Apple Inc. Q2 2026 earnings call

Good afternoon, welcome to the Apple Q2 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. John Ternus will be joining after that for a brief set of remarks, 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 March 28th, 2026 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. Before we get into the quarter, I wanted to take a moment to talk about the transition we recently announced. I just celebrated my 28th anniversary of being here at Apple, 15 years as CEO. In fact, this will be my 89th earnings call. I'll always be proud of the impact Apple has had on our users' lives, and I can't begin to express how grateful I am for our amazing teams. It's because of them that there is no company like Apple, and I truly believe there never will be. This moment for the transition is the right one for a number of reasons. First, our business has been performing extremely well. The first half of this year was very strong, growing double digits year-over-year. Second, our roadmap is incredible.

Most importantly, we have the right leader ready to step into the role. As I have said, there is no 1 on this planet I trust more to lead Apple into the future than John Ternus. John is a brilliant engineer, a deep thinker, a person of remarkable character, and a born leader. I know he will push us to go further than we think is possible in order to deliver the greatest products and services for our users. I have been so proud to call him a colleague and a friend, and I will be even more proud to call him Apple's CEO. Over the coming months, John and I will be working closely together to make sure this transition is perfectly smooth. I very much look forward to stepping into the role of Executive Chairman on September 1st.

As I've told John, I will be here to support him in any way he needs and in any way I can. I am incredibly optimistic about Apple's future, and I know we have the right team in place to deliver on the promise of this company. I also want to take just a moment to share my profound gratitude for our shareholders, especially our long-term shareholders, for believing in Apple and for your support over the years. It means a great deal to all of us. With that, I'd like to bring John on the call for a moment to say a few words. John?

Thanks, Tim, and thanks to everyone on the call. In my view, Tim is one of the greatest business leaders of all time. Stepping into the role of CEO is an incredible honor, and it means a great deal to me to have Tim's trust and confidence. I want to echo Tim's sentiment about our shareholders, especially those who have been with us for many years. Thank you so much for your confidence in our company. As you know, one of the hallmarks of Tim's tenure has been a deep thoughtfulness, deliberateness, and discipline when it comes to the financial decision-making of the company. I want you to know that is something Kevan and I intend to continue when I transition into the role in September. This is an especially exciting moment for Apple. As Tim mentioned, we have an incredible roadmap ahead.

While you're not going to get me to talk about the details of that roadmap, suffice it to say this is the most exciting time in my 25-year career at Apple to be building products and services. There are so many opportunities before us, and I couldn't be more optimistic about what's to come. For now, let me simply say I am deeply grateful to Tim, to the executive team, and to everyone at Apple, and I look forward to all of the important work ahead. With that, let me turn it back over to Tim.

Thanks, John. Let me turn to the quarter. Today, Apple is proud to report $111.2 billion in revenue, up 17% from a year ago, and a March quarter record, which was above the high end of our guidance range despite supply constraints. Customer enthusiasm for iPhone has been extraordinary, with revenue growing 22% year-over-year to achieve a March quarter record. Services reached an all-time revenue record, growing 16% from a year ago, while EPS set a March quarter record of $2.01, up 22% year-over-year. We set March quarter revenue records and grew double digits in every geographic segment, including strong double-digit growth in Greater China and the rest of Asia Pacific.

We also achieved March quarter revenue records in both developed and emerging markets and saw double-digit growth in nearly every emerging market we track, including India. We recently marked Apple's 50th anniversary with celebrations in our retail stores and with users around the world. It was a special moment for us to reflect on the incredible journey we've shared with our users, to thank everyone who's been a part of it, and to look forward to writing the next chapter in our story of innovation. We have always believed that people who think different can change the world, and we have been proud to build tools and technologies that allow them to do just that. In March, we put an amazing showcase of human creativity and ingenuity in action with updates across iPhone, iPad, and Mac.

Through an unforgettable week of innovation, we also unveiled MacBook Neo, giving us an opportunity to bring the power of Mac to more people than ever before. I'll have more to say on that and all the incredible things we delivered for our customers over the last few months. Let's take a closer look at results from across our product line, beginning with iPhone. As I mentioned earlier, iPhone had an excellent quarter with $57 billion in revenue, a March quarter record despite supply constraints. During the quarter, we welcomed iPhone 17e, the newest addition to what is already the strongest iPhone lineup we've ever had. It brings outstanding performance and core iPhone experiences at a remarkable value for everyone from enterprise teams to consumers. Across the lineup, this is the most powerful, capable, and versatile iPhone family we've ever created.

