Apple Q3 Revenue and Profit Beat Estimates, but Shares Dip on Services Miss

Apple Inc. on Thursday announced fiscal third-quarter sales and profits that exceeded analyst estimates, buoyed by strong demand for its iPhones and Mac computers. Despite the top- and bottom-line beat, the company's shares fell 4% in after-hours trading, reflecting investor concern over a revenue miss in its high-margin services business.

Quarterly Performance by the Numbers

For the quarter ending June 27, Apple reported significant growth, aided in part by a one-time tariff refund. The key figures, compared to LSEG analyst consensus, include:

• Total Revenue: $109.42 billion, up 16.4%, versus an estimated $108.65 billion.
• Earnings Per Share (EPS): $2.02, compared to an estimate of $1.89. This figure includes 11 cents from a U.S. government tariff refund.
• iPhone Revenue: $54.25 billion, up 21.7%, beating estimates of $53.86 billion.
• Mac Revenue: $10.35 billion, a 28.7% increase, significantly outpacing the $8.74 billion estimate.
• Services Revenue: $30.74 billion, up 12.1%, but missing the consensus forecast of $31.22 billion.
• iPad Revenue: $6.19 billion, down 5.9%, and below the expected $6.92 billion.

Strong Hardware Demand Meets Supply Headwinds

The company posted its best-ever third-quarter iPhone sales, a period when demand typically slows ahead of new model launches in the fall. This strength comes as consumers purchase devices amid broader price increases in the electronics sector. Mac sales also saw a substantial surge, which the company linked to a strong product cycle and growing consumer interest in using Mac devices for on-device AI tasks.

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In an interview with Reuters, CEO Tim Cook acknowledged significant supply chain challenges. He cited an industry-wide shortage of advanced chipmaking technology as the primary constraint during the quarter, particularly impacting the Mac lineup. "The (advanced chipmaking) supply chain just fundamentally has less flexibility in it to meet the high levels of demand," Cook told Reuters.

Services Miss and Margin Strength

The miss in the services division, which includes the App Store and iCloud, tempered the otherwise strong results and likely contributed to the stock's decline. This segment is a crucial driver of growth and profitability for investors.

Despite the services miss, Apple's gross margin was 50.1%. Excluding the two-point benefit from tariff refunds, the margin stood at 48.1%, still ahead of the 47.92% analysts had projected. The company also signaled a potential need for future capital expenditures by ending its long-held goal of returning all cash to shareholders.