Apple Reports "Staggering" iPhone Demand Amid Record Quarter

It's been a tough time to be an Apple (NASDAQ: AAPL) investor over the past few years. Slowing iPhone sales and questions about the company's artificial intelligence (AI) strategy have plagued Apple, leading investors to wonder whether its best days are behind it.

Expectations were high coming into the quarterly financial report, spurred on by reports of strong demand for the recently released iPhone 17. That said, investors couldn't have imagined the record-setting performance, led by "staggering" iPhone demand.

Image source: Getty Images.

By the numbers

For its fiscal 2026 first quarter (ended Dec. 27), Apple generated record revenue of $143.8 billion, up 16% year over year, marking the company's highest growth rate since 2021. This drove diluted earnings per share (EPS) of $2.84, which jumped 19%, an all-time record.

For context, analysts' consensus estimates called for revenue of $138.5 billion and EPS of $2.67. Not only did Apple exceed its own robust guidance, but blew past even the most bullish Wall Street forecasts.

CEO Tim Cook said, "Today, Apple is proud to report a remarkable, record-breaking quarter." He went on to say that iPhone sales were driven by "unprecedented demand" with "all-time records across every geographic segment."

Sales were broad-based across products and geographies. One of the biggest surprises was a record-setting performance in China, following a surprise sales slump late last year. During the earnings call, Cook said that this "was the best iPhone quarter ever in China," a stark about-face compared to difficulties last year.

In fact, the iPhone was the top-selling smartphone in China during the last three months of 2025, rising 28% year over year and accounting for 22% of shipments during the quarter, according to Counterpoint Research.

CFO Kevan Parekh went a step further, saying, "The demand for iPhone was simply staggering." He went on to note that Apple surpassed 2.5 billion active devices, up from 2.35 billion in the prior-year quarter.

Overall, iPhone revenue led the charge, rising 23% year over year, as users lined up to upgrade to the iPhone 17. The services segment also shone, with revenue rising to an all-time record $30 billion, up 14%.

One of the more stunning revelations concerned Apple's margins. Many iPhone users have been upgrading to the iPhone Pro and iPhone Pro Max, Apple's high-end models. That provided a big boost to the company's gross profit margin, which rose to 48.1% from 46.9% in the prior-year quarter.

In a surprise development, Apple revealed that it had acquired start-up Q.ai, which will no doubt help the company in its bid to become an AI superpower. While terms weren't disclosed, reports suggest the deal was value at $2 billion.

Time to buy?

Apple has lagged many of its big tech peers over the past year, with the stock up just 8%, compared to nearly 15% gains for the S&P 500. Concerns have swirled over declining iPhone sales and an unclear AI strategy, leaving investors to wonder whether Apple would be left behind.

At 34 times earnings, Apple still trades at a premium, but its dramatic sales gains suggest it might be time to give the iPhone maker a look.

Danny Vena, CPA has positions in Apple. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.