Title

Presentation

Apple Inc. beats earnings expectations. Reported EPS is $2.84, expectations were $2.67.

Suhasini Chandramouli: Good afternoon and welcome to the Apple Q1 fiscal year 2026 earnings conference call. My name is Suhasini Chandramouli, Director of Investor Relations. Today’s call is being recorded. Speaking first today is Apple CEO, Timothy D. Cook. And he’ll be followed by CFO, Kevan Parekh.

Operator: After that, we’ll open the call to questions from analysts.

Suhasini Chandramouli: Please note that some of the information you’ll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expense, taxes, capital allocation, and future business outlook. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast, including risks related to the potential impact to the company’s business and results of operations from macroeconomic conditions, tariffs, and other measures, and legal and regulatory proceedings. For more information, please refer to the risk factors discussed in Apple’s most recently filed reports on Form 10-Q and Form 10-K and the Form 8-K filed with the SEC today along with the associated press release.

Additional information will also be in our report on Form 10-Q for the quarter ended December 27, 2025, to be filed tomorrow and in other reports and filings we make with the SEC. Apple assumes no obligation to update any forward-looking statements, which speak only as of the date they are made. I’d now like to turn the call over to Tim for introductory remarks.

Timothy D. Cook: Thank you, Suhasini. Good afternoon, everyone. And thanks for joining the call. I am proud to say that we just had a quarter for the record books. We are reporting our best-ever quarter with $143.8 billion in revenue, up 16% from a year ago and exceeding our expectations. The demand for iPhone was simply staggering, with revenue growing 23% year over year and all-time records across every geographic segment. Services set an all-time revenue record as well, up 14% from a year ago, and EPS reached an all-time record of $2.84, growing a robust 19% year over year. We set all-time revenue records in The Americas, Europe, Japan, and the rest of Asia Pacific and grew in the vast majority of markets we track. We continue to gain momentum in emerging markets, which includes India, where we saw strong double-digit revenue growth.

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Greater China also grew 38% year over year, driven by iPhone, which had record upgraders and double-digit growth on switchers. Apple’s December results underscore our relentless commitment to innovation, to our customers, and to our mission to build the best products and services in the world. Now I’d like to take a closer look at results from across our lineup, beginning with iPhone. As I mentioned earlier, it was a fantastic quarter for iPhone with an all-time revenue record of $85.3 billion, up 23% year over year. This is the strongest iPhone lineup we’ve ever had and by far the most popular. Throughout the quarter, customer enthusiasm for iPhone was simply extraordinary. Users were incredibly excited about everything it enables them to do.

iPhone 17 Pro and 17 Pro Max deliver the ultimate iPhone experience. They feature the best-ever performance and battery life on an iPhone, the most advanced camera system, and a striking design. iPhone Air, our slimmest and lightest smartphone yet, packs powerful capabilities into an ultra-slim and sleek design. And iPhone 17 is a truly fantastic upgrade and an incredible value. Turning to Mac, revenue was $8.4 billion for December. We were pleased to see the Mac installed base reach another all-time high, with nearly half of customers who purchased a Mac being new to the product. The M5-powered 14-inch MacBook Pro takes a huge leap in AI performance thanks to the next-generation GPU architecture and a faster neural engine. From the world’s most popular laptop for consumers and businesses in MacBook Air to the small and spectacular Mac mini, every Mac in our lineup has something special to offer users.

And with the recently released Apple Creator Studio, available across Mac, iPad, and iPhone, creators have more tools at their fingertips to make incredible music or turn their devices into a video production studio. Meanwhile, iPad saw December revenue of $8.6 billion, up 6% from a year ago, with an all-time record for upgraders. We are proud to have our strongest lineup ever, from iPad powered by A16, which is proving to be incredibly popular, to iPad Air with its amazing versatility, to the unbelievably powerful M5 iPad Pro with its remarkably thin and light design. It’s no wonder that iPad continued to be the most popular tablet in the world. Across wearables, home, and accessories, revenue was $11.5 billion. With Apple Watch Ultra 3 and Apple Watch Series 11, users are tapping into a comprehensive set of health and wellness features to help them meet their health goals.

In a recent survey, we see an increasing number of users telling us they’re wearing their watch to sleep, which allows them to check their sleep scores each morning and find ways to improve their sleep quality. And Apple Watch alerts are enabling important conversations between users and their doctors regarding potential signs of hypertension. These are just some of the many ways that WATCH is helping people live healthier lives. The response to AirPods Pro 3 has been amazing. Customers are raving about the rich, immersive sound quality, the unmatched level of active noise cancellation, and the noticeably improved comfort that makes them effortless to wear. Features like live translation are also changing the way people can communicate by helping users connect across languages in real-time and making everyday conversations feel more natural and accessible.

