Apple Beats Expectations With 5% Revenue Growth And Strong iPad Sales: Shares Up 2%

Apple reported its fiscal third-quarter earnings on Thursday, surpassing Wall Street expectations with a 5% increase in overall revenue. Shares rose approximately 2% in after-hours trading.

Here’s a comparison of Apple’s performance against LSEG consensus estimates for the quarter ending June 29:

• EPS: $1.40 vs. $1.35 estimated
• Revenue: $85.78 billion vs. $84.53 billion estimated
• iPhone revenue: $39.30 billion vs. $38.81 billion estimated
• Mac revenue: $7.01 billion vs. $7.02 billion estimated
• iPad revenue: $7.16 billion vs. $6.61 billion estimated
• Wearables, Home, and Accessories revenue: $8.10 billion vs. $7.79 billion estimated
• Services revenue: $24.21 billion vs. $24.01 billion estimated
• Gross margin: 46.3% vs. 46.1% estimated

Apple did not provide formal guidance, though CEO Tim Cook and CFO Luca Maestri typically discuss the current quarter’s information on their analyst call.

The company reported $21.44 billion in net income for the quarter, compared to $19.88 billion in the same period last year. The iPhone remains Apple’s key business, contributing about 46% of total sales for the quarter. Despite beating LSEG estimates, iPhone revenue saw a 1% annual decline, totaling $39.29 billion.

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“On a constant currency basis, we grew year on year. And so that’s sort of how we look at it from an operational point of view,” Cook told CNBC’s Steve Kovach.

Cook noted that Apple cannot yet gauge the impact of its new Apple Intelligence service on sales, as it will not ship until later this fall. He added that Apple has increased its investment in AI, redeploying staff and partnering with other data centers.

“Certainly embedded in our results this quarter is an increase year over year in the amount we’re spending for AI and Apple Intelligence,” Cook said.

The iPad division showed the strongest growth, with sales rising nearly 24% year-over-year to $7.16 billion, driven by the release of new iPads for the first time since 2022. Cook mentioned that about half of iPad buyers were new to the product, indicating the tablet market is still expanding.

Apple’s Mac division reported $7 billion in sales, a 2% increase from the previous year.

The “Wearables, Home, and Accessories” category, which includes Apple Watch, Beats headphones, and HomePod speakers, saw a 2% decline to $8.10 billion in sales.

“A whopping two thirds of the Apple Watch buyers were new to the product. So, we’re still growing that base significantly,” Cook said.

Services, which encompasses hardware warranties, revenue from Google, cloud storage subscriptions, and content services like Apple TV+, remains Apple’s most important growth area. Services revenue reached $24.21 billion, up 14% and aligning with Apple’s forecast and LSEG estimates.

Apple stated it now has more active devices than ever across all regions, although no specific numbers were provided. In February, Apple reported 2.2 billion active devices. The company also reached 1 billion paid subscriptions, including those for iPhone apps through the App Store.

However, sales in Greater China, which includes Taiwan and Hong Kong, fell 6% to $14.72 billion. Apple faces competition from local rivals such as Huawei in mainland China.

“Mainland China and Greater China actually had a record in the iPhone install base,” Cook said. “Kantar tells us we had the top three selling smartphones in urban China and the results in China represent an acceleration from the first half of the year.”

During the quarter, Apple spent $32 billion on dividends and share repurchases.

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