Apple revenue guidance tops estimates on booming iPhone, Mac demand

Apple issued a better-than-expected revenue forecast for the current period after beating on sales and earnings in the fiscal second quarter. The stock rose about 3% in extended trading.

Sales for iPhones missed estimates for the second time in three quarters, the only significant number that came up short of expectations in Thursday's report.

Here's how the company did compared to analyst estimates, according to LSEG consensus.

Wall Street is also looking at these key areas: 

Revenue climbed 17% from $95.4 billion a year earlier, Apple said. It was the first time the company faced Wall Street since the announcement last week that Tim Cook will be stepping down as CEO after 15 years on the job.

Apple said on the earnings call that revenue in the June quarter will increase between 14% and 17% from a year earlier. Analysts were expecting growth of 9.5% to $103 billion, according to LSEG.

The company's board authorized an additional $100 billion in stock repurchases and declared a cash dividend of 27 cents per share, up 4%.

Sales of iPhones rose 22% in the quarter from a year earlier. Like other consumer electronics companies and device makers, Apple faces supply chain constraints, largely due to the global memory shortage that's being driven by soaring artificial intelligence demand. Meta and Microsoft said Wednesday that higher memory prices contributed to their increased capital expenditures forecasts for the year.

Cook said on the earnings call that the iPhone 17 is now the "most popular lineup in our history" and noted that overall revenue beat guidance "despite supply constraints." CFO Kevan Parekh said the company faced supply constraints on iPhones and Macs.

Along with strong revenue guidance, Cook made clear to investors that the memory crunch isn't going away. He said the impact in the December quarter was "minimal" and that there was a bit more of a hit in the March period.

In the current quarter, "we expect significantly higher memory costs," Cook said. Going beyond that, "we believe memory costs will drive an increasing impact on our business," which will lead the company to "look at a range of options," he said.

In March, Apple announced a number of new products, including its iPhone 17e, a refreshed iPad Air laptop with an M4 chip in 11-inch and 13-inch sizes. it also unveiled the MacBook Neo, a low-cost laptop priced at $599 and aimed at students and budget-conscious consumers.

While device sales are always key to Apple's results, top of mind for Wall Street is what to expect from incoming CEO John Ternus. Apple announced on April 20, that Ternus is succeeding Cook, who will become executive chairman on Sept. 1.

Ternus, a longtime Apple exec who's been running hardware, joined the call and was introduced by Cook.

"We have the right leader ready to step into the role," Cook said in his opening remarks, adding that Apple has the team to realize the "promise of this company."

Ternus thanked Cook and Apple's shareholders and said, the company has an "incredible roadmap ahead."

"And 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," Ternus said.

One of the first things Ternus has to figure out is where Apple is going to go with AI. Early in the quarter, Apple announced it would partner with Google to use its Gemini AI model to power its Siri product.

During the Q&A part of the earnings call, Cook said, "the collaboration with Google is going well," and that the company is "happy with where things are and we're happy with the work that we're doing independently as well."

Services revenue in the quarter rose about 16% from $26.65 billion a year ago. Apple uses its massive customer base — and a total of over 2.5 billion active devices on the market — to sell subscriptions to entertainment services, as well as to services for Apple Pay, iCloud and AppleCare.

With the growth in services, Apple generates higher profit margins. Long stuck in the high 30s, Apple's gross margin has been steadily moving up in recent years, reaching 49.3% in the latest quarter up from 48.2% in the previous period.

Greater China sales increased during the quarter to $20.5 billion, up 28% from $16 billion a year ago. The China region is Apple's third biggest, behind Americas and Europe.

Research and development costs increased at a much faster pace than revenue, growing 33% in the quarter to $11.42 billion from $8.55 billion a year earlier.

Cook said, about the R&D figures, that the company is "clearly investing more," in part due to the AI growth potential it sees.

"We're investing in products and services, and we see opportunities in both of those," he said.

Parekh followed by saying that the company believes "AI is a really important investment area for Apple and we're going to be doing that incrementally on top of what we normally invest in our product roadmap."

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