Together, these innovations create an experience that feels both powerful and personal, and the enthusiasm we are seeing reflects just how strongly AirPods Pro 3 are resonating with customers. Across our product categories, we are seeing very high levels of customer satisfaction, and we are proud to report that we have a new record for our installed base with more than 2.5 billion active devices. During the quarter, we were excited to see that the majority of users on enabled iPhones are actively leveraging the power of Apple Intelligence. Since the launch of Apple Intelligence, we’ve introduced dozens of features, including writing tools and cleanup, and made it available in 15 languages. These AI experiences are personal, private, integrated across our platforms, and relevant to what our users do every day.

We are bringing intelligence to more of what people already love about our products so we can make every experience even more capable and effortless. One of our most popular features is visual intelligence, which helps users learn and do more than ever with the content on their iPhone screen, making it faster to search, take action, and answer questions across their apps. And as I touched on earlier, we are hearing powerful stories of people using live translation to communicate seamlessly across languages. And these are just some of the many powerful AI features that are enabling our users to do remarkable things with our products, which are far and away the best platforms in the world for AI. That’s in no small part because of the extraordinary power and performance of Apple Silicon.

Building on our efforts in the AI space, we are also collaborating with Google to develop the next generation of Apple foundation models. This will help power future Apple intelligence features, including a more personalized Siri coming this year. We’re incredibly excited for what’s to come with so many new experiences to unlock. Turning to services, we achieved an all-time revenue record of $30 billion, 14% higher from a year ago. Services also set all-time revenue records in both developed and emerging markets. Apple TV has seen fantastic momentum, with December seeing a 36% increase in viewership over the previous year. It’s no wonder with shows like Pluribus, which are creating landmark cultural moments that audiences are loving. Anticipation is building for upcoming new productions like Cape Fear from Steven Spielberg and Martin Scorsese.

And we are thrilled to announce that Ted Lasso will be returning for a fourth season this summer. Six years since launch, we’re excited by the growing enthusiasm viewers have for Apple TV, and we are grateful for the accolades that have followed, most recently at the Critics’ Choice and Golden Globe Awards. To date, Apple TV productions have earned more than 650 wins and more than 3,200 nominations, including a recently announced Oscar nomination for Best Picture for F1, the movie. And speaking of F1, we’re also approaching the start of a new Formula One season. And for F1 fans in The US, Apple TV will be the place to watch every practice, qualifying, sprint, and Grand Prix. MLS fans will also be able to watch every regular and postseason game with their Apple TV subscription this year, and we’re looking forward to kickoff in the coming weeks.

Looking back, 2025 was a fantastic year for services as we rolled out amazing new features and broke records. Apple Music climbed to all-time highs in both listenership and new subscriber growth. Apple Pay eliminated more than $1 billion in fraud for our partners last year, and we’ve made it available in more markets than ever before. And last year, we welcomed more than 850 million users every week on average to the App Store, the world’s safest and most innovative app marketplace. Developers have now earned more than $550 billion on our platform since 2008. In retail, we continue to bring a magical experience to our customers all around the world, and we were thrilled to have our best-ever results in retail during the quarter. We were excited to open our fifth store in India in December and have plans to open another store in Mumbai soon.

Wherever we are, we see ourselves as part of a larger whole. That’s why we show up with our values in everything we do. That means working with partners in places like Vietnam to bring more clean water to rural areas. It means celebrating graduations of new classes of innovators from our developer academies in places such as Brazil, Indonesia, and South Korea. It means 3D printing titanium cases for Apple Watch using so that they’re better for the planet without compromising quality. And so much more. We’re especially proud of the work we’re doing to support American innovation. Last year, we committed to invest $600 billion over four years in vital industries like advanced manufacturing, silicon engineering, and artificial intelligence. As we’re building on our long-standing investments in America, we’re supporting nearly half a million jobs with thousands of suppliers across all 50 states.

In the year since we made our initial commitment, we’re making great progress. Today, we’re shipping servers to power Apple Intelligence from our new manufacturing facility in Houston. Through our advanced manufacturing program, we’re working with Corning in Kentucky to make 100% of cover glass for iPhone and Apple Watch. We’re working with Micron, which broke ground on a new advanced chip packaging and test facility, and we continue to advance the development of an end-to-end silicon supply chain across the country, sourcing 20 billion US chips in 2025. Through our Apple Manufacturing Academy in Detroit, we’re already training American innovators on the latest smart manufacturing and artificial intelligence techniques. Six months since opening, the academy is already making an enormously positive impact for businesses working alongside Apple engineers to drive productivity, efficiency, and quality in their supply chains.

As I said at the beginning of my remarks, this was in so many ways a remarkable quarter for Apple. And we’re excited for all the opportunities we’ll have in the year ahead to deliver innovations that have never been seen before and enrich the lives of users every step of the way. With so much to look forward to in the weeks and months ahead, I have every confidence that our best work is yet to come. With that, I’ll turn it over to Kevin.

Kevan Parekh: Thanks, Tim, and good afternoon, everyone. Our revenue of $143.8 billion was up 16% year over year, our best quarter ever. Across the world, we set all-time revenue records in both developed and emerging markets. And we saw double-digit growth year over year across the majority of the markets we track, including The US, Latin America, Western Europe, Greater China, India, and South Asia. Products revenue was $113.7 billion, up 16% year over year, driven by double-digit growth in iPhone, setting a new all-time record. And as Tim mentioned, thanks to our strong levels of customer loyalty and satisfaction, our installed base of active devices has now surpassed 2.5 billion, reaching another all-time high across all product categories and geographic segments.

