base grew to an all-time high, and we set a March record for iPhone upgraders.

According to a recent survey from Worldpanel, iPhone was a top-selling model in the US, urban China, the UK, Australia, and Japan. We have been extremely pleased with the positive reception of the iPhone 17 family. In fact, customer satisfaction for the iPhone 17 family in the US was recently measured at 99% by 451 Research. Mac revenue was $8.4 billion, up 6% year over year, driven by the strength of the recent product launches including MacBook Neo. We grew in both developed and emerging markets, with double-digit growth in many emerging markets, including India and Indonesia.

As Tim mentioned earlier, we had a March record for customers new to the Mac, and this helped drive a new all-time record for the overall Mac installed base. And in the US, customer satisfaction for Mac was recently reported at 97%. iPad revenue was $6.9 billion, up 8% year over year, driven by the continued strength of the A16-powered iPad and the M5-powered iPad Pro. The iPad install base reached a new all-time high as iPad continued to reach new customers around the world. During the quarter, over half of the customers who purchased an iPad were new to the product.

Many of these customers are in our emerging markets, where we grew iPad revenue by double digits, including in India, Mexico, and Thailand. And based on the latest reports from 451 Research, customer satisfaction was 98% in the US. Wearables, Home, and Accessories revenue was $7.9 billion, up 5% year over year, driven by strength in wearables and accessories. We were pleased to see strength in our emerging markets where we set a new March revenue record. The wearables installed base reached a new all-time high, with over half of the customers purchasing an Apple Watch during the quarter being new to the product. And in the US, customer satisfaction on Apple Watch was measured at 96%.

Our Services revenue reached an all-time high of $31 billion, up 16% year over year. The strong performance was broad-based, with all-time records in both developed and emerging markets. And as Tim mentioned, we also set all-time revenue records in most of the Services categories. We are optimistic about the future of our Services business. With our large installed base of over 2.5 billion active devices, we have an incredibly strong foundation for growth opportunities. Both transacting and paid accounts reached new all-time highs in the quarter, as we continue to see more customers leveraging our Services offerings.

And we continue to improve the quality and expand the breadth of our Services—from the expansion of features like Tap to Pay, now available in over 50 markets, to deeper support for enterprise customers. Building on this, we launched Apple Business, a new all-in-one platform that combines our hardware, software, and enterprise services, enabling companies to efficiently manage their deployments and scale their business. We continue to see more organizations in enterprise choosing Apple Inc.’s devices for performance and productivity. Marsh, a leading professional services firm, deployed a large-scale refresh of corporate devices to iPhone 17 as part of a commitment to security, alongside adopting Mac for internal AI development.

With Apple silicon and its powerful unified memory architecture, leading AI developers like Perplexity are choosing Mac as their preferred platform to build enterprise-grade AI assistants that power autonomous agents and boost workplace productivity. Across the Mac lineup, customers are finding the right device for their needs—from MacBook Pro and MacBook Air to our newest addition, MacBook Neo, which delivers an unprecedented combination of quality, value, and industry-leading security that is resonating strongly in enterprise and education. Kansas City Public Schools, for example, is switching their high school students from Windows laptops and Chromebooks to MacBook Neo, completing their transition to an all-Apple district.

And in India, leading enterprise software provider Freshworks deployed over 5 thousand MacBook Pro and MacBook Air to accelerate their AI development. Let us turn to our cash position and capital return program. We ended the quarter with $147 billion in cash and marketable securities. We had $5.8 billion of debt maturities and commercial paper remained unchanged at $2 billion, resulting in $85 billion in total debt. Therefore, at the end of the quarter, net cash was $62 billion. During the quarter, we returned $15 billion to shareholders. This included $3.8 billion in dividends and equivalents and $11 billion through open-market repurchases of 42 million Apple Inc. shares.

Our repurchase activity at any time can be affected by a number of factors that we take into account, and as you are aware, we recently announced a CEO transition. Taking a step back, we plan to continue our capital allocation philosophy of, first, making all the necessary investments needed to support the business, and then returning excess cash to shareholders over time. Net cash neutral has been a valuable framework for our capital structure, and since 2018, we have significantly right-sized our balance sheet and reduced net cash by over $100 billion. As we move ahead, we are no longer providing net cash neutral as a formal target, and we will independently evaluate cash and debt.

