Apple Q1 Earnings Call Highlights

Key Points

• Apple reported its best-ever quarter in fiscal Q1 2026 with revenue of $143.8 billion, record EPS of $2.84, net income of $42.1 billion and operating cash flow of $53.9 billion.
• iPhone revenue hit an all-time record of $85.3 billion (up 23% YoY), but demand has created supply constraints tied to availability of 3‑nanometer chips, and Apple guided March-quarter revenue growth of 13–16% while factoring constrained iPhone supply.
• Services reached a record $30.0 billion on higher engagement, and Apple disclosed a strategic AI push — including a collaboration with Google on Apple Foundation Models — while stressing a mix of on‑device processing, Private Cloud Compute and privacy.

Apple NASDAQ: AAPL reported its best-ever quarter in fiscal Q1 2026, posting revenue of $143.8 billion, up 16% year-over-year, as CEO Tim Cook called iPhone demand “simply staggering.” The company said it set all-time revenue records in the Americas, Europe, Japan, and the rest of Asia Pacific, while also delivering record EPS of $2.84, up 19% from a year ago.

CFO Kevan Parekh said products revenue rose 16% to $113.7 billion and services revenue increased 14% to a record $30.0 billion. Apple also reported record net income of $42.1 billion and an all-time record for operating cash flow of $53.9 billion during the December quarter.

iPhone drives record quarter; supply constraints emerge

Apple said iPhone revenue reached an all-time record of $85.3 billion, up 23% year-over-year, driven by the iPhone 17 family. Cook highlighted iPhone 17 Pro and Pro Max, as well as iPhone Air and iPhone 17, as key elements of the lineup’s appeal.

However, Apple said the strength of demand contributed to a lean channel inventory exiting the December quarter and has pushed the company into “supply chase mode.” Cook told analysts Apple is currently constrained and said it is “difficult to predict when supply and demand will balance.” He attributed the constraints to availability of advanced nodes used to produce the company’s system-on-chips, referencing “3 nanometer” specifically in response to a question about what is gating supply.

Apple’s March-quarter outlook incorporates what Parekh described as “our best estimates of constrained iPhone supply during the quarter,” with total company revenue expected to grow 13% to 16% year-over-year.

Services expands to $30 billion as engagement hits records

Services set another all-time revenue record at $30.0 billion, rising 14% year-over-year. Parekh said performance remained broad-based and included all-time revenue records for advertising, cloud services, music, and payment services, along with December-quarter records on the App Store and video.

On the call, management pointed to increased customer engagement: Parekh said both transacting and paid accounts reached all-time highs in the quarter. He also cited product updates intended to support growth, including new Wallet features such as Digital ID, and “additional ads coming to search in the App Store,” which he said provides advertisers more ways to drive downloads from search.

Cook also discussed Apple TV momentum, saying December viewership increased 36% over the prior year. He announced that Ted Lasso will return for a fourth season this summer and said Apple TV productions have earned more than 650 wins and more than 3,200 nominations. Cook added that for U.S. fans, Apple TV will carry every Formula One practice, qualifying, sprint, and Grand Prix, and that MLS subscribers will be able to watch every regular and postseason game this year.

Mac and iPad results mixed; wearables impacted by AirPods constraints

Mac revenue was $8.4 billion, down 7% year-over-year. Parekh said Apple faced a difficult comparison against launches in the year-ago quarter, including the M4 MacBook Pro, Mac Mini, and iMac. Despite the decline, Cook said the Mac install base reached an all-time high and that nearly half of Mac buyers during the quarter were new to the product.

iPad revenue was $8.6 billion, up 6% year-over-year, driven by the M5-powered iPad Pro and the A16-powered iPad. Parekh said over half of customers who purchased an iPad during the quarter were new to the product, helping lift the iPad install base to an all-time high and producing an all-time record for upgraders.

Wearables, home, and accessories revenue was $11.5 billion, down 2% year-over-year. Parekh said Apple experienced constraints on AirPods Pro 3 and believed the category “would have grown had it not been for these constraints.” Cook highlighted health and wellness usage trends for Apple Watch, including more users wearing the device to sleep and Watch alerts prompting conversations with doctors about potential signs of hypertension.

AI strategy: Apple Intelligence adoption, cloud approach, and Google collaboration

Cook said Apple reached a new installed base record of more than 2.5 billion active devices, and noted that “the majority of users on enabled iPhones are actively leveraging the power of Apple Intelligence.” Apple said it has introduced dozens of Apple Intelligence features and expanded availability to 15 languages. Cook highlighted Visual Intelligence and Live Translation as popular examples.

Apple also disclosed a collaboration with Google to develop the next generation of Apple Foundation Models, which Cook said will help power future Apple Intelligence features, including a more personalized Siri coming this year. Responding to questions, Cook said Google’s AI technology would provide “the most capable foundation” for Apple Foundation Models, while emphasizing Apple’s continued use of on-device processing and Private Cloud Compute and the company’s privacy standards. Apple declined to provide details on the partnership arrangement.

Asked about edge versus cloud, Cook said Apple sees both on-device and Private Cloud Compute as important, rather than an either/or choice, and called privacy a differentiator. The company did not provide the number of AI-capable devices in its installed base, though Parekh said it is a growing figure.

Margins, tariffs, memory, and capital return

Apple reported company gross margin of 48.2%, above the high end of its guidance range and up 100 basis points sequentially. Products gross margin was 40.7%, up 450 basis points sequentially, while services gross margin was 76.5%, up 120 basis points sequentially. Parekh attributed margin performance primarily to favorable mix and leverage, noting that a strong iPhone cycle can support mix dynamics, and that services growth also contributes.

On memory, Cook said memory had a minimal impact on December-quarter gross margin but is expected to have more impact in the March quarter, which was “comprehended” in Apple’s gross margin guidance of 48% to 49%. He also said the company continues to see market pricing for memory “increasing significantly,” while declining to provide specifics on how Apple might respond.

On tariffs, Parekh said Apple had outlined an amount of $1.4 billion for the December quarter and “landed roughly in that range.” The company’s March-quarter outlook assumes global tariff rates and policies remain in effect as of the call and that the macroeconomic outlook does not worsen.

Apple ended the quarter with $145 billion in cash and marketable securities and total debt of $91 billion, resulting in net cash of $54 billion. During the quarter, Apple returned nearly $32 billion to shareholders, including $3.9 billion in dividends and equivalents and $25 billion through open market repurchases of 93 million shares. Apple’s board declared a cash dividend of $0.26 per share payable February 12, 2026, to shareholders of record as of February 9, 2026.

For the March quarter, Apple guided to:

• Total company revenue growth: 13% to 16% year-over-year (including constrained iPhone supply)
• Services revenue growth: similar year-over-year rate to the December quarter
• Gross margin: 48% to 49%
• Operating expenses: $18.4 billion to $18.7 billion
• Other income and expense: about $100 million (excluding mark-to-market impacts)
• Tax rate: about 17.5%

About Apple NASDAQ: AAPL

Apple Inc NASDAQ: AAPL is a multinational technology company headquartered in Cupertino, California, founded in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne. The company designs, develops and sells consumer electronics, software and services. Over its history Apple has evolved from personal computers to a broad portfolio that spans mobile devices, wearables, home entertainment and digital services.

Apple's principal hardware products include the iPhone smartphone, iPad tablet, Mac personal computers, Apple Watch wearable devices and a range of accessories such as AirPods and HomePod.

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