Services revenue was $30 billion, up 14% year over year. This performance continues to be broad-based, with double-digit growth in almost every market we track. We also reached all-time revenue records for advertising, cloud services, music, and payment services, with December quarter records on the App Store and video. Company gross margin was at 48.2%, above the high end of our guidance range and up 100 basis points sequentially, driven by favorable mix and leverage. Products gross margin was 40.7%, up 450 basis points sequentially, driven by favorable mix and leverage. Services gross margin was 76.5%, up 120 basis points sequentially, driven by mix. Operating expenses landed at $18.4 billion, up 19% year over year. This was within the range we provided and driven by increased investment in R&D.

Net income was $42.1 billion, and diluted earnings per share was $2.84, up 19% year over year. Both net income and diluted EPS were all-time records. These incredibly strong business results drove an all-time record for operating cash flow, coming in at $53.9 billion. Now I’m going to provide some more details on each of our revenue categories. iPhone revenue was $85.3 billion, up 23% year over year, driven by the iPhone 17 family. iPhone saw strength around the world, reaching all-time revenue records in many of the markets we track, including The US, Greater China, Latin America, Western Europe, The Middle East, Australia, and South Asia, as well as a December record in India. The iPhone active installed base grew to an all-time high and set a new all-time record for upgraders in aggregate and across many countries, including The US, China Mainland, Japan, and India.

According to a recent survey from World Panel, iPhone was the top-selling model in The US, urban China, The UK, Australia, and Japan. Customers are loving the latest iPhone lineup. The latest customer satisfaction for the iPhone 17 family in The US was measured at 99% by 451 Research. Mac revenue was $8.4 billion, down 7% year over year. As we described in the last call, we faced a very difficult compare against an M4 MacBook Pro, Mac Mini, and iMac launches in the year-ago quarter. Despite this difficult compare, we continued to see growth in several emerging markets, including Brazil, India, Malaysia, Vietnam, and more. And as Tim mentioned earlier, the Mac install base reached another all-time high, with nearly half of the customers who purchased a Mac being new to the product.

And in The US, customer satisfaction for Mac was measured at 97%. iPad revenue was $8.6 billion, up 6% year over year, driven by the M5-powered iPad Pro and the A16-powered iPad. We continue to add new users to the iPad. In fact, over half the customers who purchased the iPad during the quarter were new to the product. This helped the iPad install base to reach an all-time high, and we also reached an all-time high for upgraders. Based on the latest reports from 451 Research, customer satisfaction was 98% in The US. Wearables, home, and accessories revenue was $11.5 billion, down 2% year over year. During the quarter, we experienced constraints on the AirPods Pro 3, and we believe the overall category would have grown had it not been for these constraints.

The wearables installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And in The US, customer satisfaction was recently reported at 96%. Our services revenue reached an all-time high of $30 billion, up 14% year over year. As we said earlier, we had all-time revenue records on advertising, music, payment services, and cloud services, where we saw double-digit growth on paid subscribers. We continue to be optimistic about the future of our services business. With our installed base of over 2.5 billion active devices, we have an incredibly strong foundation for new growth opportunities. We saw increased customer engagement across our service offerings, with both transacting and paid accounts reaching all-time highs in the quarter.

And we continue to improve the quality and expand the breadth of our services offerings. From new wallet features like digital ID, which provides a way for users to create an ID in Wallet using information from their US passport, to additional ads coming to search in the App Store, which provides advertisers more ways to drive downloads from search. Turning now to enterprise, organizations are continuing to expand their fleet of Apple devices to drive productivity while remaining secure. Snowflake has deployed over 9,000 Mac devices company-wide, establishing Mac as a primary laptop across all business units, resulting in increased performance and a reduction in support tickets. AstraZeneca is rolling out over 5,000 M5-powered iPad Pros to its pharmaceutical sales team to take advantage of AI capabilities, including Apple Intelligence, while meeting with clinicians daily.

And in Mexico, Copel, the country’s largest domestic retailer, recently added MacBook Air in addition to a growing fleet of over 10,000 iPad devices. Let’s turn to our cash position and capital return program. We ended the quarter with $145 billion in cash and marketable securities. We had $2.2 billion of debt maturities and decreased commercial paper by $6 billion, resulting in $91 billion in total debt. Therefore, at the end of the quarter, net cash was $54 billion. During the quarter, we returned nearly $32 billion to shareholders. This included $3.9 billion in dividends and equivalents, and $25 billion through open market repurchases of 93 million Apple shares. As we move ahead into March, I’d like to review our outlook, which includes the types of forward-looking information that Suhasini referred to.

