Apple Beats Revenue Estimates but iPhone Sales Miss; Ternus Transition Takes Focus

Key facts

• fiscal Q2 revenue of $111.18 billion, above the $109.66 billion estimate.
• iPhone revenue was $56.99 billion, missing the $57.21 billion consensus.
• Services revenue hit $30.98 billion, topping the $30.39 billion forecast.
• Gross margin reached 49.3%, exceeding the expected 48.4%.
• Tim Cook will step down as CEO on Sept. 1, succeeded by John Ternus.
• Apple shares rose about 3% in extended trading after the report.
• Apple's stock is up less than 1% in 2026, underperforming the Nasdaq 100's 8.3% gain.

Revenue Beat Masks iPhone Miss as Transition Looms

fiscal second-quarter revenue of $111.18 billion, surpassing analyst expectations of $109.66 billion, even as iPhone sales fell short of estimates for the second time in three quarters. The results, released Thursday, mark the company's first earnings report since the announcement that Tim Cook will step down as chief executive on Sept. 1. Investors, however, are largely looking past the quarterly numbers and focusing on the incoming CEO, John Ternus, currently head of hardware infrastructure. The earnings call represents the first significant opportunity for Wall Street to gauge Ternus's strategic priorities, though it remains unclear whether he will appear on the call. A company spokesperson declined to comment on his participation. "It isn't really about the numbers," said Anthony Saglimbene, chief market strategist at Ameriprise. "We want to know what the CEO transition looks like."

Services Strength and Margin Expansion Offset iPhone Weakness

Apple's services business posted revenue of $30.98 billion, beating the $30.39 billion estimate and helping drive the company's gross margin to 49.3%, above the 48.4% consensus. The services segment has become an increasingly important profit driver as iPhone sales growth moderates. Other hardware categories performed well: Mac revenue reached $8.4 billion versus $8.02 billion expected, iPad revenue came in at $6.91 billion against $6.66 billion, and wearables, home and accessories generated $7.9 billion, topping the $7.7 billion forecast. The only significant miss was the iPhone, which brought in $56.99 billion compared to the $57.21 billion analysts had predicted.

Ternus Takes Helm at a Complex Moment for Apple

John Ternus is assuming leadership at a time when Apple faces a confluence of challenges and opportunities. The company is expected to debut several major products in the coming months, including a foldable iPhone, but it is also grappling with skyrocketing costs for key components such as memory chips. A volatile macroeconomic backdrop, driven by the war in Iran and rapid advances in artificial intelligence, has created winners and losers across the stock market. "Investors have reason to be excited about Ternus since he was an overseer of some of Apple's most successful recent products, but his strategy will be a long-term story," said David Wagner, portfolio manager at Aptus Capital Advisors, which manages about US$14 billion in assets and holds Apple in various portfolios. "In the short term, the impact of component costs will be the focal point."

Apple's Stock Lags Tech Peers Amid AI Uncertainty

Apple shares have risen less than 1% in 2026, following a relatively disappointing 8.6% gain in 2025. By contrast, the technology-heavy Nasdaq 100 Index has advanced 8.3% this year, and the S&P 500 has gained 4.9%. Apple's stock was up 1.2% on Thursday afternoon before the earnings release. The company is accelerating development of AI-powered hardware and features but has experienced delays with its own artificial intelligence products. Unlike its megacap peers—Alphabet, Amazon, Meta, and Microsoft—Apple has not invested tens of billions of dollars in AI infrastructure, which has reduced the stock's correlation with the broader tech sector. Earnings from those four companies on Wednesday offered a mixed picture: Meta shares fell after raising its 2026 capital expenditure forecast, while Alphabet's stock rose on strong cloud computing growth, suggesting its AI investments are beginning to pay off.

Outlook and Guidance Signal Confidence Despite Headwinds

Apple issued a better-than-expected revenue forecast for the current quarter, providing a vote of confidence in its growth trajectory. The company's ability to beat on both sales and earnings in the fiscal second quarter, despite the iPhone miss, underscores the resilience of its diversified business model. However, the transition to a new CEO introduces uncertainty. Ternus's background in hardware infrastructure suggests he may prioritize product innovation and supply chain management, but his strategic vision for Apple's role in the AI era remains largely unknown. The coming months will be critical as the company navigates component cost pressures, geopolitical risks, and the need to deliver on its AI promises without the massive spending seen elsewhere in the industry.

The bottom line

• Apple beat overall revenue and earnings estimates but missed iPhone sales expectations for the second time in three quarters.
• Services revenue and gross margin exceeded forecasts, highlighting the growing importance of Apple's non-iPhone businesses.
• CEO Tim Cook will step down on Sept. 1, with John Ternus taking over; investors are eager for clarity on his strategic priorities.
• Apple faces headwinds from rising component costs, geopolitical instability, and AI product delays, while underperforming the broader tech market in 2026.
• Unlike other tech giants, Apple has not made massive AI infrastructure investments, reducing its stock's correlation with the sector.