---
title: "Apple's iPhone Revenue Rose 22% Last Quarter, Slightly Beating Expectations, but Services and China Performance Lagged, Warning of Supply Shortage Impact | Earnings Insights"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/294424310.md"
description: "In the third fiscal quarter, Apple's total revenue increased 16% year-over-year, slightly above analyst expectations, while EPS rose 29% year-over-year to a new high for the period. However, the beat was primarily driven by U.S. government tariff rebates. Mac revenue exceeded expectations by 20%, while iPad revenue missed by 10%. Services revenue grew 12% year-over-year but declined slightly quarter-over-quarter, falling nearly 2% short of expectations. Revenue growth in Greater China slowed more than expected to 22%. Operating cash flow hit a new record high for the period, with a cash dividend of $0.27 per share"
datetime: "2026-07-30T22:41:35.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/294424310.md)
  - [en](https://longbridge.com/en/news/294424310.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/294424310.md)
---

# Apple's iPhone Revenue Rose 22% Last Quarter, Slightly Beating Expectations, but Services and China Performance Lagged, Warning of Supply Shortage Impact | Earnings Insights

Apple's overall revenue and earnings, as well as sales growth of its flagship iPhone, were stronger than Wall Street expectations in the last fiscal quarter. However, performance in its services business and the key Chinese market fell short of expectations. Executives also hinted that supply shortages of components such as memory chips would hurt company revenue more than anticipated.

On Thursday, July 30 (U.S. Eastern Time), Apple announced that for its third fiscal quarter ended June 27, 2026, revenue grew approximately 16% year-over-year to $109.42 billion, slightly higher than analyst expectations. Earnings per share (EPS) increased about 29% year-over-year to $2.02, nearly 7% above analyst expectations. Apple Chief Financial Officer (CFO) Kevan Parekh stated that both EPS and operating cash flow for the third fiscal quarter reached new historical highs for the same period.

By business segment, Apple's hardware products generally outperformed expectations. In particular, Mac revenue was about 20% higher than analyst expectations, and iPhone revenue grew nearly 22% year-over-year, slightly beating expectations. However, iPad revenue was about 10% below expectations, while wearables largely met expectations. Apple CEO Tim Cook stated that Apple achieved its strongest June-quarter performance in company history, with double-digit revenue growth in iPhone, Mac, services, and all geographic markets.

Services revenue, which contributes nearly 30% of Apple's total revenue, grew 12% year-over-year to $30.74 billion, falling nearly 2% short of analyst expectations. The year-over-year growth rate slowed from 16% in the previous fiscal quarter, and it decreased by nearly 0.8% quarter-over-quarter, ending a streak of more than three years of setting new quarterly records for services revenue. This underperformance has a greater impact on Apple's valuation logic, as the services business is viewed by the market as a high-margin, stable growth engine.

In terms of regional markets, in the closely watched Greater China region, Apple recorded revenue of $18.82 billion, nearly 4% below analyst expectations. Year-over-year growth slowed to 22%, failing to remain roughly flat with the previous fiscal quarter as expected. Apple's lower-than-expected revenue in China, the world's largest smartphone market, may reignite market concerns regarding iPhone demand, local competition, and the sustainability of growth.

Market performance showed that Apple's earnings report, which superficially beat expectations, failed to impress investors. Before the earnings release, Apple's stock closed down 1.4% during regular trading hours. After the report, the decline widened in after-hours trading, dropping over 4%.

Subsequently, during the earnings conference call, Apple provided fourth-fiscal-quarter revenue guidance of 9%-11% growth, which was overall below the analyst expectation of 12.1%. CFO Parekh stated that component supply constraints would affect iPhone, Mac, and iPad businesses in the fourth fiscal quarter, and exchange rate fluctuations were also constraining growth. The company's stock accelerated its decline, dropping over 8% in after-hours trading at one point.

Analysts believe that the accelerated stock price decline was influenced by multiple factors: The EPS beat was mainly due to one-time benefits rather than a comprehensive acceleration in core business; excluding the impact of U.S. government tariff rebates, EPS was only slightly above expectations. Underperformance in the high-margin services business directly affected market confidence in profit margins and long-term growth. Weaker revenue in Greater China also indicated that the market's previous judgment on the recovery of Chinese demand was overly optimistic. Apple mentioned in the conference call that foreign exchange and supply constraints would drag down revenue, suggesting that the strong hardware performance last quarter may not smoothly continue into this quarter.