Importantly, the color we’re providing assumes that global tariff rates, policies, and their application remain in effect as of this call, and the global macroeconomic outlook does not worsen from today. We expect our March total company revenue to grow by 13% to 16% year over year, which comprehends our best estimates of constrained iPhone supply during the quarter. We expect services revenue to grow at a year-over-year rate similar to what we reported in December. We expect gross margin to be between 48-49%. We expect operating expenses to be between $18.4 billion and $18.7 billion, which is at a similar level to what we reported in December and driven by higher R&D on a year-over-year basis. We expect OI&E to be around $100 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 17.5%.

Finally, today our Board of Directors has declared a cash dividend of $0.26 per share of common stock payable on 02/12/2026, to shareholders of record as of 02/09/2026. With that, let’s open the call to questions.

Suhasini Chandramouli: Thank you, Kevin. We ask that you limit yourself to two questions. Operator, may we have the first question, please?

Operator: Certainly.

Amit Daryanani: We’ll go ahead and take our first question from Amit Daryanani of Evercore. Yes. I have two. Maybe to start with, you know, there’s a lot of focus on the impact of memory to host the companies and love to kind of get your perspective when you’re first guiding gross margins up into March. Talk about, a, your comfort in securing the bit that you need for shipment and b, how do we think about memory inflation flowing through Apple’s model over time?

Timothy D. Cook: Yeah. Amit, hi. It’s Tim. Let me back up a bit and talk about the constraints that Kevin referred to in his remarks and memory. And try to get both of these out at once. First of all, we were thrilled with the customer response on the latest iPhone lineup. It exceeded our expectations, to say the least. And, you know, iPhone grew 23%. What the result of that was was that we exited December with very lean channel inventory due to that staggering level of demand. And based on that, we’re in a supply chase mode to meet the very high levels of customer demand. We are currently constrained and at this point, it’s difficult to predict when supply and demand will balance. The constraints that we have are driven by the availability of the advanced nodes that our SoCs are produced on.

And at this time, we’re seeing less flexibility in the supply chain than normal. Partly because of our increased demand that I just spoke about. From a memory point of view, to answer your question, memory had a minimal impact on Q1. So the December gross margin. We do expect it to be a bit more of an impact to the Q2 gross margin and that was comprehended in the outlook of 48 to 49% that Kevin gave earlier. You know, we don’t obviously provide outlooks beyond the current quarter. Beyond Q2, but we do continue to see market pricing for memory increasing significantly. As always, we’ll look at a range of options to deal with that. So, hopefully, that gives you the full view.

Amit Daryanani: No. Thank you. I appreciate all the clarity on that, Tim. You know, maybe the other second question I have for you is maybe just touch on the China strength you folks had. I think this is very close to all-time high revenues you’ve had in China. What’s driving the strength over here? And just sort of the durability of the growth rate we saw in December would be helpful to understand. Thank you.

Timothy D. Cook: Sure. Greater China was up 38% year on year. It was driven by iPhone, where we set an all-time revenue record. So it was the best iPhone quarter in history in Greater China. It’s driven by the customer enthusiasm for the iPhone 17 lineup. And I would tell you that during the quarter, traffic in our stores in China grew by strong double digits year over year. It was a terrific quarter. Our installed base reached an all-time high in both Greater China and Mainland China. And we set an all-time record for the upgraders and we saw strong double-digit growth on switchers. And according to a survey from World Panel, iPhones were the top three smartphones in urban China during the quarter. So it was and it’s really driven primarily by the product strength.

And the customer response to the product strength. We do see on non-iPhone products, that the majority of customers that are buying a Mac, a watch are still new to that product. So that’s a very good sign for us. And if you look at iPad, on that same survey, iPad was the top tablet model in urban China. And according to Counterpoint, the MacBook Air was the top-selling laptop model and Mac Mini was the top-selling desktop model in December. So overall, great quarter in China. We could not be more happy with it.

Suhasini Chandramouli: Awesome. Thank you, Amit. Operator, could we get the next question, please?

Operator: Our next question is from Erik Woodring of Morgan Stanley. Please go ahead.

Erik Woodring: Great, guys. Thank you for taking my questions. Tim, congrats on announcing the partnership with Google, and we’re all excited to see what you bring to market later this year. When I think about your AI initiatives, you know, it’s clear there are added costs associated with that. We’re obviously seeing that flow through in OpEx. Can you help us understand maybe what the revenue upside potential that exists with AI? Many of your competitors have already integrated AI into their devices. And it’s just not clear yet what incremental monetization they’re seeing because of AI, but you’re always disciplined with investing. You obviously have a differentiated product. So how do you monetize AI? And what’s the timeline to realizing that ROI? Then a quick follow-up. Thank you.

Timothy D. Cook: Well, let me just say that we’re bringing intelligence to more of what people love, and we’re integrating it across the operating system in a personal and private way. And I think that by doing so, it creates great value, and that opens up a range of opportunities across our products and services. And we’re very happy with the collaboration with Google as well. I should add.

Erik Woodring: Okay. Thank you, Tim. And then maybe just a follow-up. Now that you have kind of more time and data to evaluate this cycle, can you maybe help us understand what the primary factors are driving strength in the iPhone? Sure there’s a number of factors, but if you had to point to one or two, just what would they be and how sustainable do you think those are?

