Apple Inc. Q1 2026 earnings call

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, 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-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.

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 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. Greater China also grew 38% year-over-year, driven by iPhone, which had record upgraders and double-digit growth on switchers. Apple's December quarter 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. iPhone 17 is a truly fantastic upgrade and an incredible value. Turning to Mac, revenue was $8.4 billion for the December quarter. 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 quarter 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. 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 Clean Up, 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 1 season, and for F1 fans in the U.S., 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. 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 recycled materials 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 500,000 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.

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 U.S., 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, and 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 for 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 U.S., Greater China, Latin America, Western Europe, the Middle East, Australia, and South Asia, as well as a December quarter 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 U.S., China Mainland, Japan, and India. According to a recent survey from Worldpanel, iPhone was the top-selling model in the U.S., Urban China, the U.K., Australia, and Japan. Customers are loving the latest iPhone lineup. The latest customer satisfaction for the iPhone 17 family in the U.S. 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 the 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.

As Tim mentioned earlier, the Mac installed base reached another all-time high, with nearly half of the customers who purchased a Mac being new to the product. In the U.S., 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 continued to add new users to the iPad. In fact, over half the customers who purchased an iPad during the quarter were new to the product. This helped the iPad installed 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 U.S. 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. In the U.S., 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 a 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. 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 U.S. 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. In Mexico, Coppel, 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 the March quarter, 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 quarter total company revenue to grow by 13%-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 the December quarter. We expect gross margin to be between 48% and 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 the December quarter 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 February 12th, 2026, to shareholders of record as of February 9th, 2026. With that, let's open the call to questions.