That starts with the latest in Apple silicon for iPhone, A19 and A19 Pro, which include neural accelerators in the GPU to deliver a huge boost to AI performance. With incredible performance and battery life and deep integration of Apple Intelligence, iPhone continues to set the standard for what a smartphone can be. Customers are capturing stunning photos and videos with our most advanced camera system ever on iPhone 17 Pro and Pro Max, including an 8x optical quality zoom and the all-new Center Stage front camera, unlocking entirely new ways to frame, create, and share their moments. In fact, during their recent mission, Artemis II astronauts captured some truly otherworldly images of Earth and space using iPhone 17 Pro Max. Meanwhile, iPhone Air users are tapping into the pro-level performance in our slimmest iPhone ever.

With iPhone 17, we're seeing a strong response, not only from customers upgrading from previous generations, but also from people choosing iPhone for the very first time. We've been enormously pleased with how the entire lineup has been received. In fact, the iPhone 17 family is now the most popular lineup in our history when looking at the launch through the March quarter. According to IDC, we gained market share during the quarter. Mac revenue was $8.4 billion for the March quarter, up 6% from a year-ago, despite supply constraints driven by higher-than-expected levels of demand. We're delighted with the reception of what is the most advanced Mac lineup in our history. We set March quarter records for upgraders and customers new to Mac. According to IDC, we gained market share in the quarter.

From Mac mini to MacBook Pro and everything in between, Mac is the best platform for AI, with Apple silicon delivering exceptional performance, industry-leading efficiency, and the ability to run advanced models locally in ways that simply weren't possible before. It's so exciting to see how strongly users are embracing Mac for these capabilities. There's tremendous enthusiasm for MacBook Neo, which made its debut during the March quarter, opening up an entirely new way to experience Mac at a breakthrough price. We've also further improved MacBook Air, already the world's most popular laptop, with M5, making everyday tasks faster and more responsive than ever. MacBook Pro reaches new heights with M5 Pro and M5 Max, delivering extraordinary performance and dramatically advancing what users can do with AI on a portable system.

For desktop users, Studio Display pairs beautifully with Mac, while the all-new Studio Display XDR takes things even further, bringing unmatched image quality and an extraordinarily immersive experience to pro workflows. Turning to iPad, revenue was $6.9 billion, up 8% from a year ago. iPad continues to be a great choice for students, small business owners, artists, and so many others because it empowers entirely new ways to work, learn, create, and connect. It's not just about mobility. It's about versatility, delivering a uniquely flexible experience that adapts to whatever users want to accomplish. Today, our iPad lineup is stronger than ever, led by the arrival of the M4-powered iPad Air. With a remarkable leap in performance, it raises the bar for what users can do on iPad, from advanced creative workflows to powerful productivity and immersive learning.

With the addition of our latest Apple silicon, along with the N1 wireless networking chip and C1X modem, users can stay seamlessly connected wherever they are. Across wearables, home, and accessories, revenue for the March quarter came in at $7.9 billion, up 5% from a one year ago. Apple Watch Ultra 3, Apple Watch Series 11, and Apple Watch SE continue to play an essential role in users' lives, going far beyond fitness tracking to deliver meaningful insights and support for their health and well-being. From helping users stay active and reach their fitness goals to delivering powerful, science-backed health insights that can prompt meaningful conversations with care providers, Apple Watch is with them every step of the way. It's tremendously meaningful to see how Apple Watch continues to empower users to better understand their health, make more informed decisions, and in many cases change and even save lives.

During the quarter, we introduced customers to a new level of audio experience with AirPods Max 2, delivering stunning sound quality and our most advanced active noise cancellation yet. At the same time, AirPods Pro 3 combine an incredibly immersive listening experience with intelligent features that adapt to how users move, train, and live. Whether it's a call across town or a conversation across continents, AirPods make it effortless to stay connected. AirPods can bridge languages too, thanks to live translation powered by Apple Intelligence. In addition to live translation, Apple Intelligence brings together dozens of powerful capabilities from visual intelligence to cleanup in photos that are seamlessly integrated into the moments that matter most to our users every day. We look forward to bringing a more personalized Siri to users coming this year.