Timothy D. Cook: I think it’s different for different cohorts of where people are coming from in the device that they have. But it’s a combination of things always that make the product sing. It’s the display. It’s the camera. It’s the performance. It’s the new selfie camera. It’s the design. The design is beloved. And so it’s all of these things that come together at once and are producing a very strong product cycle as witnessed by our December results.

Erik Woodring: Great. Thank you, Tim. Best of luck.

Suhasini Chandramouli: Awesome. Thank you, Erik. Operator, could we get the next question, please?

Operator: We’ll now go to Michael Ng of Goldman Sachs. Please go ahead.

Michael Ng: Wonderful. Good afternoon. Thank you for the questions. I have two as well, if I could. First, it was encouraging to hear about the revenue growth outlook of 13% to 16% for March. I was just wondering if you could talk about any comps that we should be particularly aware of as we kind of think about each of the product categories? I know last year you guys had, you know, MacBook Air with M4, the iPhone 16E, the iPad A16, and the iPad Air with M3. So just wanted to, you know, ask if those things would create tough comps or is it just less of an issue just given the new product outlook? Thank you.

Kevan Parekh: Yeah, Mike. It’s Kevin. How are you? Thanks for the question. Yeah. I wouldn’t say there’s any particular comp issue that we’d note. As you recall, last quarter, we talked about the difficult comparison we had at Mac. But there’s nothing that rises to that kind of color that we’d outlined, you know, in the Outlook. And so I think it’s, you know, continuation of the strong cycle we’re seeing subject to constraints that I had mentioned in prepared remarks that Tim, you know, alluded to a little earlier as well.

Michael Ng: Great. Wonderful. And then just on services, advertising, strong in the quarter. I wanted to ask about some of the new growth opportunities in advertising. I know you guys are doing the new ad slots in the App Store. Maybe you could just talk a little bit about that. And then any plans to do more in advertising across other products like maps or TV? Thank you.

Kevan Parekh: Yeah. Sure. Like, what I would say, if I step back in general, I think as we outlined, we saw really good broad-based performance in our crossword services business. So ranging from, you know, all-time records in advertising, music, payment services, and cloud services. So I think we see really good opportunities across a lot of our service categories. And we continue to, you know, add new service offerings. We talked about, you know, what we added to the wallet, like digital ID, and you can reference the additional, kind of additional ads coming in the search in the App Store. Which we are excited about. It provides, you know, advertisers more ways to be discovered. So I think we’ll continue to look for ways to expand opportunities to add value to users, and also, you know, create opportunities for Apple.

I think as we talked about, we created, you know, across a really significant milestone of two and a half billion, you know, active devices. So we really feel excited about the opportunity that provides for our services business as well.

Michael Ng: Wonderful. Thanks for the thoughts, Kevin.

Suhasini Chandramouli: Thank you, Mike. Operator, could we get the next question, please?

Operator: The next question will be coming from Ben Reitzes of Melius. Please go ahead.

Ben Reitzes: Yeah. Hey, guys. How are you?

Operator: Hi, Ben.

Ben Reitzes: Hey, Tim. First question is on Google partnership again. I wanted to understand how you came to that decision with regard to the AI and Siri in particular. And if there’s an opportunity for you guys to share in revenue too with that partnership like you do in search? Thanks.

Timothy D. Cook: Yeah. We basically determined that Google’s AI technology would provide the most capable foundation for Apple Foundation Models. And we believe that we can unlock a lot of experiences and innovate in a key way due to the collaboration. We’ll continue to run on the device and run-in private cloud compute. And maintain our industry-leading standards in doing so. In terms of the arrangement with Google, we’re not releasing the details of that.

Ben Reitzes: Bummer. Okay. Well, I tried.

Timothy D. Cook: You did.

Ben Reitzes: So yeah, you knew it would be me. So the next question is on gross margin. I’m pretty shocked I gotta hand it to you, Tim. I’m, you know, that you’re able to do 48 to 49. What’s really going on there? How are you doing that with this memory, the NAND prices? Is it due to mix that there’s a good less hardware and more services? Services and services margins are going up. How are you doing it to keep it at 48 to 49?

Kevan Parekh: Yeah, Ben. This is Kevin. How are you doing? Let me start maybe by just reflecting on the Q1 gross margin. I think we talked about the fact that we landed at 48.2%, so just above the high end of the range we provided, you know, on the last call. I think if you look at that performance, you know, we were up 100 basis points sequentially. We talked about the fact that we had favorable mix. I mean, as you know, when we have a good product cycle, strong price cycle we’re seeing for iPhone, that does lend itself to a bit more favorable opportunity on the and leverage side. So we’re having a strong iPhone cycle as Tim outlined. And so that also translates itself. So we talked about products sequentially went up by 450 basis points.

