Apple Q3 2026: Strong iPhone demand amid services moderation

Apple delivered a solid overall quarter with mid-teens growth. The company’s solid products revenue growth was led by iPhone and Mac as demand was higher than expected and led to supply constraints alongside forecast challenge. Services revenue growth moderated relative to products.

Apple posted a June quarter revenue record despite supply constraints and foreign exchange headwinds. Most emerging markets recorded double-digit growth. The growth in products revenue was driven by double-digit growth in iPhone and Mac. The number of active Apple devices globally surpassed 2.5 billion during the quarter.

The overall gross margin increased from 49.3% in Q2 2026 to 50.1% in Q3 2026, driven by about 2% of tariff refunds. Products gross margin increased from 38.7% to 40.1% over the same period, driven by over 2.5% of tariff refunds. Services gross margin declined from 76.7% to 75.6%, caused by a different mix.

As part of its US$600 billion commitment to invest in American supply chain, Apple is expected to spend US$30 billion to partner with Broadcom to design and manufacture custom silicon components as well as wireless connectivity technologies.

Apple ended the quarter with US$146.5 billion in cash and marketable securities as well as US$84.3 billion in term debt and commercial paper. Management returned US$33 billion to shareholders, primarily through US$25.8 billion in share repurchases and US$4 billion in dividend payments. Management also announced a cash dividend per share of US$0.27.

Revenue in the September quarter is expected to grow between 9% and 11% year-on-year despite foreign exchange headwinds. iPhone revenue is anticipated to grow in the mid-teens, even as the company faces more significant supply constraints, particularly across the iPhone, Mac, and iPad. Services revenue is expected to grow in the low teens. Overall gross margin is projected to range between 47% and 48%, supported by approximately one percentage point from tariff refunds and a favourable product mix.

Products

In Q3 2026:

• iPhone revenue grew 21.7% year-on-year to US$54.3 billion (June quarter record), driven by the iPhone 17 lineups.
• Mac revenue increased 28.7% year-on-year to US$10.4 billion (June quarter record), driven by demand for MacBook Pro and MacBook Neo across Latin America, India, and Southeast Asia amid supply constraints.
• iPad revenue declined 5.9% year-on-year to US$6.2 billion, despite sales being led by the iPad Air, iPad Pro, and iPad Mini amid a difficult comparison against the A16-powered iPad launch in Q3 2025.
• Revenue for Wearables, home, and accessories increased 6.5% year-on-year to US$7.9 billion, driven by Apple Watch and AirPods lineups.

Product demand remained robust as the number of active iPhone, iPad, and wearables users reached record highs in Q3 2026. The number of iPhone and Apple Watch upgraders set a June quarter record. iPhone and Mac gained global market shares according to IDC. According to Worldpanel, iPhone was the top-selling smartphone across the U.S., urban China, the U.K., France, Australia, and Japan.

Mac was well-received in Greater China and posted a record-high revenue in the region during the quarter. The number of upgraders and customers new to Mac reached record highs. The supply constraint on Mac during the quarter, which was less prominent for iPhone and iPad, was primarily driven by limited availability of the semiconductor nodes powering its Systems on a chips (SoCs). Outgoing CEO Tim Cook added that the situation stems from an unexpected demand forecast challenge because both iPhone and Mac performed better than projected.

More than half of the customers who bought an iPad or an Apple Watch were new to the products.

Services

Services revenue grew by double digits across most regions, driven by broad-based growth and records across multiple categories. Paid subscriptions surpassed 1.5 billion, while transacting and paid accounts in emerging markets grew by double digits to reach all-time highs in Q3 2026.

Key analyst questions

Memory prices have risen sequentially since December 2025 and are foreseen to grow further in the September quarter. To respond, management has increased iPad and Mac prices and will partially offset rising costs through existing inventory mostly until the September quarter. Meanwhile, selected non-memory component prices are expected to decline.

An analyst highlighted the sequential decline in services growth from 16.3% in Q2 2026 to 12.1% in Q3 2026. CFO Kevin Parekh attributed the decline to the absence of a major theatrical film release compared to the previous June and September quarters that benefited from the F1 release.

Revenue from the App Store delivered a June quarter record despite mobile gaming headwinds and business model changes in selected countries.

Apple partnered with Klarna to launch Apple Upgrade in the U.S. The new financing and leasing programme allows users to acquire devices in instalments, leveraging Apple’s higher residual device value to drive future upgrades.

Apple utilises a hybrid infrastructure model combining third-party cloud services with proprietary data centres to support AI capabilities. AI-related investments and infrastructure spending have increased, with future cost implications dependent on adoption and usage of Apple Intelligence features. Potential monetisation opportunities, such as increased demand for higher-tier iCloud services, could help offset these costs, although the overall financial impact remains uncertain.

The fifth perspective

Apple is positioned for continued growth, supported by its large active device install base and ongoing upgrade cycles. The deceleration in Services revenue growth has become a key concern for long-term investors. Analysts are watching closely how this slowdown impacts the company’s future profit margins and long-term monetisation potential.