Apple reported quarterly results that beat expectations on revenue and profit, but the company’s guidance for the next quarter fell short of what Wall Street had been looking for, sending the stock down about 6% in after-hours trading.
Total revenue reached $109.4 billion in the latest quarter, up 16% from a year earlier. Diluted earnings per share came in at $2.02, also ahead of expectations. The market reaction centered on Apple’s outlook: the company expects revenue growth of 9% to 11% in the next quarter ending in September, below analyst expectations of more than 12%.
Supply constraints weigh on the outlook
Apple said component shortages and a sharp rise in memory costs are limiting its near-term performance. Tim Cook said processor supply for computers remains tight and described the jump in memory costs as a “once-in-a-century flood.” Apple had already raised prices for the Mac and iPad.
The supply-chain bottleneck has also extended delivery times for products including the Mac mini and Mac Studio. Apple expects the disruption to continue into the fourth quarter, affecting the iPhone, Mac, and iPad product lines and potentially limiting growth during the first quarter of the next-generation iPhone launch cycle.
iPhone and Mac outperform, iPad misses
Performance across Apple’s hardware business was uneven.
iPhone revenue rose 22% year over year to $54.3 billion, ahead of market expectations of $53.6 billion. The result suggested steady demand for the iPhone 17 lineup and the lower-end 17e model launched in March.
Mac revenue climbed 29% to $10.4 billion, well above the expected $8.62 billion, helped by the MacBook Neo and updated MacBook Pro and MacBook Air models.
iPad revenue, by contrast, came in at $6.19 billion, below expectations of $6.89 billion. The report said recent iPad upgrades focused mainly on chip changes and lacked major exterior design updates.
Services and China fall short of expectations
Services revenue rose 12% to $30.7 billion, missing market estimates of $31.4 billion. Apple also said services growth will slow again in the next quarter.
In addition to weaker gaming revenue, the company pointed to regulatory changes in the European Union and other markets. Under digital market rules, developers can bypass Apple’s ecosystem and charge users directly for subscriptions, adding pressure to the App Store model.
In China, Apple posted revenue of $18.8 billion for the quarter, below expectations of $19.6 billion, a sign that competition in the market remains intense.
A final earnings report before the CEO handoff
The earnings release marks Cook’s final report after 15 years leading Apple. During his tenure, according to the report, Apple’s annual revenue was pushed to nearly $500 billion.
Cook is set to hand over the CEO role to hardware engineering chief John Ternus on Sept. 1. Ternus will take over as Apple faces several immediate tests, including catching up in artificial intelligence after falling behind Silicon Valley peers, dealing with succession pressure as senior executives near retirement, and trying to slow the loss of technical talent to rivals such as OpenAI.