Apple Inc. Q4 2025 earnings call

Afternoon, and welcome to the Apple Q4 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, Kevan Parekh. 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-K for the year ended September 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. Additionally, today's discussion will refer to certain non-GAAP financial measures. You can find a reconciliation of these measures in our fourth quarter earnings release, which is available on our Investor Relations website. 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. Apple is proud to report $102.5 billion in revenue, up 8% from a year ago and a September quarter record. Services achieved an all-time revenue record of $28.8 billion, growing 15% from a year ago. EPS came in at $1.85, setting a September quarter record. We grew in the vast majority of markets we track and had September quarter revenue records in dozens of markets, including the U.S., Canada, Latin America, Western Europe, the Middle East, Japan, Korea, and South Asia. We also set a September quarter revenue record in emerging markets and an all-time revenue record in India. These results come at the close of an extraordinary year for Apple, in which we achieved an all-time revenue record of $416 billion for the fiscal year.

We set all-time revenue records in emerging and developed markets. We set an all-time revenue record for iPhone. In services, we achieved all-time records across every geographic segment. These results reflect the tremendous customer enthusiasm Apple products and services, as well as our deep commitment to innovation. We are incredibly excited about the strength we're seeing across our products and services, and we expect the December quarter's revenue to be the best ever for the company and the best ever for iPhone. We are heading into the holiday season with a truly remarkable lineup that includes the biggest leap ever for iPhone, which has had a tremendous response from our users around the world. Our Apple Watch lineup is more capable than ever too, giving users ways to take charge of their health like never before through new features like hypertension notifications and sleep score.

The next-level sound quality and active noise cancellation of AirPods Pro 3 are hitting all the right notes for our users. In October, we also broke new ground in power-efficient performance with the uncomparably fast M5 chip, packed with neural accelerators in each GPU core to supercharge AI workloads. iPad Pro combines game-changing features in iPadOS 26 with the power of M5 to create our most capable iPad ever. At the same time, the M5 MacBook Pro raises the bar for what users can do with a laptop, while the new M5-powered Apple Vision Pro opens up amazing possibilities on its infinite canvas. We also launched a beautiful new software design that creates a unified experience across all of our platforms for the very first time. The design is crafted with a new material called Liquid Glass that brings fluidity, vitality, and flexibility to our products.

Along with the new design, we delivered powerful new features to enable users to do even more with their devices. That includes updates to the phone and messages apps in iOS 26 to help users stay connected, continuity enhancements in Mac to deliver an even more seamless experience across devices, and a powerful new windowing system that fundamentally transforms the user experience in iPadOS 26. As we continue to expand our investment in AI, we're bringing intelligence to more of what people already love about our products and services, making every experience even more personal, capable, and effortless. At the heart of it all is Apple Silicon, and we were thrilled to launch new products powered by the A19 Pro chip and M5. These incredibly advanced chips make Apple products the very best place to experience the power of AI.

With Apple Intelligence, we've introduced dozens of new features that are powerful, intuitive, private, and deeply integrated into the things people do every day. Features like live translation, which help users communicate across languages in real time, and visual intelligence, which opens new ways to learn about and explore the world. We also introduced Workout Buddy, a new experience that uses AI to provide personalized motivational insights based on a user's workout data and fitness history. These join so many others, from cleanup in photos and new image creation tools to powerful writing tools. We're also seeing developers take advantage of our on-device foundation models to create entirely new experiences for users around the world. We're also excited for a more personalized Siri. We're making good progress on it, and as we've shared, we expect to release it next year.

Now let's take a closer look at the September quarter results across our lineup, starting with iPhone. iPhone set a revenue record for the September quarter at $49 billion, up 6% from a year ago, with growth in the vast majority of markets we track, despite supply constraints we faced on several iPhone 16 and iPhone 17 models given strong demand. Redesigned from the inside out and powered by the outstanding A19 Pro chip, the iPhone 17 Pro is by far the most powerful iPhone we've ever made, setting a whole new standard for the smartphone industry. The iPhone 17 Pro also offers our best camera system ever, with an all-new 8x telephoto camera, and looks stunning with bold new finishes like Cosmic Orange.

The iPhone Air introduces an incredibly breakthrough design, and with a bigger and brighter display with ProMotion, the iPhone 17 is a fantastic upgrade packed with features users will love. In Mac, we had a strong September quarter with revenue of $8.7 billion, up 13% year-over-year, driven by the strength of the MacBook Air. The MacBook Air enables users to get things done easily on the world's most popular laptop. Mac Mini users are loving how much performance is packed into our smallest Mac ever made, while Mac Studio customers are pushing the envelope of what's possible with our most powerful Mac ever. The latest 14-inch MacBook Pro unlocks incredible speed and next-level performance with the all-new M5 chip, which delivers three and a half times faster AI performance than M4. Turning to iPad, revenue was $7 billion for the September quarter.

