Key facts
- Apple's Q3 earnings per share of $2.02 beat estimates of $1.89.
- iPhone sales reached $109.4 billion, exceeding the $108.85 billion estimate.
- Mac revenue was $10.35 billion, surpassing the $8.62 billion estimate.
- Revenue from China, services, and iPad sales missed analyst expectations.
- Apple's stock declined 7% in after-hours trading.
- Rising memory costs contributed to a decrease in Apple's gross margin to 48.1%.
Apple reported its fiscal third-quarter earnings on Thursday, surpassing top and bottom line estimates, but its stock fell 7% in after-hours trading. The company's crucial iPhone sales reached $109.4 billion, slightly exceeding the $108.85 billion estimate, and Mac revenue significantly outperformed expectations at $10.35 billion against an $8.62 billion estimate. Earnings per share came in at $2.02, beating the $1.89 analyst consensus.
However, revenue from China, the services division, and iPad sales fell short of Wall Street's projections. This marks Tim Cook's final earnings report as CEO, with hardware chief John Ternus set to assume the role on September 1st, while Cook transitions to executive chairman.
Apple's gross margin for the quarter was 48.1%, adjusted for a tariff refund, down from 49.3% in the prior quarter. Apple's CFO attributed this decrease primarily to rising memory costs, though partial offsets came from inventory reduction benefits and favorable product mix.
Concerns about rising memory hardware costs were previously highlighted by Cook, who noted price increases to offset supply crunches. While the iPhone was not included in recent price hikes, Apple is widely expected to increase prices for its new lineup in September. Investors are also seeking updates on Apple's artificial intelligence strategy, though the company is not currently a major capital expenditure story like some other tech giants.
During the analyst call, incoming CEO John Ternus expressed confidence in Apple's AI plans amidst competition. Tim Cook stated that the impact of recent price increases on Macs and iPads is still being evaluated and that it is too early to draw definitive conclusions. He also discussed ongoing work with the European Commission regarding the potential launch of Siri AI in the EU, contingent on regulatory changes.