Capital returns will continue to be important to our overall approach by delivering long-term shareholder value. Accordingly, our Board has authorized an additional $100 billion for share repurchases, and we are also raising our dividend by 4% to $0.27 per share of common stock. This cash dividend will be payable on May 14, 2026, to shareholders of record as of May 11, 2026. As we move ahead into June, I would like to review our outlook, which includes the types of forward-looking information that Suhasini referred to. Importantly, the color we are providing assumes that global tariff rates, policies, and their application remain in effect as of this call, and the global macroeconomic outlook does not worsen from today.

We expect our June total company revenue to grow by 14% to 17% year over year, which comprehends our best view of constrained supply. On iPad, keep in mind we face a difficult compare driven by the launch of the A16-powered iPad in the prior year. We expect Services revenue to grow at a year-over-year rate similar to what we reported in March, after removing the favorable year-over-year impact from foreign exchange tailwinds. Keep in mind, during March, FX was a 2.5 percentage point tailwind to the total company growth rate, and for Services, that impact was slightly more favorable. We expect gross margin to be between 47.5% and 48.5%.

We expect operating expenses to be between $18.8 billion and $19.1 billion. We expect OI&E to be around $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 17%. With that, Tim and I will take questions.

Suhasini Chandramouli: Thank you, Kevan. We will now open the call for questions. We ask that you limit yourself to two questions. Operator, may we have the first question, please?

Operator: Certainly. We will go ahead and take our first from Erik Woodring with Morgan Stanley.

Erik Woodring: Great, thank you very much for taking my questions, guys. And Tim, I will save the congrats for next quarter. But it has been a pleasure working together. I would love, maybe, Tim, if I could ask you to contextualize the supply constraints you alluded to in your prepared remarks, meaning how much did demand outpace supply for iPhone and Mac in March? And does your June guidance also reflect supply constraints for those segments, or is that an unconstrained guide as you see it today? And then a quick follow-up, please. Thank you.

Timothy D. Cook: Hi, Erik. Thanks for your comments. We were constrained during March. This was primarily on iPhone and, to a lesser extent, on Mac. And as we talked about in the last call, the constraints were primarily driven by the availability of the advanced nodes our SoCs are produced on. If you look forward to June, the majority of our supply constraints will be on several Mac models, given the continued high levels of demand that we are seeing, and we have less flexibility in the supply chain than we normally would. For Mac in June, there are two factors that are driving the constraint.

One is that on the Mac mini and the Mac Studio, both of these are amazing platforms for AI and agentic tools, and the customer recognition of that is happening faster than what we had predicted, and so we saw higher-than-expected demand. The second reason is that the customer response to MacBook Neo has just been off the charts, with higher-than-expected demand. And we set a March record for customers new to the Mac, partly due to the Neo. We think looking forward that the Mac mini and the Mac Studio may take several months to reach supply-demand balance. And so, hopefully, that gives you a view of both Q2 and Q3 on the supply side.

Erik Woodring: Thank you very much for that color, Tim. And then, Kevan, I would love to turn to you and the surprise little announcement there talking about net cash—great path, but no longer providing this as a formal target. Could you maybe expand on that a bit? Are we thinking about any different type of capital return policy? It does not seem so, but maybe give a little bit more detail when you talk about making investments. Is that organic versus inorganic? Just tease that comment out a little bit more for us. Be super helpful. Thank you so much, guys.

Kevan Parekh: Sure, Erik. Thanks for the question. Let me reiterate what we said, which is really more of a comment on the capital structure. Our goal of net cash neutral has really served us well and been a valuable framework for our capital structure since 2018. We believe we are at a stage where evaluating cash and debt independently is the right approach for us and allows us to make more optimal economic decisions around how we best utilize our debt and cash portfolios to support the business based on business factors and market conditions. We also believe we can manage this flexibility while also being very efficient and remaining disciplined.

With all that being said, we remain very committed to returning excess cash to shareholders. As we talked about, our investment in the business comes first and foremost, and then we look to return excess cash to shareholders. We have a very good track record of being disciplined—we have returned over $1 trillion to shareholders from the start of the program, over $850 billion of which has been through share repurchases. And as part of that, we have increased our buyback authorization by another $100 billion, on top of the leftover capacity from the prior authorization. You can see the capital return piece is very important to us and important to our overall approach to delivering long-term shareholder value.

Suhasini Chandramouli: Thank you, Erik. Operator, could we get the next question, please?

Operator: Our next question is from Ben Reitzes with Melius Research. Please go ahead.

