Apple (NASDAQ:AAPL) reported record-breaking revenue and earnings per share on Thursday, supported by a second consecutive quarter of more than 20% growth in iPhone sales. The update marks the company’s first earnings release since its unexpected CEO transition announcement.
Shares rose nearly 3% in premarket trading on Friday after management projected second-quarter revenue growth of 14% to 17%, alongside what Morgan Stanley described as a “remarkable” gross margin outlook of 47.5% to 48.5%.
Results Beat Expectations as iPhone Momentum Continues
Analyst Eric Woodring said Apple delivered “an impressive quarter and guide,” noting that both the results and outlook exceeded bullish investor expectations.
The Cupertino-based company reported fiscal Q2 2026 earnings of $2.01 per share on revenue of $111.18 billion, ahead of analyst forecasts of $1.93 per share and $108.92 billion in revenue.
Despite ongoing concerns about Apple’s progress in artificial intelligence, the company has regained momentum in its core smartphone business. iPhone sales rose 21.7% year over year to $56.99 billion, following a 23.3% increase in the previous quarter—the strongest growth since late 2021.
Strong Demand for iPhone 17 Drives Market Share Gains
Consumer demand for the latest iPhone 17 lineup—particularly premium Pro models—has been a key driver of growth. According to Counterpoint Research, Apple led global smartphone shipments in the first quarter for the first time.
“iPhone achieved a March quarter revenue record, fueled by such extraordinary demand for the iPhone 17 lineup,” said CEO Tim Cook, adding that it was the company’s best March quarter on record.
Broader Product and Services Growth Supports Performance
Apple’s Mac revenue increased 5.7% year over year to $8.40 billion, while iPad sales rose 8% to $6.91 billion. Revenue from wearables, home, and accessories climbed 5% to $7.90 billion.
The Services division continued to deliver strong growth, with revenue up 16.3% year over year to $30.98 billion, driven by subscriptions such as iCloud and Apple Music, as well as App Store fees.
“Continued strong customer demand for our products and services once again helped us achieve a new all-time high for our installed base of active devices across all major product categories and geographic segments,” said CFO Kevan Parekh.
“During the quarter, Services achieved yet another all-time record, and we were excited to introduce remarkable new products to our strongest lineup ever. That included the addition of the iPhone 17e and the M4-powered iPad Air, along with the launch of MacBook Neo, which is captivating customers all around the world,” Cook added.
Analysts Highlight Services Strength and Supply Chain Resilience
Jacob Bourne described the period as a “standout quarter,” noting that Services continues to “oil Apple’s financial machinery, serving as a testament to Tim Cook’s legacy”.
“iPhone revenue came in just shy of expectations, but strength across Mac, iPad, and Wearables helps offset the miss. The results suggest Apple is continuing to weather the global memory chip crunch, pointing to the tech giant’s supply chain resilience,” he said.
Apple, like other smartphone manufacturers, is facing ongoing memory chip shortages. Rival Samsung Electronics recently warned that profitability in its mobile division could decline, with supply constraints expected to worsen in the coming years.
Leadership Transition and AI Strategy in Focus
Earlier this month, Apple announced that Tim Cook will move into the role of chairman, with John Ternus set to take over as CEO. The leadership change raised concerns among investors about Apple’s direction in artificial intelligence.
“The question is whether incoming CEO John Ternus can translate this momentum into a credible AI strategy, particularly as the Google Gemini partnership for Siri signals Apple’s willingness to lean on external AI innovators,” Bourne said.
The analyst was referring to Apple’s agreement with Google to integrate its Gemini AI model into Siri and other Apple Intelligence features.
“Investors will be watching for clues about how Ternus plans to balance Apple’s cautious AI posture with the pressure to define the next consumer device for the AI era, particularly as expectations about the iPhone’s performance are getting harder to meet,” Bourne added.
AI Spending Scrutiny and Share Buyback
Apple’s results come amid broader scrutiny of AI-related spending across the technology sector, with peers such as Alphabet, Microsoft, and Meta outlining increased investments in the space.
The company also announced an additional $100 billion share buyback, reinforcing its commitment to returning capital to shareholders.