John Ternus, in the earnings section.
The Apple executive known as the “product guy” released his first earnings report as chief executive on Monday.
“It’s an honor to meet you for the first time as Apple’s CEO,” Ternus said on a conference call with analysts after the results. “This is an incredible moment for Apple. We just completed one of the most prolific launch phases in our history. It’s an extraordinary moment for all of our innovation across all categories,” he added.
Revenue in the third quarter (Apple’s fourth fiscal quarter) was US$114.5 billion, exceeding Wall Street’s expectations of US$113.46 billion. Earnings per share were $2.10, beating analysts’ expectations of $2.
Spoiler alert: Apple continues to sell a lot of iPhones. The segment’s revenue was $57.58 billion, compared with analysts’ expectations of $56.48 billion.
The company’s closely watched gross profit margin was 47.9%. This indicator improved due to tariff refunds.
Chief Financial Officer Kevan Parekh told analysts on a conference call: “If tariff refunds are eliminated for the June and September quarters, company and product gross margins will decline by approximately 1 percentage point sequentially, primarily due to higher memory costs.”
China revenue was $17.54 billion, below analysts’ expectations of $18.75 billion. iPad sales were also light, at $6.23 billion, compared with Wall Street expectations of $6.83 billion. Mac sales of $10.79 billion were more than $1 billion above expectations. Apple’s services business was US$31.57 billion, basically in line with expectations.
Ternus praised the performance of the iPhone and Mac during the earnings call while acknowledging “supply constraints.”
The stock was trading roughly flat hours after the report.
While Apple didn’t release detailed guidance for the holiday quarter, it did provide some information. It forecast operating expenses of $20.4 billion to $20.8 billion, slightly higher than analysts’ estimate of $20.37 billion.
“Greater China revenue was about $1 billion lower than expected; that’s not a rounding error, but a worrying pattern,” Investing.com senior analyst Jesse Cohen said in a report. “Wearables, home and accessories also missed the mark, so the problem isn’t just China, but Apple’s business outside of iPhone isn’t performing as well as it should.”
New CEO, new equipment
Apple CEO John Ternus shows off first touchscreen MacBook Pro Kyle Grillot/Bloomberg via Getty Images
Ternus, who succeeded Tim Cook on September 1, has already taken the stage to announce a number of Apple’s major new products: Apple’s first foldable smartphone iPhone Duo, Apple’s first smart home center Apple HomeView and the first touch screen MacBook Pro.
The iPhone Duo doesn’t go on sale until October, which means it didn’t appear in Apple’s last quarter results. The quarter did include about a few weeks of iPhone 18 Pro sales. Importantly, Apple has yet to announce any non-Pro versions of the new iPhone range, which is expected to be released early next year.
Ternus begins his tenure as CEO at a time when Apple is facing soaring costs for memory – a key component in iPhones, iPads and Macs – and other supply chain constraints that are driving up the price of its hardware.
“The memory pricing we are seeing now is unprecedented,” Ternus told analysts.
While he said price increases across the iPhone and Mac lines will help offset higher component costs, the company expects memory costs to increase during the holiday quarter.