Ben Reitzes: Thanks. I will ask two myself. First, there has been a lot of talk around agentic smartphones—the way, I do not even know what that means, but there are comments about AI on the edge and that agents could catalyze smartphones but also shift the smartphone form factor or maybe not. With the rise of agents, how would you like us to think about that? Does this mean there are new products coming, a totally new form factor? Or does it change the game? Anything high level you might want to say about that trend or potential non-trend? Thanks.

Timothy D. Cook: Hi, Ben. We do not get into our future roadmap, and so I do not want to give too much info there, but I would just say that we are thrilled with how the iPhone is doing, growing 22% in the quarter and following up an incredible Q1 cycle—the strongest we have ever had in our history from the launch through March. We could not be happier with it.

Ben Reitzes: Thanks, I appreciate that. I am sure we will hear a lot more. Then regarding constraints and whatnot—and, Tim, I may push you one more time—the big concern out there is margins after the June quarter given component trends and all these constraints. Is there some overarching philosophy you want us to think about? Do you or maybe Kevan see a lot of variability in the model, or is 47%–48% kind of a range you think you might be able to stay in? Is there just no visibility beyond June to answer this? Any comfort level there would be so helpful. Thanks.

Timothy D. Cook: Ben, let me talk about memory specifically, which I think is the root of the question. I will go back to December for a moment and walk you through the chronology. In the December quarter, we really had a minimal impact due to memory, and you can see that in the gross margin results. We said it would be a bit more in the March quarter, and we did see higher memory costs in the March quarter, and they were partially offset by benefits from carry-in inventory that we had. For the June quarter—and what is embedded in the guidance that Kevan went through earlier—we expect significantly higher memory costs.

They are also partly offset by the benefit of carry-in inventory. And while we do not give color beyond June, I can tell you that beyond the June quarter, we believe memory costs will drive an increasing impact on our business, and we will continue to evaluate this. As we have said before, we will look at a range of options.

Suhasini Chandramouli: Thank you, Ben. Operator, could we have the next question, please?

Operator: Our next question comes from Michael Ng with Goldman Sachs. Please go ahead.

Michael Ng: Good afternoon, thank you for the questions. I have two as well. First, given the success of the MacBook Neo, could you talk about how it has helped drive penetration with new customer segments—whether education, value, or emerging markets? And then, how do you think about opportunities in underpenetrated markets more broadly, and how will your future product roadmap inform that strategy? Thank you.

Timothy D. Cook: Right now, we are supply constrained on the MacBook Neo. We were very bullish on the product before announcing it, but we undercalled the level of enthusiasm. It is very much focused on getting the Mac to even more people than we were reaching before. We are very focused on customers new to the Mac and customers that have been holding on to their Mac for a very long period of time. We are doing well with both of those. And as Kevan alluded to in his comments, we are seeing school systems like the Kansas City Public Schools switching from Chromebooks and Windows PCs to the MacBook Neo.

I am hearing anecdotally more and more of those stories, both at the school system level and at the individual consumer level. We could not be happier with how things are going at the moment.

Michael Ng: Great, thank you, Tim. And for the second question, I wanted to ask about advertising within Services. I think Apple Inc. introduced new inventory to ads on the App Store earlier this year. Has that new ad inventory on the App Store been a notable contributor to the Services growth and outperformance in the quarter? And then could you talk more broadly about your ad strategy given the plans to also introduce ads to Maps this summer? Thank you.

Kevan Parekh: Yep, Mike, thanks for the question. In advertising, we did see year-over-year growth in our advertising business. As you alluded to, we recently introduced additional ads across the App Store search results to provide developers with more ways to drive downloads on platforms that users trust. And this summer, in the US and Canada, Apple Maps will feature ads during key search and discovery moments, creating a new way for local businesses to reach customers and explore new places. Importantly, we believe it is possible to help businesses of all sizes grow via advertising while still delivering a great customer experience and respecting people’s fundamental right to privacy.

Suhasini Chandramouli: Thank you, Michael. Operator, could we get the next question please?

Operator: Our next question is from Wamsi Mohan with Bank of America. Please go ahead.

Wamsi Mohan: Thank you so much. Tim, you noted higher impact from memory as you look beyond June. Clearly, you have a lot of scale, supply chain efficiencies, relationships from a long time. As you think about product and pricing relative to competition, do you think in such times of dislocation that Apple Inc. would be strategically more focused on share gain—where potentially you do not raise pricing and perhaps at lower ends of the portfolio where your competitors are struggling—or more focused on profitability? What is the right framework as you enter that period? And I have a follow-up.

Timothy D. Cook: Wamsi, we will look at a range of options with memory costs increasing, and I really do not want to go beyond that at this point.

