Apple Q3 Earnings Beat Estimates, iPhone Drives Top-Line Growth

Apple AAPL delivered third-quarter fiscal 2026 earnings of $2.02 per share, up 28.7% year over year. After adjusting for non-recurring items, earnings were $1.91 per share, which beat the Zacks Consensus Estimate by 1.6%. 

Net sales increased 16.4% year over year to $109.42 billion, surpassing the consensus mark by 0.6%. The results reflected record June-quarter revenues from iPhone, Mac and Services. Apple’s installed base exceeded 2.5 billion active devices, reaching an all-time high across all major product categories and geographic segments.

AAPL's iPhone and Mac Set June Records

Product sales increased 18.1% year over year to $78.68 billion and accounted for 71.9% of total revenues. iPhone remained the primary growth engine, with sales rising 21.7% year over year to $54.25 billion. The category set June-quarter records across every geographic segment and benefited from strong demand for the iPhone 17 family.

Mac sales surged 28.7% year over year to $10.35 billion, driven by MacBook Neo and MacBook Pro. Apple achieved records for both upgraders and customers new to Mac, despite supply constraints tied mainly to advanced-node chips used in its systems.

Apple Services Extend Recurring Revenue Growth

Services revenues advanced 12.1% year over year to a June-quarter record of $30.74 billion. The segment represented 28.1% of total sales and produced records across every services category.

Cloud and payment services reached all-time highs, while advertising, the App Store, AppleCare, Music and video posted June-quarter records. Paid subscriptions surpassed 1.5 billion, supported by record transacting and paid accounts. However, Apple noted softness in mobile gaming and changes to the App Store business model in certain markets.

AAPL's Other Product Categories Deliver Mixed Results

iPad sales declined 5.9% year over year to $6.19 billion, reflecting a difficult comparison with the prior-year launch of the A16-powered iPad. Still, the iPad installed base reached a record, and more than half of quarterly buyers were new to the product.

Wearables, Home and Accessories sales increased 6.5% year over year to $7.88 billion. Growth was broad-based across developed and emerging markets. Apple Watch set a June-quarter record for upgraders, while more than half of customers purchasing the device were first-time buyers.

Apple Posts Broad-Based Geographic Growth

Americas sales rose 11.1% year over year to $45.78 billion and remained Apple’s largest geographic market. Europe revenues jumped 22.4% year over year to $29.40 billion.

Greater China sales also climbed 22.4% to $18.82 billion, supported by strength across Apple’s product portfolio. Japan sales increased 13.4% to $6.55 billion, while Rest of Asia Pacific sales grew 15.6% to $8.87 billion. The company achieved June-quarter revenue records across every geographic segment.

AAPL's Margins Gain From Tariff Refunds

Gross margin expanded 360 basis points (bps) on a year-over-year basis to 50.1%. The result included a favorable impact of roughly 2 percentage points from tariff refunds. Products gross margin was 40.1%, up 140 bps sequentially. Services gross margin reached 75.6%, down 110 bps sequentially, primarily attributed to unfavorable mix.

Operating expenses increased 22.9% year over year to $19.08 billion as Apple stepped up research and development (R&D) investments. R&D expenses surged 32.3% year over year to $11.73 billion, while selling, general and administrative expenses rose 10.5% to $7.35 billion. 

Operating income increased 26.6% year over year to $35.70 billion.

Apple Cash Flow Supports Shareholder Returns

Apple ended the period with $147 billion in cash and marketable securities and $84 billion in total debt. 

Operating cash flow totaled $34.4 billion during the quarter, setting a June-quarter record.

The company returned $33 billion to shareholders, including $25.8 billion through share repurchases and $4 billion in dividends and equivalents. The board declared a quarterly dividend of 27 cents per share.

AAPL Outlook Flags Supply and Memory Pressure

For the fourth quarter of fiscal 2026, Apple expects revenues to increase 9% to 11% year over year. Management anticipates foreign exchange to reduce the growth rate by about 2.5 percentage points sequentially, while supply constraints are expected to intensify across iPhone, Mac and iPad.

Apple expects iPhone to grow at mid-teens year over year in the September quarter. Services year-over-year reported growth rate is expected to be largely similar to June growth rate after removing the 2.5 percentage point negative impact from foreign exchange.

Gross margin is projected between 47% and 48%, including a roughly 1-percentage-point benefit from tariff refunds. Operating expenses are expected between $19.1 billion and $19.4 billion. 

Apple also expects higher memory costs to pressure profitability, partially offset by carry-in inventory, lower costs for certain non-memory components and favorable product mix.

Zacks Rank & Stocks to Consider

Currently, Apple carries a Zacks Rank #3 (Hold). 

Shopify SHOP, Sandisk SNDK and HubSpot HUBS are some better-ranked stocks in the broader Zacks Computer and Technology sector. While Sandisk sports a Zacks Rank #1 (Strong Buy) at present, Shopify and HubSpot carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shopify, Sandisk and HubSpot are expected to report their quarterly results on Aug. 5. Shares of Sandisk have jumped 457.3%, while Shopify and HubSpot have dropped 24% and 41.9%, year to date, respectively.

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