## Total Revenue Slightly Beats Expectations, Limited Surprise

Apple's third-fiscal-quarter revenue was $109.42 billion, about $570 million higher than market expectations, representing a beat of only about 0.5%. Although total revenue was stronger than expected, the margin was not significant. Quarterly revenue grew nearly 16.4% year-over-year, almost flat compared to the previous fiscal quarter, and slightly above the midpoint of Apple's own growth guidance range of 14%-17%.

Structurally, third-fiscal-quarter revenue was mainly supported by the product side:

-   Product revenue was $78.68 billion, higher than the expected $77.25 billion;
-   Services revenue was $30.74 billion, lower than the expected $31.36 billion.

In other words, Apple's revenue beat last quarter was not driven by the services business but relied more on the performance of hardware product lines. This is crucial for Apple: In recent years, the market has been willing to give Apple a higher valuation largely because of the increasing proportion of services business, stable cash flow, and higher profit margins. If the revenue beat comes mainly from hardware while the services business misses expectations, investors will naturally discount the quality of earnings.

## EPS Beat Mainly Due to Tariff Rebates; Dividends Maintain Shareholder Returns but Cannot Offset Growth Concerns

Apple's third-fiscal-quarter EPS was $2.02, higher than the market expectation of $1.89. On the surface, it exceeded expectations by $0.13, or about 6.9%.

However, it is particularly noteworthy in the earnings report that the EPS included a $0.11 positive effect from Trump-era tariff rebates. In other words, excluding this one-time factor, Apple's third-fiscal-quarter EPS was approximately $1.91, only $0.02 higher than market expectations.

This is also one of the important reasons for the post-market stock price decline: The market does not deny Apple's strong profitability, and even the company announced that EPS and operating cash flow hit historical highs. However, investors are more concerned about how much of these earnings come from sustainable operations. If the majority of the EPS beat comes from one-time tax rebates rather than revenue acceleration, margin expansion, or strong growth in the services business, the stock price reaction will be negative.

When announcing the earnings, Apple's board of directors declared a cash dividend of $0.27 per share. Combined with the company's statement that operating cash flow hit a historical high, Apple's cash generation capability remains strong, and its ability to return value to shareholders has not changed.

However, for the current stock price, dividends are not the decisive factor. Apple investors are more concerned with medium-to-long-term variables such as the iPhone replacement cycle, services business growth rate, demand in the China region, and the implementation of AI-related products.

Although this earnings report shows that the company's fundamentals are solid, it did not fully alleviate these concerns.

## Overall Product Revenue Stronger Than Expected, Mac Is the Biggest Surprise, iPad Clearly Drags Behind

From a revenue structure perspective, Apple's third-fiscal-quarter product revenue was $78.68 billion, higher than the analyst expectation of $77.25 billion, making it the main source of the quarterly revenue beat.

By category:

Business

Third Fiscal Quarter Revenue

Analyst Expectation

Performance

iPhone

$54.25 billion

$53.6 billion

Beat expectations

Mac

$10.35 billion

$8.62 billion

Significantly beat expectations

iPad

$6.19 billion

$6.89 billion

Clearly missed expectations

Wearables, Home, and Accessories

$7.88 billion

$7.87 billion

Largely met expectations

Total Products

$78.68 billion

$77.25 billion

Beat expectations

iPhone remains Apple's core revenue source, contributing $54.25 billion in the third fiscal quarter, accounting for nearly half of total revenue. It was only 1.2% higher than expectations, and its performance was more like "stabilizing the basics." Mac was the biggest surprise, with revenue of $10.35 billion, $1.73 billion higher than expectations, a beat of about 20%, becoming the key to offsetting weakness in other businesses.

In contrast, iPad revenue was $6.19 billion, about $700 million lower than market expectations, indicating that demand or the update cycle for the tablet business remains unstable. Wearables, home, and accessories businesses largely met expectations, lacking significant incremental growth.