Last month, we released one of the most attention-grabbing software updates we've had in years with iPadOS 26, and we recently gave iPad users even more to love with the launch of the incredible M5 iPad Pro, which offers an incredible boost in AI performance. With an unmatched combination of power and versatility, the new iPad Pro makes every interaction delightful with its thin, light, and portable design. In wearables, home and accessories, revenue was $9 billion. As I mentioned earlier, we were excited to unlock new possibilities for users with the launch of our newest Apple Watch lineup, making the world's most popular watch even better. That includes Apple Watch Ultra 3 with the largest display ever in an Apple Watch, improved battery life, and emergency SOS via satellite.

Apple Watch Series 11 brings our users the most comprehensive set of health features yet, and Apple Watch SE 3 delivers advanced capabilities at an incredible value. AI and advanced machine learning are at the core of powerful health features like heart rate monitoring, fall detection, crash detection, and more. With our latest Apple Watch lineup, we were proud to introduce hypertension notifications developed using large-scale machine learning models. Hypertension is one of the leading risk factors for heart attack and stroke, affecting more than 1 billion adults worldwide, and we expect to notify more than a million users of this life-threatening condition. We're also excited about SleepScore, a simple, intuitive way to help users better understand their sleep quality and discover ways to improve it. That's something I'm sure we can all benefit from. Meanwhile, AirPods Pro 3 have been a huge hit.

You have to hear them to really understand just how remarkable they are. Users and reviewers alike are praising their incredible sound quality and improved fit. They feature the world's best in-ear active noise cancellation, removing up to two times as much noise as the previous generation. With live translation powered by Apple Intelligence, AirPods deliver an incredibly new and exciting experience for users around the world. Turning to services, as I mentioned earlier, revenue was $28.8 billion for the September quarter, 15% higher year-over-year and an all-time record. We saw double-digit growth in both developed and emerging markets and set new all-time records across advertising, App Store, cloud services, music, payment services, and video. Apple TV celebrated a big night at this year's Emmy Awards with 22 wins. The studio led the night with 13 wins, the most of any comedy series in Emmy's history.

Severance topped all dramas with eight wins, adding to the accolades for this landmark series. To date, Apple TV productions have now earned over 600 wins and 2,800 nominations in total, driven by powerful, original storytelling. We're excited for audiences to discover new productions like Pluribus and to catch returning favorites like Slow Horses and The Morning Show. Soon, Apple TV will be the destination for F1 fans across the U.S. on track day, thanks to a new partnership with Formula One. F1 is one of the most exciting and fastest-growing sports in the world, and starting next year, Apple TV will be the place for subscribers to follow every twist and turn of the new season. In addition, F1: The Movie, one of the year's biggest blockbusters, will be coming to Apple TV on December 12th. During the September quarter, we also marked the 10-year anniversary of Apple News.

Apple News provides access to front-page news from all around the world, putting hundreds of publications right at users' fingertips. Turning to retail, we're heading into our busiest time of year with our best-ever lineup. In the last few months, we've opened new stores in emerging markets like India and the UAE and new locations in the U.S. and China. I was also in Tokyo last month for the opening of the redesigned and reimagined Apple Ginza store, and the energy among the crowd was truly remarkable. When it originally opened, it was our first store outside the U.S., and so it was especially meaningful to come back to welcome customers to the beautiful new space.

Thanks, Tim, and good afternoon, everyone. Our revenue of $102.5 billion was up 8% year-over-year and is a new September quarter record. We set September quarter records in the Americas, Europe, Japan, and the rest of Asia-Pacific, and grew in the vast majority of markets we track. Products revenue was $73.7 billion, up 5% year-over-year, driven by growth across iPhone and Mac, and reached a September quarter record. Thanks to our exceptional customer satisfaction and strong levels of loyalty, our install base of active devices has reached another all-time high across all product categories and geographic segments. Services revenue was $28.8 billion, up 15% year-over-year, and an all-time record. The performance was broad-based, with double-digit growth in the vast majority of the markets we track and double-digit growth across most of our services categories.

Company gross margin was 47.2%, above the high end of our guidance range and up 70 basis points sequentially, driven by favorable mix. This includes approximately $1.1 billion of tariff-related costs, which is in line with what we had estimated on our last call. Products gross margin was 36.2%, up 170 basis points sequentially, driven by favorable mix. Services gross margin was 75.3%, down 30 basis points sequentially. Operating expenses landed at $15.9 billion, up 11% year-over-year, driven by increased investment in R&D. These strong levels of business performance led to September quarter records for both net income and diluted earnings per share. Net income was $27.5 billion. Diluted earnings per share was $1.85, up 13% year-over-year on an adjusted basis, excluding the one-time charge we recognized during the fourth quarter of 2024. Operating cash flow was also a September quarter record at $29.7 billion.