So I think, in general, I think we’re just seeing, you know, favorable mix dynamics as well. You know, service continues to contribute as well. That business is growing, you know, double digits so that also is a contributor. And I think that, you know, if you looked at our guidance, you know, we’re providing a similar range to where we reported in December. There’s gonna be a few puts and takes. You know, we do expect to see favorable mix in the services. As you know, when we move from Q1 to Q2, that tends to be the case, and that’s partly offset by a seasonal loss leverage. So there’ll be puts and takes, but again, we feel pretty good about the guide of 48 to 49%. Which is similar to the range we reported in December.

Ben Reitzes: Wow. Okay. Great. Thank you.

Suhasini Chandramouli: Alright. Thanks, Ben. Operator, could we get the next question, please?

Operator: The next question will be coming from David Locke of UBS.

David Locke: Great. Thanks, guys, for taking my question. Maybe Tim or Kevin, if we could pull out a little bit, can you help us understand how you’re thinking about the overall kind of smartphone market demand, particularly given where memory prices are headed? And we’ve heard some conversations with some other OEMs as well as component providers that are worried about either availability of components, potential market weakness in terms of demand destruction, and some of the actions to offset or higher prices? I know you don’t give outlooks for the full year, but how are you thinking about all of those different vectors and what that might mean for the overall smartphone market? Then ultimately what that might mean for demand for iPhones as we move through the rest of this calendar year.

Timothy D. Cook: Yeah. On the supply side, I had made comments earlier about the constraint that we are seeing in Q2. You know, we and that’s reflected in the revenue guidance that Kevin gave earlier. The constraint, as I’d mentioned, is due to the advanced node capacity. And it’s really a result of growing so well in Q1 with the 23%. And having less flexibility partly due to that in the process to increase it as much as we would like to increase it. Beyond Q2, I don’t really want to comment on supply. You know, supply is a function of a lot of things in the industry that move around a lot. So I wouldn’t want to comment on that. I commented before on the memory pricing. And so I hopefully, that answers your question. Oh, and in terms of this Maybe I’ll In terms of smartphone demand, you know, we believe that based on the information that we’ve got is we gained share in December.

Obviously, the market wasn’t growing at 23%. So we feel good about doing that. But I wouldn’t want to predict how the market reacts in the future. It’s very difficult to do that.

David Locke: Got it. At the risk of not getting this answered, I’m gonna follow-up with. Can you maybe help us understand, you mentioned there’s a range of options that you’re looking at. How do how should we think about kind of like LTAs in the marketplace? I mean, is that an option as we move through the year? Or is it more spot-based? From a perspective, particularly around memory? Just want to get a better sense for how we should think about kind of the dynamics in the marketplace.

Timothy D. Cook: It’s a range, and so I don’t want to get more specific than that. I mean, there are different levers that we can push, and who knows how successful they’ll be, but there’s just a range of options.

David Locke: Great. Thanks, guys.

Suhasini Chandramouli: Great. Thank you, David. Operator, could we get the next question, please?

Operator: We’ll now be taking a question from Wamsi Mohan of Bank of America. Sorry for the pronunciation.

Wamsi Mohan: That’s fine. Thank you. Tim, on services, you grew a pretty impressive 14%. And I know you said that the App Store was a record for December. But third-party data is showing a notable deceleration in App Store growth, maybe 7% in December relative to your 14% growth. Was hoping if you could maybe confirm that. And secondarily, if it’s correct, what might be some of the drivers of that and what could be things that you could do to reverse that in future quarters? And I have a follow-up.

Kevan Parekh: Hey, Wamsi. It’s Kevin here. Look, I think I think we want to reiterate the fact that during the summer quarter, you know, we had a quarterly record on the App Store. As you know, we don’t provide, you know, specific color on how the individual services categories have done. But, again, if we step back, I think we saw, you know, again, broad-based growth across all the different categories, also across, you know, various geographies. We had, you know, all-time records in both developed and emerging markets as well. So and double-digit growth in both of those too. And so I think in general, you know, we don’t provide, you know, the color at the detailed, you know, services level.

Wamsi Mohan: Okay. Thanks, Kevin. I guess back to the memory price. I appreciate you have a range of options to address that. Historically, Apple has not used a pricing lever unless, you know, FX markets got maybe very dislocated to grow an arbitrage or issues like that. But given some of these unprecedented moves in memory, would pricing be a lever that you would be willing to pull or push outside of every other thing that you know, outside of everything else that you can do?

Timothy D. Cook: Yeah. I wouldn’t want to speculate on that one.

Wamsi Mohan: Okay. Thanks, Tim.

Suhasini Chandramouli: Thanks, Wamsi. Operator, could we have the next question, please?

Operator: We’ll now go to Samik Chatterjee of JPMorgan. Please go ahead. Your line is open.

Samik Chatterjee: Yes. Hi. Thanks for taking my questions. Maybe for the first one, I’m just looking at your capital investment in the first quarter, which did moderate from the last one. And wondering if the partnership with Google on Gemini and sort of help collaboration to develop the next generation of Apple foundational models, does that have any near-term sort of impact on your intent to use Apple private cloud? I know you emphasized sort of the role Apple private cloud plays in the long term, but are there any changes on that front through this collaboration? Any thoughts around that? And I have a quick follow-up. Thank you.

