Apple Inc. delivered a powerful start to its 2026 fiscal year, surpassing expectations with a performance anchored by its flagship product and a key geographic market. However, the company’s forward guidance acknowledges potential headwinds from supply chain constraints.
Financial Performance Exceeds Forecasts
The company reported broad-based outperformance against Wall Street estimates. Total revenue climbed 16% year-over-year to $143.76 billion. Earnings per share came in at $2.84, notably higher than the consensus estimate of $2.67. A significant signal of operational strength was the improvement in gross margin to 48.2%, indicating the company achieved growth without heavy reliance on discounting.
A critical underlying metric also showed strength: Apple’s active installed base of devices grew to 2.5 billion, up from 2.35 billion in January 2025. This expanding ecosystem is fundamental for driving future service revenue.
iPhone Demand Drives Outstanding Results
The standout performer was the iPhone, with Apple describing demand as “staggering.” iPhone revenue surged 23% compared to the prior year to $85.27 billion, decisively beating analyst projections. This strength is particularly notable given that iPhone sales had experienced a slight decline during the same holiday quarter a year earlier.
Resurgent Growth in Greater China
After a period of contraction, Apple’s business in Greater China—which includes mainland China, Taiwan, and Hong Kong—showed a dramatic recovery. Revenue for the region jumped 38% to $25.53 billion. Company executives pointed to a record number of upgraders in mainland China and double-digit growth from customers switching from competing brands. This represents a potential trend reversal after sales had fallen in three of the preceding four quarters.
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Mixed Results Across Other Segments
Performance outside of the iPhone and China was varied:
- Services: Revenue reached $30.01 billion, a 14% increase that was in line with expectations.
- iPad: Sales of $8.60 billion exceeded forecasts, growing 6%.
- Mac: Revenue declined 7% to $8.39 billion, falling short of expectations.
- Wearables, Home and Accessories: This category generated $11.49 billion, a 2% decrease that also missed estimates.
Forward Outlook and Identified Challenges
For the current quarter, Apple provided a revenue growth forecast of 13% to 16%, implying a range of $107.8 billion to $110.66 billion. This outlook is above the analyst consensus of $104.84 billion.
Concurrently, management tempered expectations by highlighting supply chain risks. Limited capacity for advanced chips and rising memory prices—driven in part by AI-related scarcity—could constrain production in the near term. In response to these challenges and strategic initiatives, Apple has ramped up investment, with research and development expenses rising to $10.89 billion from $8.27 billion in the prior year. The company also announced a partnership with Google in January to integrate Gemini models into Apple Intelligence.
The stock market has reflected this mixed landscape recently, with shares entering a consolidation phase. The closing price of $254.82 remains near its 50-day moving average.
The central question for Apple in the coming weeks is whether it can convert strong demand into sustained revenue without being hampered by chip and memory shortages—the key caveat in an otherwise impressive quarterly report.
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