Apple posted fiscal third-quarter earnings and revenue that topped Wall Street expectations due to strong gains in iPhone sales and services, while also increasing the amount it is investing in artificial intelligence.
Services — which saw a record quarter in sales — and iPhones represent the vast bulk of Apple’s business, with the company increasingly reliant on services, which include everything from iCloud to Apple TV+, as a growth engine.
While the Mac business saw growth in the quarter, iPad and wearable sales — which include AirPods, Apple Watches and its Vision Pro headset — both saw declines.
The results underscore a company still largely reliant on the iPhone to drive most of its hardware revenue, as well as to serve as a vehicle to deliver all the services Apple wants to offer on top of its devices. But it’s a strategy that’s worked, as it posted the highest revenue gain since December 2021.
The revenue and profit growth gives the company cover to raises its capital expenditure in the quarter, with expectations to increase spending again in the current fiscal fourth quarter. CEO Tim Cook said the increase has been driven by AI investment.
Apple has been under pressure to catch up to rivals Google, Meta and OpenAI when it comes to AI capabilities. While Apple touted AI as “Apple Intelligence” back in 2024, the features and capabilities promised to its devices have fallen short of expectations.
While on the call, Cook lauded AI as “one of the most profound technologies of our lifetime,” and promised new features to come later this year and in 2026.
“Apple’s always been about taking the most advanced technologies and making them easier to use and accessible to everyone,” he said. “It’s the heart of our AI strategy.”
While Apple is talking about features, OpenAI, Google and Meta are talking about advances to their AI models and billions of dollars they’re pouring into research and infrastructure to support the technology. In comparison, Apple last month spent a bulk of its time during its Worldwide Developer Conference touting its Liquid Glass design scheme for its products.
Apple leaped ahead of the pack with the idea of a digital assistant with the debut of Siri back in 2011 — 14 years ago — but has made little progress in all this time. Cook said the company is making gains on making a more personalized version of Siri and plan to roll out more features next year.
Net income: $23.43 billion, compared to $21.45 billion a year ago.
Earnings Per Share: $1.57, compared to $1.40 a year ago and $1.43 expected by analysts surveyed by Yahoo Finance.
Revenue: $$94.04 billion, compared to $89.16 billion expected by analysts surveyed by Yahoo Finance.
iPhone Sales: $44.58 billion, compared with $39.3 billion a year ago.
Services: $27.43 billion, compared with $24.21 billion a year ago.
On a more positive note, Apple Original Films finally saw the checkered flag with blockbuster “F1 the Movie.” The race car drama, starring Brad Pitt and Javier Bardem, has been a hit in theaters and last weekend crossed the $500 million mark, thanks in part to strength overseas, where F1 racing is particularly popular.
Apple’s entertainment ventures continue to be a head scratcher, with the movie business offering far less predictable margins as its core hardware or services businesses. Even a hit like “F1” doesn’t really tie back to its iPhone or MacBook. And while Apple TV+ has made headway with hit shows like “Ted Lasso” and “Severance,” it’s unclear if the subscribers are enough to move the needle on its the top or bottom line.
Cook said that Apple TV+ saw double-digit growth in subscribers, and chief financial officer Kevin Parekh said the company now has more than 1 billion subscriptions across all of its different services.
