Apple Inc. Q3 2025 earnings call

Good afternoon and welcome to the Apple Q3 Fiscal Year 2025 Earnings Conference Call. My name is Suhasini Chandramouli, Director of Investor Relations. Today's call is being recorded. Speaking first today is Apple's CEO, Tim Cook, and he'll be followed by CFO, Kevin Perek. After that, we'll open the call to questions from analysts. 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 June 28, 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.

Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, we are proud to report a June quarter revenue record of $94 billion, up 10% from a year ago, which was better than we expected. EPS set a June quarter record of $1.57, up 12% YoY. We saw an acceleration of growth around the world in the vast majority of markets we track, including Greater China and many emerging markets. We had June quarter revenue records in more than two dozen countries and regions, including the U.S., Canada, Latin America, Western Europe, the Middle East, India, and South Asia. These results were driven by double-digit growth across iPhone, Mac, and services. We set a June quarter record for iPhone, which grew a strong 13% YoY.

We saw iPhone growth in every geographic segment and double-digit growth in emerging markets, including India, the Middle East, South Asia, and Brazil. Mac continued to see excellent results, with revenue up 15% YoY. We set another all-time revenue record in services, which grew 13%, with double-digit growth in both developed and emerging markets. Last month, we hosted WWDC, an incredible event for our developer community, with millions joining us online and more than 1,000 developers here in person at Apple Park. We shared some truly exciting updates, including a stunning new design crafted from a material we call liquid glass. It is both beautiful and expressive, and for the first time ever, this design extends across all of our platforms. We cannot wait for users everywhere to experience it this fall. We were excited to share some updates across our AI work.

We announced even more capabilities coming later this year, including live translation and Workout Buddy. In addition to those new features, we announced new support for a number of languages, and we opened up access to the on-device foundation models at the core of Apple Intelligence, enabling developers to build a whole new experience for our users. It's wonderful to see great momentum building for our platforms. iOS 26, macOS 26, and iPadOS 26 are by far the most popular developer betas we've had. Taking a step back, we see AI as one of the most profound technologies of our lifetime. We are embedding it across our devices and platforms and across the company. We are also significantly growing our investments. Apple has always been about taking the most advanced technologies and making them easy to use and accessible for everyone. That is at the heart of our AI strategy.

With Apple Intelligence, we're integrating AI features across our platforms in a way that is deeply personal, private, and seamless, right where users need them. We've already released more than 20 Apple Intelligence features, including visual intelligence, cleanup, and powerful writing tools. We're making good progress on a more personalized Siri, and as we've said before, we expect to release these features next year. Apple Silicon is at the heart of all of these experiences, enabling powerful Apple Intelligence features to run directly on-device. For more advanced tasks, our servers, also powered by Apple Silicon, deliver even greater capabilities while preserving user privacy through our private cloud compute architecture. We believe our platforms offer the best way for users to experience the full potential of generative AI.

Thanks to the exceptional performance of our systems, our users are able to run generative AI models right on their Mac, iPad, and iPhone. We're excited about the work we're doing in this space, and it's incredibly rewarding to see the strong momentum building. Now let me turn to more details about our results for the quarter, starting with iPhone. iPhone revenue was $44.6 billion, up 13% from a year ago, and we set a June quarter record for upgraders. This strong, broad-based performance was driven by the incredible popularity of the iPhone 16 family, which was up strong double digits YoY as compared to the 15 family. We also recently marked a significant milestone. We shipped the 3 billionth iPhone since its launch in 2007.

From the Pro models with the powerhouse A18 Pro and innovative Pro camera features to the iPhone 16e with breakthrough battery life and a two-in-one camera system, users are finding so many reasons to love the best iPhone lineup we've ever created. iOS 26 will take that experience even further. In addition to the beautiful new design and powerful Apple Intelligence features, it introduces a range of meaningful updates, like real-time call screening and hold assist in the phone app, smarter messaging tools, and new live translation features. It all adds up to a smarter, more personal iPhone experience that we can't wait for users everywhere to enjoy this fall. In Mac, we had another strong quarter, with revenue of $8 billion, up 15% YoY, largely driven by the strength of the M4 MacBook Air.

We set a June quarter record for upgraders on Mac, and we saw great performance in emerging markets, with strong double-digit growth on revenue, as well as strong double-digit growth on both upgraders and customers new to Mac. MacBook Air, the world's most popular laptop, unlocks a whole new level of performance with the power of M4. MacBook Pro customers, meanwhile, continue to be drawn to its incredible power and the longest battery life we've ever had on a Mac. Customers are also loving the newest Mac Studio, which is the most powerful Mac we've ever made, with next-level capabilities to tackle even the most demanding AI workflows. At the same time, Mac Mini continues to win over customers by packing so much performance into an ultra-compact design.