What truly sets Apple apart is how Apple Intelligence is woven into the core of our platforms, powered by Apple silicon and designed from the ground up to deliver intelligence that is fast, personal, and private. This is not AI as a standalone feature, but AI as an essential, intuitive part of the experience across our devices. It builds on years of innovation, from the neural engine to advanced on-device processing, enabling capabilities that are not only incredibly powerful, but also respectful of user privacy. Increasingly, that same foundation is drawing developers and researchers to our products as powerful platforms for building and running agentic AI, thanks to the unique combination of performance, efficiency, and on-device capabilities. When you combine this level of integration with our relentless focus on the customer experience, it becomes clear why Apple platforms are the best place to experience AI.

Now let's turn to services, which set an all-time revenue record with $31 billion. We saw double-digit growth in both developed and emerging markets and set new all-time revenue records across most of the services categories. There's no better place to find celebrated storytellers than Apple TV. Audiences are applauding the return of shows like Your Friends & Neighbors, Shrinking, and For All Mankind, while discovering new favorites like Widow's Bay. Apple TV has also earned its place among the most decorated names in entertainment, with more than 800 wins and more than 3,400 nominations in the six years since launch. This is a great time for sports fans on Apple TV too. Formula One season kicked off in March, and Apple TV subscribers in the U.S. have one of the best views of the track.

The new MLS season is also well underway, and subscribers in more than 100 countries and regions can watch every match with no blackouts. Friday Night Baseball returned for its fifth year on Apple TV with a full season of marquee matchups. In retail, we had a March quarter revenue record and saw very high levels of store traffic throughout the quarter. From New York to Chengdu to Paris, it was wonderful to see stores around the world at the center of Apple's 50th anniversary celebrations. We were also thrilled to open the doors to our sixth store in India. It has been wonderful to see how we've continued to grow in India in recent years, part of our larger efforts to connect with even more customers in emerging markets all over the world.

Thanks, Tim. Good afternoon, everyone. Our revenue of $111.2 billion was up 17% year-over-year, a March quarter revenue record. We saw strong performance around the world with March quarter revenue records in every geographic segment. Foreign exchange was about a 2.5 percentage point tailwind to the March quarter growth rate. We also faced supply constraints on iPhone and to a lesser extent on Mac. We believe if you remove the favorable benefit from foreign exchange and add back the unfavorable impact from supply constraints, we would have had a higher growth rate for total company revenue for the quarter. Products revenue was $80.2 billion, up 17% year-over-year, driven by double-digit growth on iPhone, setting a new March quarter record.

Our install base of over 2.5 billion active devices has reached another all-time high across all major product categories and geographic segments. Services revenue was $31 billion, up 16% year-over-year. We saw strong performance across the board with double-digit growth in the vast majority of the markets we track. Company gross margin was 49.3%, above the high end of our guidance range and up 110 basis points sequentially. Products gross margin was 38.7%, down 200 basis points sequentially. Services gross margin was 76.7%, up 20 basis points sequentially. Operating expenses landed at $18.9 billion, up 24% year-over-year. This was slightly above the high end of our guidance range due to a one-time expense in SG&A.

Net income was $29.6 billion, and diluted earnings per share was $2.01, up 22% year-over-year. Both net income and diluted EPS achieved March quarter records and drove a very strong level of operating cash flow at $28.7 billion. I'm going to provide some more details for each of our revenue categories. iPhone revenue was $57 billion, up 22% year-over-year, driven by the iPhone 17 family. iPhone grew double digits in the majority of markets we track, including the U.S., Latin America, Greater China, Western Europe, India, Japan, and Southeast Asia. The iPhone active install base grew to an all-time high, and we set March quarter record for iPhone upgraders. According to a recent survey from Worldpanel, iPhone was a top-selling model in the U.S., urban China, the U.K., Australia, and Japan.

We have been extremely pleased with the positive reception of the iPhone 17 family. In fact, customer satisfaction for the iPhone 17 family in the U.S. was recently measured at 99% by 451 Research. Mac revenue was $8.4 billion, up 6% year-over-year, driven by the strength of the recent product launches, including MacBook Neo. We grew in both developed and emerging markets with double-digit growth in many emerging markets, including India and Indonesia. As Tim mentioned earlier, we had a March quarter record for customers new to the Mac. And this helped drive a new all-time record for the overall Mac install base. In the U.S., customer satisfaction for Mac was recently reported at 97%. iPad revenue was $6.9 billion, up 8% year-over-year, driven by the continued strength of the A16-powered iPad and the M5-powered iPad Pro.