Kevan Parekh: Yeah. Sure. I think this is Kevin here. I think in general, you know, as Tim outlined, we weren’t gonna provide any details on our arrangement in collaboration with Google. Just speaking of CapEx in general, you know, as you know, we have a hybrid, you know, model for CapEx. And so I think that, you know, what happens is our CapEx can be volatile, independent of kind of the volume performance of our business. And as you know, our CapEx is made of several different line items that include tooling, our facilities, retail investments, investments in our retail store, data centers. And on tooling and data centers, we leverage this hybrid model that I mentioned before, which we leverage a combination of first and third-party capacity.

So in general, it’s hard to read into the CapEx and, you know, draw any conclusions. And so I think I would just say there’s gonna be some ebbs and flows in CapEx. Last year, you’ll remember we did build out our private cloud compute environment, and so we did have CapEx spending related to that in our results in December.

Samik Chatterjee: Got it. Got it. And my follow-up probably is for you, again. You did mention product gross margin and the sort of drivers there for the product gross margin improvement. When you sort of highlighted mix as a driver, can you just sort of talk through what are the big differences and mix you’re seeing for iPhone 17 versus 16? And did tariffs and tariffs coming in more favorable play a role at all? What you’re expecting for tariffs for the next quarter?

Kevan Parekh: Yeah. So there’s a few things to unpack there. So on the overall margin on the product side, I think I mentioned that we had favorable mix of products and leverage. I think given the strong iPhone cycle we’re seeing, that was I would say, probably a higher favorability than you might have seen in maybe other cycles. And as well, as you know, in Q1, typically, we do see the impact of the cost structure of our new products that we launch. And in this case, we are seeing a more favorable offset from mix of products and leverage. On the tariff piece, we had outlined a versus historical, you know, sequential changes from Q4 to Q1. amount of $1.4 billion for December. And we landed roughly in that range, you know, at that level.

Samik Chatterjee: Thank you.

Suhasini Chandramouli: Awesome. Thank you, Samik. Operator, could we have the next question, please?

Operator: We’ll now go to Krish Sankar of TD Cowen. Please go ahead.

Krish Sankar: Hi, thanks for taking my question. The first one I have for us is for Tim. I think you touched upon this earlier on the Gemini integration. Apple foundational model. How to think about kind of like the, you know, the difference between Apple foundational model functionality and third-party models. Like, you know, does the Apple Foundation model evolve to a different layer in the AI software stack? How to think about it as you partner with third-party frontier models? I had a follow-up.

Timothy D. Cook: Yeah. Krish, you should think of it as a collaboration. Not and we’ll obviously, continue to do some of our own stuff but you should think of what is going to power the personalized version of Siri as a collaboration with Google.

Krish Sankar: Got it. Got it. So Malin, a quick follow-up for maybe Kevin or Tim. Just a lot of discussion on memory pricing. Given that the memory constraint or commodities scarcities both the smartphone and the PC markets, and Apple arguably having more purchasing power, do you think this is a chance for you to increase your share both in iPhone and Mac at the expense of competition who might have more constraints in getting access to memory?

Timothy D. Cook: Yeah. I don’t really want to talk about kind of what has happened, and we do believe, as I had shared, that iPhone gained share in December. And if you look at Mac for the full year of full calendar year of ’25, we also believe we gained share. And so we feel very good about our position.

Krish Sankar: Thanks, Tim.

Suhasini Chandramouli: Thank you, Krish. Operator, could we have the next question, please?

Operator: We’ll now go to Atif Malik calling from Citi. Please go ahead.

Atif Malik: Hi, thank you for taking my question. The first one for Tim. Tim, some of the industry pundits are comparing the iPhone 17 upgrade cycle to the 2020-2021 year as some of the iPhone 12, 30 users upgrade. Curious if you agree with that view also if you can layer on the impact from Apple Intelligence to the refresh rate.

Timothy D. Cook: I think each iPhone cycle has its own unique. And so I wouldn’t compare it to a specific one. I think iPhone 17, the family of 17, is a unique product that brings several very compelling features in one product, and it has done extremely well. And so we feel, you know, quite good about it.

Kevan Parekh: You know, Atif, I’ll just add to Tim’s comment that we talked about the fact we have a large and diverse installed base of customers. So this product has really resonated with multiple cohorts, whether you’re on older devices or newer iPhones as well. We’ve seen a really strong reaction to the product lineup.

Atif Malik: Great. As my follow-up, there was a lot of discussion on supply constraints, and I’m surprised that you guys are constrained on advanced packaging as you generally get your share at the big foundry. How long will these supply impact your ability to ship to true demand?

