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Apple Q3 Earnings Beat Estimates, Services Drive Top-Line Growth
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Key Takeaways
AAPL posted Q3 earnings of $1.57 per share, up 12.1% Y/Y and beating estimates by over 10%.
Q3 revenue rose 9.6% to $94.04B, driven by strong iPhone and Mac demand across global markets.
Services revenue grew 13.3% Y/Y, with over 1B paid subscribers and Apple TV+ viewership up double digits.
Apple (AAPL - Free Report) reported third-quarter fiscal 2025 adjusted earnings of $1.57 per share, which beat the Zacks Consensus Estimate by 10.56% and increased 12.1% year over year.
Net sales increased 9.6% year over year to $94.04 billion and beat the Zacks Consensus Estimate by 5.75%.
Overall, product sales (70.8% of sales) climbed 8.2% year over year to $66.61 billion. Services revenues grew 13.3% year over year to $27.42 billion and accounted for 29.2% of sales. The figure beat the consensus mark by 1.74%.
Apple TV+ viewership soared double-digit year over year in the fiscal third quarter. Both paid accounts and paid subscriptions grew double digits year over year. The company has more than 1 billion paid subscribers across the Services business.
Apple shares were up almost 2% in pre-market trading following the results. Year to date, AAPL shares have dropped 17.2%.
Apple’s Top Line Rides on Strong iPhone and Mac Sales
iPhone sales increased 13.5% year over year to $44.58 billion and accounted for 47.4% of total sales. iPhone sales beat the Zacks Consensus Estimate by 9.78%. Apple saw iPhone sales growth in every geographic segment and double-digit growth in emerging markets, including India, the Middle East, South Asia and Brazil. Strong demand for the iPhone 16 family drove sales.
Mac sales of $8.05 billion increased 14.8% year over year and accounted for 8.6% of total sales. The figure beat the Zacks Consensus Estimate by 12.33%. Solid demand for M4 Macbook Air drove top-line growth. Apple saw double-digit sales growth in emerging markets as well as double-digit growth in both the number of upgraders and new Mac customers.
iPad sales of $6.58 billion decreased 8.1% year over year and accounted for 7% of total sales. The figure lagged the Zacks Consensus Estimate by 2.94%.
Wearables, Home and Accessories sales decreased 8.6% year over year to $7.4 billion and accounted for 7.9% of net sales. The figure beat the consensus mark by 0.85%.
Non-iPhone revenues (iPad, Mac and Wearables) decreased 1.1% year over year on a combined basis.
Apple’s China Sales Recover, Japan and the Rest of Asia Jump
Greater China sales increased 4.4% year over year to $15.37 billion and accounted for 16.3% of total sales. Japan revenues increased 13.4% year over year to $5.78 billion and accounted for 6.1% of total sales. Rest of Asia sales soared 20.1% year over year to $7.67 billion and contributed 8.2% of total sales.
While Europe’s sales grew 9.7% to $24 billion, Americas’ sales were $41.2 billion, up 9.3%. Europe and Americas accounted for 43.8% and 25.5% of total sales, respectively.
Apple’s Gross & Operating Margins Expand Y/Y
The gross margin of 46.5% expanded 20 basis points (bps) on a year-over-year basis. The gross margin contracted 60 bps sequentially due to tariffs. Apple incurred $800 million in tariff-related costs in the reported quarter.
Products’ gross margin contracted 140 bps sequentially to 34.5% due to unfavorable mix and tariff. Services’ gross margin was 75.6%, down 10 bps sequentially.
Operating expenses rose 8.3% year over year to $15.52 billion due to a 10.7% increase in research & development expenses and a 5.2% improvement in selling, general & administrative expenses.
Operating margin expanded 40 bps on a year-over-year basis to 30%.
Apple’s Balance Sheet Remains Strong
As of June 28, 2025, cash & marketable securities were $132.99 billion compared with term debt of $91.78 billion. Apple had cash & marketable securities worth $132.92 billion compared with term debt of $92.2 billion as of March 29, 2025.
Including commercial paper of $9.92 billion, total debt was $101.7 billion as of June 28.
Apple returned nearly $27 billion in the reported quarter through dividend payouts ($3.9 billion) and share repurchases ($21 billion).
Apple’s Q4 Revenues to Grow Amid Tariff Headwinds
Apple expects the September quarter’s (fourth-quarter fiscal 2025) net sales to grow mid to high single digits on a year-over-year basis. The company expects the Services year-over-year growth rate to be similar to that of the June quarter.
Gross margin is expected to be 46-47% in the fourth quarter of fiscal 2025, including a tariff impact of $$1.1 billion. Operating expenses are expected to be between $15.6 billion and $15.8 billion.
Apple plans to spend $500 billion in the United States over the next four years and expects to source 19 billion chips during calendar year 2025.
The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is pegged at $96.43 billion, suggesting 1.58% growth over the figure reported in the year-ago quarter. The consensus mark for fourth-quarter fiscal 2025 earnings is pegged at $1.61 per share, indicating a 1.83% year-over-year decline.
Arista Networks is scheduled to report its second-quarter 2025 results on Aug. 5. Both Bumble and DoorDash are scheduled to report their respective second-quarter 2025 results on Aug. 6.
In terms of share price movement, DoorDash and Arista Networks have returned 48.5% and 11.5%, respectively, year to date. Bumble shares have dropped 4.5% over the same timeframe.