With fantastic new updates in macOS Tahoe 26, from the phone app to live activities to our biggest ever update to Spotlight, Mac users across our entire lineup are going to find delightful new ways to stay connected and productive. For iPad, June quarter revenue was $6.6 billion. Our incredibly versatile iPad lineup brings together power and portability like never before. Users are already excited for our biggest iPad software update ever with the upcoming release of iPadOS 26. It starts with a new windowing system that is remarkably intuitive, giving users more control than ever of their iPad experience. An enhanced Files app makes it easier than ever to stay organized. That is all on top of a beautiful new software design that brings these updates to life.

Turning to wearables, home, and accessories, revenue was $7.4 billion, and we saw a June quarter record for upgraders to Apple Watch. During the quarter, we marked the 10-year anniversary of Apple Watch, celebrating a decade of helping users navigate their health and fitness journeys. With watchOS 26, Apple Watch will be more intelligent than ever, with smart updates to the Workout app and Smart Stack, along with a fresh new design that feels both dynamic and personal. We're also thrilled about what's coming to Apple Vision Pro with visionOS 26, introducing spatial widgets that let users customize their digital space, more lifelike personas, and new enterprise APIs that empower companies to build their own spatial experiences.

This fall, new features for our latest AirPods lineup will unlock even more possibilities, from studio-quality audio recording to using AirPods as a camera remote, giving users powerful new ways to capture content and stay connected. As we're innovating across our lineup, we're especially proud of the work we're doing to help our users live healthier lives. Since we first launched our hearing health features for AirPods Pro 2, I've received notes from people who are delighted to be able to connect more deeply with loved ones. Whether it's with AirPods Pro 2 or Apple Watch or iPhone, it's amazing to see the power of our health and safety features. From hearing tests to fall detection alerts to irregular rhythm notifications, having such a profound impact. Turning to services, revenue for the June quarter was $27.4 billion, up 13% from a year ago and an all-time record.

Apple TV+ scored 81 nominations, a record for the platform, across nearly every eligible category for this year's Emmy Awards. Severance leads all Emmy nominees with 27 nominations, and the studio follows close behind with 23 nominations, more than any other freshman comedy series ever. It's amazing to see how these and other Apple TV shows have captured the popular imagination. To date, Apple TV+ has earned more than 2,700 award nominations and 585 wins on the strength of the highest-rated original content of any streaming network. We continue to see very positive trends in the June quarter, with TV+ viewership up strong double digits YoY. In June, we were also thrilled to release F1 in theaters around the world, one of the summer's most unforgettable blockbusters. During the quarter, we celebrated a big anniversary with 10 years of Apple Music.

To mark the occasion, we launched an all-new studio space in Los Angeles for artists to create content and connect with fans. Later this year, we're bringing Apple Music users even more to love, from an enhanced listening experience with Auto Mix, which mixes songs like a DJ, to lyrics translation and more. The App Store, meanwhile, continues to be the very best place to discover the latest apps from developers around the world in a safe and trusted way, and App Store revenue grew double digits YoY, setting a June quarter record. In retail, we continue to find opportunities in emerging markets to connect with even more customers. We recently launched the Apple Store online in Saudi Arabia, and we couldn't be more excited to open new stores in the U.A.E. and India later this year.

Thanks, Tim, and good afternoon, everyone. Our revenue of $94 billion was up 10% YoY and is a new June quarter record. We grew in every geographic segment and in the vast majority of the markets we track. Products revenue was $66.6 billion, up 8% YoY, driven by growth across iPhone and Mac. Thanks to our high levels of customer satisfaction and strong loyalty, our installed base of active devices reached another all-time high across all product categories and geographic segments. Services revenue was $27.4 billion, up 13% YoY, and an all-time record. We saw strength across the world with double-digit growth in a majority of our markets. Company gross margin was 46.5% at the high end of our guidance range and down 60 basis points sequentially, primarily driven by approximately $800 million in tariff-related costs Tim mentioned earlier. Products gross margin was 34.5%, down 140 basis points sequentially, driven by mixed and tariff-related costs partly offset by cost savings.