Timothy D. Cook: It’s difficult to estimate demand when you haven’t met the demand. And so we’ve obviously, we have internal estimates on that, but I don’t want to share those. But it’s very difficult. And just to be clear, it’s the advanced nodes that we, like three nanometer to be specific, where our SOCs are the latest SOCs are produced on is what is gating the Q2 supply. And it’s a direct result of the 23% growth and, you know, that far outstripping what we had internally estimated. And having more limited flexibility in the supply chain for some period of time. But I don’t want to estimate when supply and demand will balance at this point.

Atif Malik: Very helpful. Thanks.

Suhasini Chandramouli: Alright. Yep. Thank you, Atif. Operator, could we have the next question, please?

Operator: The next question will be coming from Aaron Rakers calling from Wells Fargo. Please go ahead.

Aaron Rakers: Yes. Thanks for taking the question. I have two as well. I’ll try and stay away from the memory question. I’m curious, and obviously, a lot of on the China demand, but I’m curious, you also called out India. And so can you maybe unpack some of the things that you’re seeing in the Indian market as far as iPhone traction? Any kind of color on, you know, what is the very large installed base in India that seems to be a good growth opportunity for Apple still?

Timothy D. Cook: Yeah. Thanks for the question. We did set a quarterly revenue record during December. And to go a little further down, we set quarterly revenue records on iPhone and Mac and iPad. And an all-time revenue record on services. So it was a terrific quarter in India. We really like what we see there. It’s the second-largest smartphone market in the world. And the fourth-largest PC market. So and we still have, despite a very nice growth history, we have modest share there. And so we think there’s a huge opportunity for us there. And we could not be more excited about it. If you look at the other thing that I would point out is that the majority of customers that are buying iPhones and Mac and iPad and Watch are all new to that product. And so it speaks very well to the opportunity there.

Kevan Parekh: Yeah. Aaron, had you mentioned the installed base, we’re seeing strong double-digit growth in the installed base in India as well, which is really encouraging.

Aaron Rakers: Yep. And then as a quick follow-up, you know, kind of tied to memory, maybe not so much, but part of this current generation iPhone cycle is you clearly deepened some of your own internal silicon capabilities on the device. I’m curious if that if we should think about that as a lever and maybe a supportive factor to gross margin that might be underappreciated and any thoughts on where we go from here as far as continual opportunities of internalizing your own silicon? Thank you.

Timothy D. Cook: Yeah. I’ll let Kevin talk about the gross margin. But in terms of the product, which is at the heart of what we think about in the user, Apple silicon has just been an incredible game-changer for us. Starting with iPhone and then on iPad and, of course, the Mac as of a few years ago. And so we believe it’s a game-changer and a major advantage.

Kevan Parekh: Yeah. And as far as impact on gross margin, yeah, we have been, as you know, investing in core technologies like our own silicon and our own modem. And certainly, while those do provide opportunities for cost savings and can be plugged in margins, they also importantly provide, you know, the differentiation that’s really important for our products as well and us more control of our roadmap. So I think there’s a lot of strategic value to it, but also we are seeing, you know, investments in our core technologies impacting, you know, gross margin in a positive way.

Suhasini Chandramouli: Awesome. Thank you, Aaron. Operator, could we have our last question, please?

Operator: Most certainly. Our last question will be coming from Richard Kramer calling from Arete Research. Please go ahead.

Richard Kramer: Thanks very much. I have two questions. Tim, when you think about how Apple might manage AI, do you see that evolving towards more edge AI or on-device services versus cloud-based AI? And are you confident you’ve reserved sufficient data center capacity to support the widespread Siri adoption, especially given that you’re not following the other hyperscalers and sharply increasing CapEx?

Timothy D. Cook: The answer is that we see both being important, the on-device and the private cloud compute. So we don’t see it as an either-or. We see it as both. And, you know, and we believe it’s a differentiator because of our privacy approach. In terms of do we have enough capacity, it’s hard to estimate with precision what the demand will be, but we’ve done the sort of the best job that we can do, and I’ve and either have or are putting capacity in for it.

Richard Kramer: Okay. And you also mentioned the 2.5 billion active device number, but Apple intelligence features have only been available since the 15 Pro. So can you speak at all to roughly what portion of your iPhone or overall active device install base is now AI capable? Has this been a factor in maybe a more gradual pace of launching wider AI services?

Kevan Parekh: Yeah, Richard. This is Kevin. You know, we don’t provide that specific number, but it is a growing number as you can imagine in our installed base. So we’re encouraged by the number of devices now that are capable. But we’re not gonna provide a specific figure on that today.

Richard Kramer: Okay. Well, had to try. Thank you.

Suhasini Chandramouli: Alright. Thank you, Richard. A replay of today’s call will be available for two weeks on Apple Podcasts, as a webcast on apple.com/investor, and via telephone. The number for the telephone replay is (866) 583-1035. Please enter confirmation code 8902968 followed by the pound sign. These replays will be available by approximately 5 PM Pacific time tonight. Members of the press with additional questions can contact Josh Rosenstock at (408) 862-1142. And financial analysts can contact me, Suhasini Chandramouli, with additional questions at (408) 974-3123. Thanks again for joining us today.

Operator: Once again, this does conclude today’s conference. We do appreciate your participation.

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