Apple Beats Revenue Forecasts but iPhone Sales Miss Estimates as Cook Era Nears End

Key facts

• 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%.
• The stock rose about 3% in extended trading after the report.
• since the announcement that Tim Cook will step down as CEO.
• iPhone sales missed estimates for the second time in three quarters.

A Quarter of Contrasts: Revenue Soars as iPhone Stumbles

Apple delivered a fiscal second-quarter revenue of $111.18 billion, surpassing analyst expectations of $109.66 billion and marking a 17% year-over-year increase. The performance was driven by robust growth in the company's services business, which generated $30.98 billion against a forecast of $30.39 billion, and a gross margin of 49.3% that beat the 48.4% estimate. Yet the headline number masked a persistent weakness in Apple's flagship product. iPhone revenue came in at $56.99 billion, below the $57.21 billion that Wall Street had anticipated. This marks the second miss in three quarters for the device that still accounts for more than half of the company's total sales. The mixed results landed as Apple faces a historic transition: the first earnings report since the announcement that chief executive Tim Cook will step down. The stock nonetheless rose about 3% in extended trading, buoyed by a better-than-expected revenue forecast for the current period.

Services Take the Lead as iPhone Growth Falters

The services segment, which includes the App Store, Apple Music, iCloud, and Apple Pay, outperformed on both the top and bottom lines. Revenue of $30.98 billion exceeded the $30.39 billion consensus, helping push overall gross margin to 49.3% — well above the 48.4% analysts had modeled. This marks a continuation of Apple's strategic shift toward recurring revenue streams. Services now contribute nearly 28% of total revenue, up from 25% a year ago, and carry significantly higher margins than hardware sales. The iPhone miss, by contrast, underscores a maturing smartphone market and intensifying competition. While the $56.99 billion in iPhone revenue still represents a substantial sum, the shortfall suggests that consumers may be holding out for the next generation of devices — or turning to rivals.

Other Hardware Lines Beat Estimates Across the Board

Beyond the iPhone, Apple's other hardware categories all exceeded expectations. Mac revenue reached $8.4 billion, topping the $8.02 billion estimate. iPad sales generated $6.91 billion, above the $6.66 billion forecast. The Wearables, Home and Accessories category — which includes the Apple Watch, AirPods, and HomePod — brought in $7.9 billion, beating the $7.7 billion consensus. These results suggest that Apple's broader ecosystem remains healthy, even as its most important product faces headwinds. The company's ability to beat on nearly every other line item helped offset the iPhone disappointment and contributed to the positive market reaction.

Cook's Swan Song: A Transition Under Scrutiny

was the first since the announcement that Tim Cook will step down as chief executive, ending a tenure that began in 2011. While the company did not provide a timeline for the succession, the transition adds a layer of uncertainty to Apple's outlook. Cook has overseen a dramatic expansion of Apple's services business and a near-tripling of the company's market capitalization. However, the iPhone's recent sales misses — two in the past three quarters — raise questions about whether the next generation of leadership can sustain the growth trajectory. The company did not comment on the succession process during the earnings call, but analysts will be watching closely for any hints about the future direction.

Outlook Brightens Despite iPhone Concerns

Apple issued a revenue forecast for the current quarter that exceeded analyst expectations, helping to lift the stock in after-hours trading. The company did not provide specific figures, but the guidance suggests confidence in the services momentum and the upcoming product cycle. Investors will now look to the next iPhone launch — widely expected to be the iPhone 17 — as a catalyst for renewed growth. The device is rumored to feature significant design and camera upgrades, which could reignite demand. For now, Apple's ability to beat on overall revenue and margins while missing on its core product illustrates the balancing act the company faces: diversifying away from the iPhone without losing its most important profit engine.

The bottom line

• Apple beat overall revenue and earnings estimates, driven by services and a 49.3% gross margin.
• iPhone sales missed expectations for the second time in three quarters, signaling a potential slowdown.
• Services revenue hit $30.98 billion, outperforming forecasts and boosting profitability.
• All other hardware categories — Mac, iPad, Wearables — exceeded analyst estimates.
• The stock rose 3% in after-hours trading on a better-than-expected revenue forecast.
• since the announcement that Tim Cook will step down as CEO.