Services gross margin was 75.6%, down 10 basis points sequentially. Operating expenses landed at $15.5 billion, up 8% YoY. This strong business performance led to June quarter records for both net income at $23.4 billion and diluted earnings per share of $1.57, which was up 12% YoY. Operating cash flow was also strong at $27.9 billion. Now, I'm going to provide some more details for each of our revenue categories. iPhone revenue was $44.6 billion, up 13% YoY, driven by the iPhone 16 family. As Tim noted, we saw iPhone growth in every geographic segment and double-digit growth in many emerging markets. The iPhone active install base grew to an all-time high in total and in every geographic segment, and we reached a June quarter record for upgraders.

According to a recent survey from Worldpanel, formerly of Kantar, iPhone was a top-selling model in the U.S., urban China, the U.K., Australia, and Japan during the June quarter. We continue to see very high levels of customer satisfaction in the U.S. at 98%, as measured by 451 Research. Mac revenue was $8 billion, up 15% YoY, driven by continued strength across the portfolio, including MacBook Air, Mac Mini, and MacBook Pro. We grew in every geographic segment and saw double-digit growth in Europe, Greater China, and the rest of Asia-Pacific. The Mac install base reached an all-time high, and we hit a June quarter record for upgraders. In the U.S., customer satisfaction was recently measured at 97%.

iPad revenue was $6.6 billion, down 8% YoY, which was expected given the difficult compare against the launch of the iPad Air and iPad Pro in the year-ago quarter. At the same time, the iPad install base reached another all-time high, and over half of the customers who purchased an iPad during the quarter were new to the product. Based on the latest reports from 451 Research, customer satisfaction was 98% in the U.S. Wearables, home, and accessories revenue was $7.4 billion, down 9% YoY. This was driven by a difficult compare on accessories due to the prior year's iPad launches that I just referred to. The Apple Watch install base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product.

We also set a quarterly record for upgraders on Apple Watch, and the latest customer satisfaction for watch in the U.S. was reported at 97%. Our services revenue reached an all-time high of $27.4 billion, up 13% YoY. The performance in the June quarter was broad-based. We saw a sequential acceleration across a majority of the categories, including cloud services, where we reached an all-time revenue record driven by the year-over-year growth of iCloud paying accounts. We saw strong momentum during the June quarter, and the growth of our install base of active devices gives us great opportunities for the future. Customer engagement across our services offerings also continued to grow. Both transacting and paid accounts reached new all-time highs, with paid accounts growing double digits YoY. Paid subscriptions also grew double digits.

We have well over a billion paid subscriptions across the services on our platform. We continue to improve the quality and breadth of our service offerings, from the new Apple Games app to a continued expansion of Tap to Pay and Wallet. Turning to enterprise, organizations are continuing to invest in Apple products to drive employee innovation and productivity. With companies like PayPal and Roche deploying more Macs for their workforce, we had the best June quarter ever for Mac and enterprise. In Thailand, Siam Commercial Bank, one of the largest Thai banks, has deployed thousands of iPads across their branches to enhance the quality and efficiency of their banking operations, from loan services to wealth management. CAE, a leader in pilot training and simulation technology, is using Apple Vision Pro to enable pilots to become more familiar with aircraft procedures, leading to more productive in-person flight simulator training outcomes.

Let's turn to our cash position and capital return program. We ended the quarter with $133 billion in cash and marketable securities. We had $5.7 billion of debt maturities, issued $4.5 billion of new debt, and increased commercial paper by $4 billion, resulting in $102 billion in total debt. Therefore, at the end of the quarter, net cash was $31 billion. During the quarter, we returned over $27 billion to shareholders. This included $3.9 billion in dividends and equivalents and $21 billion through open market repurchases of 104 million Apple shares. As we move into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that you've often referred to.

Importantly, the color we're providing assumes that the global tariff rates, policies, and application remain in effect as of this call, the global macroeconomic outlook does not worsen from today, and the current revenue share agreement with Google continues. We expect our September quarter total company revenue to grow mid to high single digits YoY. We expect services revenue to grow at a year-over-year rate similar to what we reported in the June quarter. We expect gross margin to be between 46%-47%, which includes the estimated impact of the $1.1 billion tariff-related costs that Tim referred to earlier. We expect operating expenses to be between $15.6 billion-$15.8 billion. We expect OI&E to be around negative $25 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 17%.

Finally, today, our board of directors has declared a cash dividend of $0.26 per share of common stock payable on August 14, 2025, to shareholders of record as of August 11, 2025. With that, let's open the call to questions.