Apple Revenue Surges 17% to $111bn as iPhone 17 Sets Sales Record, Cook Prepares Exit

Key facts

• Q2 revenue of $111.18bn, beating analyst estimates of $109.66bn.
• iPhone sales of $56.99bn missed expectations of $57.21bn for the second time in three quarters.
• China sales surged 28% year-over-year, outpacing all other regions.
• Services revenue hit $30.98bn, above the $30.39bn forecast, driving gross margin to 49.3%.
• Tim Cook will step down as CEO on 1 September, with hardware chief John Ternus taking over.
• The iPhone 17 is described by Cook as the 'most popular launch in Apple's history'.
• Mac revenue of $8.4bn beat estimates of $8.02bn, boosted by the new low-cost Macbook Neo.
• Apple Intelligence AI features will be updated later this year and integrated into Siri.

Record Quarter Overshadowed by CEO Transition

a 17% jump in quarterly revenue to $111.18bn, topping Wall Street forecasts, even as iPhone sales narrowly missed expectations. The results, released Thursday, mark the company's first financial report since the announcement that Tim Cook will step down as chief executive after 15 years. Cook, who will become chairman on 1 September, told analysts on a conference call that demand for the iPhone 17 had been 'extraordinary', making it the most successful launch in Apple's history. The stock rose about 3% in extended trading after the company issued a better-than-expected revenue forecast for the current period.

China Drives Growth While iPhone Misses Estimates

Sales in China surged 28% compared to the same quarter a year ago, outpacing growth in every other region. Overall iPhone revenue reached $56.99bn, falling short of the $57.21bn analysts had expected — the second miss in three quarters for Apple's flagship product. Despite the shortfall, Cook emphasised the strength of the broader portfolio. Services revenue climbed to $30.98bn, above the $30.39bn consensus, while gross margin expanded to 49.3% from the 48.4% analysts had predicted. The services segment, which includes the App Store, Apple Music, and iCloud, has become a key profit driver.

Macbook Neo Sparks Record Mac Sales

Mac revenue of $8.4bn beat the $8.02bn estimate, propelled by the newly launched Macbook Neo. Cook described demand for the lower-priced laptop as 'off the charts', noting that the quarter set a record for new Mac buyers. iPad revenue also exceeded expectations at $6.91bn versus $6.66bn, while wearables, home and accessories brought in $7.9bn, slightly above the $7.7bn forecast. Sales of other products, including the Mac computer and the Apple Watch, remained relatively flat, underscoring the uneven nature of Apple's hardware performance.

Cook's AI Strategy: Privacy-First Partnerships

Cook outlined Apple's distinctive approach to artificial intelligence, which relies on partnerships rather than building its own large language model. Apple Intelligence, the company's AI product, will be updated later this year and integrated into the Siri voice assistant. 'This is not AI as a standalone feature, but AI as an essential and intuitive part of our devices,' Cook said. He stressed that Apple's AI features are designed to be 'respectful of user privacy', positioning the company's platforms as 'the best places to experience AI'. By collaborating with OpenAI and Google rather than investing hundreds of billions in proprietary AI models, Apple has limited its exposure to potential losses if the current AI boom fails to meet expectations.

John Ternus Takes the Helm in September

Cook used the earnings call to praise his successor, John Ternus, the longtime hardware executive who will become CEO on 1 September. 'I know he will push us to go further than we think is possible in order to deliver products for our users,' Cook said. Ternus, who spoke briefly to analysts for the first time, pledged to maintain Cook's financial 'discipline' and hinted at future product roll-outs. The transition marks a pivotal moment for Apple as it navigates a maturing smartphone market and the integration of AI across its ecosystem.

Outlook: Services Strength and AI Integration

Apple's better-than-expected revenue forecast for the current quarter suggests confidence in sustained demand, particularly from services and the new Macbook Neo. The company's ability to beat earnings estimates despite an iPhone miss highlights the growing importance of recurring revenue streams. As Cook prepares to hand over the reins, the company faces the challenge of maintaining its innovation edge while preserving the financial discipline that has defined his tenure. The integration of AI into core products, coupled with the iPhone 17's record performance, provides a strong foundation for Ternus to build upon.

The bottom line

• Apple's Q2 revenue of $111.18bn beat estimates, driven by services and China growth, though iPhone sales missed for the second time in three quarters.
• Tim Cook will step down as CEO on 1 September, succeeded by hardware chief John Ternus, who vows to continue fiscal discipline.
• The iPhone 17 set a record as the most popular launch in Apple's history, with China sales up 28% year-over-year.
• Apple's AI strategy relies on partnerships with OpenAI and Google, prioritising privacy and limiting financial risk.
• The new Macbook Neo spurred record Mac sales, while services revenue hit $30.98bn, boosting gross margin to 49.3%.
• Apple issued a better-than-expected revenue forecast for the current period, signalling confidence in its product pipeline.