Apple’s June quarter revenue grew 10% y/y vs. the Street at 4%, the fastest pace since December of 2021. Cook noted that about 1% of the 10% increase was due to customers pulling forward purchases ahead of potential US tariffs. Even excluding that tariff related bump and what I estimate to be a similar 1% tailwind from new China government subsidies on low end phones, underlying revenue growth was still approximately 8%, well above the 4% consensus.

Greater China returned to growth, up 4% from a year ago after a 2.3% decline in the March quarter and 11% decline in December. As mentioned, China results benefited from government device subsidies.

iPhone revenue was up 13% vs. expectations calling for 2% growth. Services revenue was up 13%, in line with last quarter and expectations. Together, these two segments now account for 70% of total revenue.

Cook downplayed recent regulatory concerns, saying that changes to App Store policies and uncertainty around Apple’s search partnership with Google have had no material impact on results so far. As evidence, the US App Store (I estimate accounts for 17% of Services revenue) grew double digits and hit a record in the quarter despite new payment options being enabled.

The bottom line is the June quarter results demonstrated how loyal Apple’s customers are.

The September guide came in well above expectations with revenue expected to be in the “mid to high single digits,” which I would zero in on as 8% growth. The Street was looking for 3% growth. In my view, this is the best guidance Apple has given in 3 years.

Specifically, they expect Services will grow at a similar 13% rate as in the June quarter. Gross margin is projected at 46 to 47, which includes the estimated impact of the $1.1 billion tariff related costs. The average gross margin over the past year has been 46.2%, suggesting that even with the tariff headwind, margins will perform above recent averages in September. Without this cost, margins would be even higher.

The outlook assumes current global tariff policies and that the Google search revenue sharing deal remains in place, both assumptions that I believe are reasonable.

Despite Apple’s across the board beat and upbeat guidance, the stock reaction was muted. AAPL was up 2% in after hours. The reaction highlights what we have known for six months, that investor skepticism about Apple will hit a tariff, regulator, AI induced wall in the next year. From my view, this is the widest gap between fundamentals and shares that I have seen in years of following the company.

Year to date, AAPL had been the worst performer among the Mag 7, down roughly 14% YTD (Nasdaq up 10%) before these earnings. Short interest has also climbed to about 0.7% of the float, making it one of the most heavily shorted large cap stocks by dollar value.

The good news is the skepticism means the bar is low. For now, Apple remains a “show me” story. I believe if they deliver on my expectation of 7% plus top line growth in FY26, compared to the Street at 6%, the multiple will slowly get rerated.

We didn’t get much new on the AI front. Cook reiterated that Apple views AI and machine learning as “one of the most profound technologies of our lifetime” and the company’s approach to AI, building features that are personal, private, and integrated into products, rather than launching standalone apps.

What was incremental is that he reiterated that AI is all about the new Siri, which reading between the lines tells investors not to expect anything meaningful on the topic until WWDC in June of 2026.

One small update was on the capex front, with guidance calling for significant growth due to AI, but it “is not going to be exponential.” My read is they’ll step up capex to $12–$14B a year from around $11B recently, still well behind the rest of the Mag 7 that are spending nearly $75B a year on average. My sense is if the company guided to capex doubling over the next year, shares would trade higher.

As for M&A for AI, Cook stated Apple is “very open to M&A that accelerates its roadmap” and is “not stuck on a certain size” of deal. I have heard similar commentary in the past when the company is asked about M&A, specifically when they were rumored to be looking to buy a studio years ago. That said, his comments taken in the context of what is at stake for the company when it comes to nailing the next Siri lead me to believe the odds of them doing something big in the next six months are in the 30 to 50% range.

The obvious company is of course Perplexity. The rationale is that its tools would help Apple build on top of third party LLMs and separately it would reduce its heavy reliance on Google for search. Additionally, Perplexity would help add agentic features into Siri. The one setback to my optimism on the deal is that Perplexity just raised money in July. If a deal was in the works, I think Apple would have stepped in before a new mark up.

Disclaimer