Wamsi Mohan: Okay. As a follow-up, is Apple Inc. thinking about broader monetization in the agentic AI world? What parts of the stack do you think Apple Inc. will be focused on internally versus leveraging partners? As we think longer term, where will Apple Inc. invest more heavily over the next several years, and is this at all related to your net cash comments in terms of perhaps building out more infrastructure as we enter an AI-centric world? Thank you.

Timothy D. Cook: We are clearly investing more. You can see that in the OpEx numbers. If you look a step deeper at R&D separate from SG&A, you will find that R&D is accelerating much higher than the company overall. We are investing in products and services, and we see opportunities in both. We could not be more excited about how the future is playing out.

Kevan Parekh: And building on what Tim said, from the start we have believed AI is a really important investment area for Apple Inc., and we are going to be doing that incrementally on top of what we normally invest in our product roadmap.

Suhasini Chandramouli: Thank you, Wamsi. Operator, could we get the next question please?

Operator: Our next question is from Amit Daryanani with Evercore. Please go ahead.

Amit Daryanani: Good afternoon, everyone. First, going back to the iPhone performance—for a couple of quarters you have had 20%+ growth despite supply constraints, and the guide implies the momentum will continue in June. Could you double click on the levers driving this impressive iPhone growth despite supply constraints, and what is the durability of this growth?

Timothy D. Cook: It is the iPhone 17 family that is driving it, despite the supply constraints we are experiencing. Customers love the design, performance, durability, the camera, Center Stage, and that Apple Intelligence is integrated across the platform. From where we are seeing the growth, it is amazing—we are seeing double-digit growth in the majority of the markets we track, from the US to Latin America to Greater China to Western Europe to India to Japan to Southeast Asia. We set a new March record for upgraders as well. Customer satisfaction for the 17 family in the US, as an example, is 99%. These numbers are just unheard of. We are thrilled with how things are going.

Amit Daryanani: Thank you. And then, Tim, I think we have you for one more earnings call, but I would appreciate if you could share a bit about the upcoming transition. You have historically talked about the advice that Steve gave you when you took over—around do not ask what I would do, just do the right thing. What advice are you giving John to help him build on Apple Inc.’s strengths while shaping the next chapter for the company?

Timothy D. Cook: Steve’s advice to me lifted a huge burden, and it served me well over the 15 years. For John, what I have told him is that one of the most important decisions he will make is where to spend his time. Spend it where the greatest benefit to the company and the users are. And never forget the North Star for the company. We are about making the best products in the world that really enrich other people’s lives. If you keep focusing on that and make your decisions around that, it will produce a great business, and we will be able to build more products and do it all over again. Thank you for the question.

Suhasini Chandramouli: Thank you, Amit. Operator, could we get the next question, please?

Operator: Our next question is from David Vogt with UBS. Please go ahead.

David Vogt: Thanks for taking my question. Tim, coming back to the supply chain for a second—I do not think I heard you state in your prepared remarks or in response to a question that the iPhone is constrained in June. Can you walk through how you are thinking about your ability to secure not just SoC, but also memory? Are you thinking about using alternative sources of memory outside of your traditional partners? And what is driving the confidence that the iPhone is not constrained given the amount of share it sounds like you are taking? Then I have a follow-up as well.

Timothy D. Cook: David, the constraint in March and June—the primary constraint—is the availability of the advanced nodes our SoCs are produced on, not memory. I do not want to predict our ability for supply and demand to match. Realistically, on the Mac mini and the Mac Studio, I believe it will take several months to reach supply-demand balance. We are not at the point where we are saying this is going to end anytime soon. It is not because of a problem per se, other than we undercalled demand, and there are lead times as you know. For this quarter—the June quarter—the majority of the constraint will be on Mac: Mac mini, Mac Studio, and MacBook Neo. It is all of those.

David Vogt: Maybe on Services—relatively strong gross margins yet again. Are we getting to a point, given the product mix within Services, where it is increasingly more challenging to scale profitability? Or is there still low-hanging fruit in terms of volume leverage or lower losses in some categories that can continue to scale gross margin across the Services base?

Kevan Parekh: David, as you know, our Services portfolio contains a wide range of businesses that have different business models and profitability profiles and are growing at different rates. At any given time, the relative performance of those can impact gross margin. In Q2 specifically, Services margin increased 20 basis points sequentially, primarily driven by mix. It is hard to speculate how that evolves over time, but we are encouraged by what we are seeing. We do have some Services that are improving in profitability as they gain scale. Overall, we are encouraged by the trajectory.

