Apple sets revenue records, but the market remains cautious: a breakdown of the quarterly report.
Apple Corporation presented its financial results for the June quarter, which formally beat Wall Street expectations for profit and revenue. However, behind the facade of record numbers lie alarming signals: a slowdown in the services segment and weakness in the key Chinese market. Investors, after picking the report apart, responded by sending shares lower in after-hours trading.
Revenue for the period ending June 27 reached $109.42 billion, showing 16% year-over-year growth. Diluted earnings per share jumped 29% to $2.02, notably above the consensus estimate of $1.89. The main driver was the Mac segment, which brought in $10.35 billion — 29% more than last year's result and significantly exceeding analysts' expectations of $8.7 billion.
iPhone sales also pleased: growth of 22% to $54.25 billion. At the same time, the company recorded double-digit growth in all geographic regions, and the installed base of active devices hit an all-time high. Tim Cook, commenting on the results, called this quarter the strongest June period in the company's history.
Tariff refunds distort the picture
However, upon closer inspection, the quality of these results raises questions. Gross margin rose to 50.1%, but about two percentage points and $0.11 per share were provided by one-time import tariff refunds. These funds are tied to a U.S. Supreme Court decision that struck down the global tariff regime. Without this factor, the report would have looked much more modest, and such an effect is unlikely to repeat in the coming quarters.
The services segment, long considered the main growth driver, showed only 12% growth to $30.74 billion, falling short of the expected $31.2 billion. The company cites the negative impact of currency exchange rates. Sales in Greater China rose 22% to $18.82 billion, but here too, analysts had expected a higher result given Apple's recent strengthening market position.
The market chooses caution
Shares closed Thursday at $338.43, down 0.56%, and collapsed to $317.66 in after-hours trading. Market capitalization stands at about $4.97 trillion — just below the psychologically important $5 trillion level the company approached last week.
The July rally was a serious test for Apple: over the month, shares gained about 15%, and the week of earnings reports from the largest corporations heated expectations above standard forecasts. A number of analysts, including Dan Niles, had warned in advance about the risk of overvaluation. Weak services segment figures only reinforced these concerns.
This report was the last for Tim Cook as CEO — from September 1, he will be replaced by John Ternus. The leadership change coincides with a challenging September period: memory supply constraints and a recent rise in iron prices create additional challenges. The market is now closely watching not so much the final numbers as management's guidance: will Apple announce a resumption of services growth, or will the current quarter turn out to be the peak of the cycle?
My view: The formal beat of expectations should not be misleading — earnings quality leaves much to be desired due to one-time factors. Combined with the CEO transition and macroeconomic uncertainty, this creates an elevated risk of correction. Investors should wait for clear signals from the new leadership about the services segment growth strategy before adding to positions.