This contrasts with the comprehensive growth in Apple's second fiscal quarter. In the second fiscal quarter, iPhone revenue grew 22% year-over-year, Mac grew 6%, iPad grew 8%, and wearables, home, and accessories grew 5%. By the third fiscal quarter, the growth structure began to diverge more: iPhone and Mac supported the overall performance, but iPad lagged behind, meaning the product side was not comprehensively strong.

## Services Revenue Hits New High but Misses Expectations, the Most Sensitive Deduction Point for Valuation

Apple's third-fiscal-quarter services revenue was $30.74 billion, lower than the analyst expectation of $31.36 billion, a gap of about $620 million. Although the company announced that the services business continued to set records, the market is more concerned that the high-margin business did not meet expectations.

The services business includes the App Store, Apple Music, iCloud, AppleCare, payments, and advertising, and has been an important source of Apple's valuation re-rating in recent years. Compared to the hardware business, services revenue usually has higher gross margins, stronger repurchase attributes, and more stable cash flow, so the market has higher requirements for its growth rate.

In the second fiscal quarter, Apple's services business revenue grew 16.3% year-over-year, an important factor supporting profits and valuation. Although the absolute scale of services revenue in the third fiscal quarter remained high, missing expectations means that the market's previous assumption of sustained high growth in the services business has been challenged.

This is also one of the important reasons why Apple's stock price did not rise after hours despite beating revenue and EPS expectations: If the beat mainly comes from hardware, especially the more cyclical Mac, while the services side misses expectations, investors will lower their judgments on future profit margins and valuation centers.

## Greater China Revenue Misses Expectations, Recovery Slope Lower Than Market Imagination

Greater China's third-fiscal-quarter revenue was $18.82 billion, lower than the analyst expectation of $19.58 billion, about $760 million below expectations, a difference of about 3.9%.

This data received particular attention. In the second fiscal quarter, Apple's Greater China revenue grew 28.1% year-over-year. Although this slowed from the nearly 38% growth in the first fiscal quarter, it still showed significant recovery. At that time, Apple also recorded double-digit growth in the Americas, Europe, Japan, and the Asia-Pacific region excluding China and Japan, with Greater China seen as an important source of flexibility for the company's global growth.

However, Greater China missed market expectations in the third fiscal quarter, indicating that the "strong recovery in the China region" previously bet on by investors was not fully realized. Analysts expected the revenue growth rate in this market to slow slightly to 27.4%, while Apple actually recorded a revenue growth rate of 22.4%.

In the Chinese market, Apple faces multiple factors such as competition from local high-end smartphone manufacturers, pressure from price promotions, and fluctuations in the replacement cycle. For a company with total revenue exceeding $100 billion, the $760 million shortfall in the China region is enough to offset a considerable portion of the positive surprises from other businesses.

More importantly, Greater China not only affects short-term revenue but also influences the market's judgment on the resilience of global iPhone demand. If the growth slope in the China region slows, the upside potential for Apple's iPhone cycle in the coming quarters will be reassessed.

## Fourth Fiscal Quarter Guidance Below Expectations, Supply Constraints and Exchange Rates Become New Pressures

What truly triggered the widening post-market decline was the fourth-fiscal-quarter guidance during the earnings conference call.

Apple management expects that the company's fourth fiscal quarter, i.e., the current fiscal quarter, revenue will grow by 9%-11%. This guidance range is overall below the analyst expectation of 12.1%. In other words, even taking the upper end of the range at 11%, it is still below market consensus expectations.

Management also pointed out that total revenue in the fourth fiscal quarter will be dragged down by two major factors: foreign exchange and supply constraints. Among them, iPhone revenue will be affected by supply constraints, with growth expected to fall in the mid-teens, meaning a growth range in the mid-double digits. Mac and iPad products will also suffer from supply chain shocks.

This had a significant negative impact on market sentiment. The reason is that Apple's iPhone and Mac just delivered performance stronger than expectations in the third fiscal quarter, and investors might have expected this momentum to continue into the fourth fiscal quarter. However, management now explicitly warns of supply constraints, which means that even if terminal demand exists, Apple may not be able to fully convert it into shipments and revenue for the quarter.

For a high-valuation, high-expectation company like Apple, supply constraints bring not just a simple "delay in demand," but require analysts to downgrade revenue pacing, gross margin assumptions, and short-term earnings forecasts in their models.

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