The iPad install base reached a new all-time high as iPad continued to reach new customers around the world. During the quarter, over half of the customers who purchased an iPad were new to the product. Many of these customers are in our emerging markets, where we grew iPad revenue by double digits, including in India, Mexico, and Thailand. Based on the latest reports from 451 Research, customer satisfaction was 98% in the U.S. Wearables, home, and accessories revenue was $7.9 billion, up 5% year-over-year, driven by strength in wearables and accessories. We were pleased to see strength in our emerging markets, where we set a new March quarter revenue record. The wearables install base reached a new all-time high, with over half of the customers purchasing an Apple Watch during the quarter being new to the product.

In the U.S., customer satisfaction on Apple Watch was measured at 96%. Our services revenue reached an all-time high of $31 billion, up 16% year-over-year. The strong performance was broad-based, with all-time records in both developed and emerging markets. As Tim mentioned, we also set all-time revenue records in most of the services categories. We're optimistic about the future of our services business. With our large install base of over 2.5 billion active devices, we have an incredibly strong foundation for growth opportunities. Both transacting and paid accounts reached new all-time highs in the quarter as we continue to see more customers leveraging our services offerings. We continue to improve the quality and expand the breadth of our services from the expansion of features like Tap to Pay, now available in over 50 markets, to deeper support for enterprise customers.

Building on this, we've launched Apple Business, a new all-in-one platform that combines our hardware, software, and enterprise services, enabling companies to efficiently manage their deployments and scale their business. We continue to see more organizations and enterprise choosing Apple's devices for performance and productivity. Marsh, a leading professional services firm, deployed a large-scale refresh of corporate devices to iPhone 17 as part of a commitment to security alongside adopting Mac for internal AI development. With Apple silicon and its powerful unified memory architecture, leading AI developers like Perplexity are choosing Mac as their preferred platform to build enterprise-grade AI assistants that power autonomous agents and boost workplace productivity. Across the Mac lineup, customers are finding the right device for their needs.

From MacBook Pro and MacBook Air to our newest edition, MacBook Neo, which delivers an unprecedented combination of quality, value, and industry-leading security that is resonating strongly in enterprise and education. Kansas City Public Schools, for example, is switching their high school students from Windows laptops and Chromebooks to MacBook Neo, completing their transition to an all-Apple district. In India, leading enterprise software provider Freshworks deployed over 5,000 MacBook Pro and MacBook Air to accelerate their AI development. Let's turn to our cash position and capital return program. We ended the quarter with $147 billion in cash and marketable securities. We had $5.8 billion of debt maturities, and commercial paper remained unchanged at $2 billion, resulting in $85 billion in total debt. Therefore, at the end of the quarter, net cash was $62 billion.

During the quarter, we returned $15 billion to shareholders. This included $3.8 billion in dividends and equivalents and $11 billion through open market repurchases of 42 million Apple shares. Our repurchase activity at any time can be affected by a number of factors that we take into account. As you're aware, we recently announced a CEO transition. Taking a step back, we plan to continue our capital allocation philosophy of first making all the necessary investments needed to support the business and then returning excess cash to shareholders over time. Net cash neutral has been a valuable framework for our capital structure, and since 2018, we have significantly right-sized our balance sheet and reduced net cash by over $100 billion.

As we move ahead, we are no longer providing net cash neutral as a formal target, and we will independently evaluate cash and debt. Capital returns will continue to be important to our overall approach by delivering long-term shareholder value. Accordingly, our board has authorized an additional $100 billion for share repurchases, and we're also raising our dividend by 4% to $0.27 per share of common stock. This cash dividend will be payable on May 14th, 2026 to shareholders of record as of May 11th, 2026. As we move ahead into the June 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. The global macroeconomic outlook does not worsen from today. We expect our June quarter total company revenue to grow by 14%-17% year-over-year, which comprehends our best view of constrained supply. On iPad, keep in mind, we face a difficult compare driven by the launch of the A16-powered iPad in the prior year. We expect services revenue to grow at a year-over-year rate similar to what we reported in the March quarter after removing the favorable year-over-year impact from foreign exchange tailwinds. Keep in mind, during the March quarter, FX was a 2.5 percentage point tailwind to the total company growth rate, and for services, that impact was slightly more favorable.

We expect gross margin to be between 47.5% and 48.5%. We expect operating expenses to be between $18.8 billion and $19.1 billion. We expect OINE to be around $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 17%. With that, Tim and I will take questions.