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Apple Q3 Earnings Beat Estimates, Services Drive Top-Line Growth
Key Takeaways
Apple (AAPL - Free Report) reported third-quarter fiscal 2025 adjusted earnings of $1.57 per share, which beat the Zacks Consensus Estimate by 10.56% and increased 12.1% year over year.
Net sales increased 9.6% year over year to $94.04 billion and beat the Zacks Consensus Estimate by 5.75%.
Overall, product sales (70.8% of sales) climbed 8.2% year over year to $66.61 billion. Services revenues grew 13.3% year over year to $27.42 billion and accounted for 29.2% of sales. The figure beat the consensus mark by 1.74%.
Apple TV+ viewership soared double-digit year over year in the fiscal third quarter. Both paid accounts and paid subscriptions grew double digits year over year. The company has more than 1 billion paid subscribers across the Services business.
Apple Inc. Price, Consensus and EPS Surprise
Apple Inc. price-consensus-eps-surprise-chart | Apple Inc. Quote
Apple shares were up almost 2% in pre-market trading following the results. Year to date, AAPL shares have dropped 17.2%.
Apple’s Top Line Rides on Strong iPhone and Mac Sales
iPhone sales increased 13.5% year over year to $44.58 billion and accounted for 47.4% of total sales. iPhone sales beat the Zacks Consensus Estimate by 9.78%. Apple saw iPhone sales growth in every geographic segment and double-digit growth in emerging markets, including India, the Middle East, South Asia and Brazil. Strong demand for the iPhone 16 family drove sales.
Mac sales of $8.05 billion increased 14.8% year over year and accounted for 8.6% of total sales. The figure beat the Zacks Consensus Estimate by 12.33%. Solid demand for M4 Macbook Air drove top-line growth. Apple saw double-digit sales growth in emerging markets as well as double-digit growth in both the number of upgraders and new Mac customers.
iPad sales of $6.58 billion decreased 8.1% year over year and accounted for 7% of total sales. The figure lagged the Zacks Consensus Estimate by 2.94%.
Wearables, Home and Accessories sales decreased 8.6% year over year to $7.4 billion and accounted for 7.9% of net sales. The figure beat the consensus mark by 0.85%.
Non-iPhone revenues (iPad, Mac and Wearables) decreased 1.1% year over year on a combined basis.
Apple’s China Sales Recover, Japan and the Rest of Asia Jump
Greater China sales increased 4.4% year over year to $15.37 billion and accounted for 16.3% of total sales. Japan revenues increased 13.4% year over year to $5.78 billion and accounted for 6.1% of total sales. Rest of Asia sales soared 20.1% year over year to $7.67 billion and contributed 8.2% of total sales.
While Europe’s sales grew 9.7% to $24 billion, Americas’ sales were $41.2 billion, up 9.3%. Europe and Americas accounted for 43.8% and 25.5% of total sales, respectively.
Apple’s Gross & Operating Margins Expand Y/Y
The gross margin of 46.5% expanded 20 basis points (bps) on a year-over-year basis. The gross margin contracted 60 bps sequentially due to tariffs. Apple incurred $800 million in tariff-related costs in the reported quarter.
Products’ gross margin contracted 140 bps sequentially to 34.5% due to unfavorable mix and tariff. Services’ gross margin was 75.6%, down 10 bps sequentially.
Operating expenses rose 8.3% year over year to $15.52 billion due to a 10.7% increase in research & development expenses and a 5.2% improvement in selling, general & administrative expenses.
Operating margin expanded 40 bps on a year-over-year basis to 30%.
Apple’s Balance Sheet Remains Strong
As of June 28, 2025, cash & marketable securities were $132.99 billion compared with term debt of $91.78 billion. Apple had cash & marketable securities worth $132.92 billion compared with term debt of $92.2 billion as of March 29, 2025.
Including commercial paper of $9.92 billion, total debt was $101.7 billion as of June 28.
Apple returned nearly $27 billion in the reported quarter through dividend payouts ($3.9 billion) and share repurchases ($21 billion).
Apple’s Q4 Revenues to Grow Amid Tariff Headwinds
Apple expects the September quarter’s (fourth-quarter fiscal 2025) net sales to grow mid to high single digits on a year-over-year basis. The company expects the Services year-over-year growth rate to be similar to that of the June quarter.
Gross margin is expected to be 46-47% in the fourth quarter of fiscal 2025, including a tariff impact of $$1.1 billion. Operating expenses are expected to be between $15.6 billion and $15.8 billion.
Apple plans to spend $500 billion in the United States over the next four years and expects to source 19 billion chips during calendar year 2025.
The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is pegged at $96.43 billion, suggesting 1.58% growth over the figure reported in the year-ago quarter. The consensus mark for fourth-quarter fiscal 2025 earnings is pegged at $1.61 per share, indicating a 1.83% year-over-year decline.
Zacks Rank & Stocks to Consider
Currently, Apple carries a Zacks Rank #3 (Hold).
Arista Networks (ANET - Free Report) , Bumble (BMBL - Free Report) and DoorDash (DASH - Free Report) are top-ranked stocks in the broader Zacks Computer & Technology sector. Each of the three stocks sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks is scheduled to report its second-quarter 2025 results on Aug. 5. Both Bumble and DoorDash are scheduled to report their respective second-quarter 2025 results on Aug. 6.
In terms of share price movement, DoorDash and Arista Networks have returned 48.5% and 11.5%, respectively, year to date. Bumble shares have dropped 4.5% over the same timeframe.