Suhasini Chandramouli: Thank you, David. Operator, could we get the next question, please?

Operator: Our next question is from Samik Chatterjee with JPMorgan. Please go ahead.

Samik Chatterjee: Hi, thanks for taking my questions. Tim, last quarter you talked about Apple foundational models and a two-pronged strategy: the collaboration with Google as well as continuing to work on your own models. Can you give us an update in terms of balancing those two priorities? Do you feel like you need to double down and invest more to balance those side by side? A follow-up for Kevan after.

Timothy D. Cook: It is a good question. We are investing more—you can see that in the OpEx numbers. R&D in particular has scaled rather significantly year over year. The collaboration with Google is going well. We are happy with where things are, and we are happy with the work we are doing independently as well.

Samik Chatterjee: Great. Kevan, the sequential moderation in product gross margin this year is relatively muted compared to what we have seen over the last couple of years. Is it primarily mix, or was there an FX tailwind as well? How would we break it down versus what we typically see, and could you clarify the FX impact on gross margin for the quarter?

Kevan Parekh: Sure, Samik. On products for Q2, product gross margin decreased by 200 basis points sequentially, driven by seasonal loss of leverage and higher memory costs, as Tim alluded to. If I zoom out to overall company gross margin, the sequential impact was +110 basis points, driven by favorable mix and lower tariff-related costs, partly offset by seasonal loss of leverage and higher memory costs. I want to turn it over to Tim to provide some clarity around the lower tariff-related costs.

Timothy D. Cook: Thanks, Kevan. For March, the gross margin of 49.3% did include the impact of tariff-related costs. However, tariffs in March versus December were lower because we had lower product volume sequentially from Q1 to Q2, and there was the full-quarter benefit from a reduction in the IPEA tariff rates as well as the reduced global tariff rate under Section 122. In terms of applying for a refund of tariffs paid, we are following the established processes, and we plan to reinvest any amount we receive back into US innovation and advanced manufacturing. These would be new investments and would be in addition to our prior commitments in the US.

Kevan Parekh: And one last point on your FX question: we did not see any sequential impact related to foreign exchange going from Q1 gross margin to Q2.

Suhasini Chandramouli: Thank you. Operator, could we get the last question, please?

Operator: We will go ahead and take our last question from Aaron Rakers with Wells Fargo. Please go ahead.

Aaron Rakers: Congrats on the quarter. I wanted to ask about a few of the end markets. Tim, could you comment on what you are seeing specifically in China? From a competitive perspective, are you seeing advantages from supply constraints impacting some of your competitors? Any thoughts on the China market? And I have a quick follow-up.

Timothy D. Cook: We are thrilled with the performance in Greater China. The first half of the year grew 33%. In March, revenue was up 28%—a quarterly revenue record for us. The performance is really driven by iPhone, which was also a March record. If you look at individual products, iPhone was the top-selling model in urban China. The Mac mini was the top-selling desktop in China, and the MacBook Air was the top-selling laptop model. We are doing well across the board. I was over there in March—the traffic in our stores grew by double digits. We were celebrating Apple Inc.’s 50th anniversary there. It was amazing to be a part of the community.

I am really happy with how things have gone in the first half of this year.

Aaron Rakers: And then similar question on the India market. How are you seeing the market in India evolve around the base of iPhones and the rising middle class—just the overall opportunity set in that large mobile market?

Timothy D. Cook: I think it is a huge opportunity for us. We have been focused on this for a while. It is the second-largest smartphone market in the world and the third-largest PC market. Despite doing extremely well there for quite some time, we still have a modest share, which speaks to the opportunity we have. There are a lot of people moving into the middle class, and we have some great products for them, both currently and coming. In the majority of our categories—from iPhone to Mac to iPad to Watch—over half of customers are new to that product there. It speaks very well to growing the install base. Net, I am over the moon excited about India.

Suhasini Chandramouli: A replay of today’s call will be available for two weeks on Apple Podcasts, as a webcast on apple.com/investor, and via telephone. The number for the telephone replay is (866) 583-1035. Please enter confirmation code 2803309 followed by the pound sign. These replays will be available by approximately 5 PM Pacific time today. Members of the press with additional questions can contact Josh Rosenstock at (408) 862-1142, and financial analysts can contact me, Suhasini Chandramouli, with additional questions at (408) 974-3123. Thanks again for joining us today.

Operator: Once again, this does conclude today’s conference. We do appreciate your participation.

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