Apple revenue, profits beat expectations on iPhone sales but services miss targets

Apple reported quarterly results that topped Wall Street expectations on both the top and bottom lines, with iPhone sales outperforming forecasts. However, the Services segment — which includes App Store, iCloud, Apple Music, and other subscription revenue — missed targets, a notable wrinkle given how central Services has become to Apple's margin profile and growth narrative in recent years.

For context on the broader business, Apple's fiscal 2025 SEC filings show full-year revenue of $416.2 billion, up 6.4% year over year, with a 46.9% gross margin and 26.9% net margin, and diluted EPS of $7.46. Those figures underscore how profitable the overall business remains even as investors parse which segments are driving growth versus lagging.

The beat on iPhone sales matters because it suggests demand held up despite concerns about a maturing smartphone upgrade cycle and competitive pressure in key markets like China. The Services miss matters for a different reason: Services carries higher margins than hardware, and any deceleration raises questions about the durability of Apple's margin mix and its multi-year push to diversify revenue beyond the iPhone.

The second-order setup here is a tension between two narratives — hardware resilience versus Services deceleration — that will likely dominate post-earnings commentary and analyst revisions. Investors will be watching management commentary on guidance, any color on Services growth drivers (App Store, subscriptions, advertising), and whether the iPhone strength is sustainable or a pull-forward, as the stock's near-term reaction plays out against a backdrop of already-elevated expectations for Apple's stock.