Now, I'm going to provide some more details for each of our revenue categories. iPhone revenue was $49 billion, up 6% year-over-year, driven by the iPhone 16 family. iPhone grew in the vast majority of the markets we track, with September quarter records in many emerging markets, including Latin America, the Middle East, and South Asia, and an all-time record in India. The iPhone active install base grew to an all-time high, and we set a September quarter record for upgraders. According to the recent survey from World Panel, iPhone was a top-selling model in the U.S., urban China, the U.K., France, Australia, and Japan. We continue to see very high levels of customer satisfaction in the U.S. at 98%, as measured by 451 Research. Mac revenue was $8.7 billion, up 13% year-over-year, driven by MacBook Air.

We grew in every geographic segment with strong double-digit growth in emerging markets. The Mac install base reached another all-time high, with nearly half of customers who purchased a Mac being new to the product. The latest customer satisfaction for Mac in the U.S. was reported at 96%. iPad revenue was $7 billion, flat year-over-year. Keep in mind we faced a difficult compare against the full quarter impact of the iPad Air and iPad Pro launch from last year, offset by the better-than-expected performance on the iPad. The install base reached an all-time high, with a September quarter record for upgraders, 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 $9 billion, flat year-over-year.

This was driven by growth on Watch and AirPods, offset by accessories, which was impacted by strong performance in the year-ago quarter, driven by the iPad launches. Both the Apple Watch and AirPods install bases reached new all-time highs. Over half of the customers purchasing an Apple Watch during the quarter were new to the product. We also set a September record for upgraders on Apple Watch. In the U.S., customer satisfaction was recently measured at 95%. Our services revenue reached an all-time high of $28.8 billion, up 15% year-over-year. We achieved all-time revenue records in the Americas, Europe, Japan, and rest of Asia-Pacific, as well as a September quarter record in Greater China.

The majority of categories saw a sequential acceleration, and as Tim mentioned, we set many all-time revenue records, including payment services, where we reached an all-time revenue record and saw double-digit growth year-over-year on Apple Pay active users. This strong momentum in the September quarter drove our total fiscal year services revenue to surpass $100 billion, up 14% year-over-year and our best ever. The growth of our install base of active devices continues to offer 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. We continue to improve the quality and expand the reach of our services offerings, from additional markets for Apple Pay, now available in nearly 90 countries, to Apple Care One, a great new way to cover multiple Apple products in a single plan.

Turning to enterprise, we are seeing an adoption of Apple products accelerate across industries to improve productivity and drive innovation. The BMW Group has been deploying tens of thousands of iPhones, including to factory employees, to further strengthen its digital capabilities and advanced innovation at the company. Capital One has expanded its Mac Choice program by adding thousands more MacBook Airs across its workforce. In the Czech Republic, its largest bank, Česká spořitelna, continues to invest in the Apple ecosystem with over 5,000 iPhones in addition to its existing thousands of iPads and Macs. Purdue University has launched a spatial computing hub built around Apple Vision Pro, designed to help prepare students to lead the next wave of innovation in critical industries like semiconductor and pharmaceutical manufacturing. Let's turn to our cash position and capital return program. We ended the quarter with $132 billion in cash and marketable securities.

We had $1.3 billion of debt maturities and decreased commercial paper by $1.9 billion, resulting in $99 billion in total debt. Therefore, at the end of the quarter, net cash was $34 billion. During the quarter, we returned $24 billion to shareholders. This included $3.9 billion in dividends and equivalents and $20 billion through open market repurchases of 89 million Apple shares. Taking a step back, we are very pleased with our record fiscal year 2025 results. As Tim mentioned, total company revenue for the year was $416 billion, with growth in iPhone, Mac, iPad, and services, and all-time records in the vast majority of markets we track. This revenue performance led to very strong full-year operating results, with all-time records for net income and for diluted EPS, which grew double digits year-over-year on an adjusted basis.

As we move ahead into the December quarter, I'd like to review our outlook, which includes the types of forward-looking information Suhasini referred to. Importantly, the color we're providing assumes that the global tariff rates, policies, and application remain in effect as of this call, and the global macroeconomic outlook does not worsen from today. We expect our December quarter total company revenue to grow by 10%-12% year-over-year, which would be our best quarter ever. We expect iPhone revenue to grow double digits year-over-year, which would be our best iPhone quarter ever. On Mac, keep in mind we expect to face a very difficult compare against the M4 MacBook Pro, Mac Mini, and iMac launches in the year-ago quarter. We expect services revenue to grow at a year-over-year rate similar to what we reported in the fiscal year 2025.

We expect gross margin to be between 47% and 48%, which includes an estimated impact of $1.4 billion of tariff-related costs. As we've said before, we are significantly increasing our investments in AI while continuing to invest in our product roadmap. For the December quarter, we expect operating expenses to be between $18.1 billion and $18.5 billion. We expect OI&E to be around $150 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 17%. Today our board of directors has declared a cash dividend of $0.26 per share of common stock payable on November 13, 2025, to shareholders of record as of November 10, 2025. With that, let's open the call to questions.