Apple reported strong results for the third quarter of the fiscal year 2026 (April to June), with iPhone revenue rising 22% from a year earlier and beating analysts' estimates. However, the services institutional sector fell short of expectations. Despite the strong results, Apple's share price fell nearly 5% during the conference call on concerns about the impact of future memory supply constraints.
Apple said on the 30th (local time) that third-quarter revenue rose 16% from a year earlier to $109.42 billion, topping analysts' estimates of $108.65 billion from financial data firm LSEG. It was a record third-quarter revenue. Third-quarter net income increased to $29.79 billion from $24.43 billion in the same period last year. Earnings per share (EPS) for the same period rose to $2.02 from $1.57. Eleven cents of EPS reflected a U.S. government tariff refund. Previously, analysts projected Apple's third-quarter EPS at $1.89.
By institutional sector, iPhone and MacBook led the results. Despite sluggish global smartphone sales due to higher memory chip prices, Apple's third-quarter iPhone revenue rose 22% year over year to $54.25 billion. That beat LSEG's estimate of $53.86 billion. Revenue in Greater China, which had been declining amid intensifying competition with local players such as Huawei, rose 22.4% year over year to $18.82 billion. However, Greater China revenue fell short of the market estimate of $19.6 billion. Greater China revenue includes China, Hong Kong, and Taiwan. Third-quarter revenue for the PC product MacBook surged about 29% year over year to $10.35 billion, far exceeding the estimate of $8.74 billion.
In contrast, third-quarter services revenue rose 12.1% year over year to $30.74 billion but missed the estimate of $31.22 billion. Services revenue includes App Store fees and iCloud subscription fees. iPad revenue for the same period fell 5.9% year over year to $6.19 billion, below analysts' estimate of $6.92 billion. Third-quarter wearables revenue was $7.88 billion, in line with the estimate of $7.82 billion.
The third-quarter gross margin was tallied at 50.1%, and the company said 2 percentage points of that reflected the effect of a tariff refund. Analysts had expected a gross margin of 47.92%.
Kevan Parekh, Apple's chief financial officer (CFO), said, "We were able to deliver excellent results despite headwinds from supply constraints and successive foreign-exchange fluctuations." Anurag Rana, a Bernstein (BI) analyst, said of the gross margin, "It was somewhat weak in Greater China, but overall it was solid."
What comes next matters. Apple guided fourth-quarter revenue growth at 9% to 11%. That fell short of the 12% estimate compiled by LSEG.
This was the last earnings release for CEO Tim Cook. Seemingly mindful of that, Cook said, "I am more confident than ever about Apple's future."