Apple stock falls as supply warning overshadows record quarter

Apple (NASDAQ: AAPL) brought in $109.42 billion during its fiscal third quarter, yet the stock dropped more than 6% after regular trading ended. Traders focused on the company’s softer forecast for the current period, where sales are expected to rise by only 9% to 11%.

Apple blamed tight supplies for the weaker view. The reaction came even though quarterly revenue beat the $108.65 billion expected by analysts tracked by London Stock Exchange Group (LON: LSEG).

Profit came in ahead of analysts’ expectations as well. Apple posted $2.02 in earnings per share, higher than the expectation of $1.89. This is not a like-for-like comparison, however, since tariff reimbursements boosted EPS by 11 cents.

Apple’s net income reached $29.79 billion, up from $23.43 billion one year earlier. On a per-share basis, last year’s result was $1.57. Apple’s total revenue rose by more than 15% for the third quarter in a row, while cash holdings stood at $146.52 billion.

Apple gets most of its growth from iPhone and Mac sales

The iPhone business produced $54.25 billion, ahead of the $53.86 billion analysts had expected. Sales from the phone line climbed close to 22% from the same quarter last year. That increase came late in the iPhone 17 sales cycle, with another hardware release expected in September.

Mac revenue came in at $10.35 billion, well above the $8.74 billion forecast. That was an annual increase of almost 29%. Apple Chief Executive Officer Tim Cook tied the jump to demand for the MacBook Neo and the MacBook Pro.

The Neo is a lower-priced notebook that uses a chip based on Apple’s iPhone technology. It went on sale in March, shortly before the quarter began.

Apple hiked prices for many Macs during the reporting period. One such model was the MacBook Neo. Lack of memory chips and low manufacturing capacity for processors resulted in increased expenses and reduced availability of components. According to Tim, it was a “tough situation” that needed to be highlighted during the earnings call.

The iPad business had a weaker quarter. Revenue fell 6% from a year ago to $6.19 billion, missing the $6.92 billion estimate. Apple said last year’s comparison was unusually hard because a cheaper iPad had lifted sales during that period.

Wearables revenue reached $7.88 billion, slightly higher than the $7.82 billion analysts expected. Apple also reported that revenue from its wearables and home unit grew 6% to $4.9 billion, which came in above forecasts.

China remained Apple’s third-largest regional business. Revenue from the market rose 22% to $18.82 billion. Apple includes mainland China, Hong Kong, and Taiwan in that regional total.

Apple expands services while supply limits weaken its next-quarter forecast

The services unit generated $30.74 billion, below the $31.22 billion Wall Street estimate. Revenue from the division still increased 12% from the prior year. Apple said currency changes outside the United States reduced the final number.

The division received more money from advertising, the App Store, AppleCare plans, music, streaming video, online storage, and payment products. Tim said Apple now has 1.5 billion paid subscriptions. That figure covers iCloud accounts and subscriptions bought through the App Store, where Apple receives part of each payment.

Gross margin came to 50.1%, while analysts had expected 47.9%. The reported figure was helped by refunds tied to earlier United States tariffs. Those payments added about two percentage points and took the exact margin to a record 50.06%. Without the refund benefit, Apple’s margin would have landed close to the original Wall Street estimate.

The refund came after the U.S. Supreme Court struck down certain tariffs that were imposed by the previous government of President Donald Trump earlier this year. Under these emergency powers, Apple had been paying more import fees for the finished products as well as individual components that it brings to the country.

Apple is also preparing a new Siri system that will use technology from Alphabet’s Google (NASDAQ: GOOGL, GOOG). The voice assistant is expected to arrive with new iPhone hardware in September. Investors have questioned Apple’s position in artificial intelligence as competing companies release new AI products at a faster pace.

“Today, Apple is proud to report our strongest June quarter ever, with double-digit revenue growth across iPhone, Mac and Services, and in every geographic segment,” Tim said. He also pointed to the Siri AI update, new software, and child-protection tools introduced during WWDC26.

Apple Chief Financial Officer Kevan Parekh said, “We are very pleased with our record business performance during the quarter, which set new June quarter records for both EPS and operating cash flow.” Kevan added that Apple’s active-device count reached a new high across every main product group and every region.

The call was Tim’s final earnings appearance before John Ternus takes over as chief executive. John has worked at Apple for 25 years and currently runs the company’s hardware division. He spoke only briefly during the call.

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