---
title: "Apple conference call: Expected to welcome the strongest iPhone quarter in history, significantly increasing AI research and development investment"
type: "News"
locale: "zh-CN"
url: "https://longbridge.com/zh-CN/news/263638345.md"
description: "Apple's management expects revenue growth of 10-12% in the December quarter, far exceeding expectations, with iPhone achieving double-digit growth, marking the strongest quarter in history. Demand for the iPhone 17 series is strong but supply is limited, and the Chinese market is expected to recover growth. The company has significantly increased its investment in AI research and development, launching the unparalleled M5 chip, and its private cloud computing factory has begun production in Houston"
datetime: "2025-10-31T01:40:41.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/263638345.md)
  - [en](https://longbridge.com/en/news/263638345.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/263638345.md)
---

> 支持的语言: [English](https://longbridge.com/en/news/263638345.md) | [繁體中文](https://longbridge.com/zh-HK/news/263638345.md)


# Apple conference call: Expected to welcome the strongest iPhone quarter in history, significantly increasing AI research and development investment

On Thursday after the U.S. stock market closed, Apple's latest financial report showed that quarterly sales increased by 7.9% to $102.5 billion, slightly above the market expectation of $102.2 billion; earnings per share were $1.85, exceeding the average expectation of $1.77. The services business remains Apple's fastest-growing segment, with revenue increasing by 15% to $28.8 billion, surpassing analysts' expectations of $28.2 billion. Apple's stock price rose more than 4% in after-hours trading.

At the same time, **the launch of the new iPhone helped the company overcome a series of global challenges, including trade tensions, a sluggish Chinese market, and delays in the development of artificial intelligence features; this flagship product remains the company's growth engine**. iPhone sales for the quarter accounted for about half of total revenue, growing by 6.1% year-on-year to $49 billion, benefiting from the release of new models, but slightly below analysts' expectations of $49.3 billion.

In the subsequent conference call, CEO Cook stated that Apple is facing supply constraints, which may suppress growth, but **the constraints are not related to manufacturing capacity, as demand is very strong**. CFO Kevan Parekh stated that revenue for the first fiscal quarter ending in December is expected to grow by 10% to 12%, far exceeding the average analyst expectation of 6%. He said, "**We expect iPhone revenue to achieve double-digit year-on-year growth, which will be our strongest iPhone quarter ever.**"

**Here are the key points from the conference call:**

> **Overall performance and growth:** Today, Apple proudly announced revenue of $102.5 billion, an 8% year-on-year increase, setting a new record for the September quarter; these results also mark the end of an extraordinary year for Apple, during which we achieved a historic revenue record of $416 billion.
> 
> **Outlook for future quarters:** We are incredibly excited about the strong momentum shown by our products and services, and we expect revenue for the December quarter to set the best record in the company's history, with iPhone also achieving the best record ever.
> 
> **iPhone business performance and supply situation:** iPhone set a revenue record for the September quarter, reaching $49 billion, a 6% year-on-year increase, despite facing supply constraints on several iPhone 16 and iPhone 17 models due to strong demand. This constraint is not related to manufacturing capacity itself, but rather our forecast for the number of iPhone 16s to be produced was slightly below actual demand. Regarding the iPhone 17 series, demand is very strong. So, clearly, we have a lot of backlog orders as we end the fourth quarter.
> 
> **Milestone for services business:** The services business set a historic revenue record of $28.8 billion, a 15% year-on-year increase, and this strong momentum drove our total service revenue for the fiscal year to exceed $100 billion, a 14% year-on-year increase, which is our best performance ever
> 
> **China Market Outlook:** Revenue in Greater China declined by 4% year-on-year in the September quarter, primarily due to supply constraints on the iPhone; we are excited about the current situation, with a significant year-on-year increase in foot traffic, and we expect to see a return to growth this quarter (December quarter).
> 
> **Tariff Impact:** The company's gross margin was 47.2%, above the upper limit of our guidance range, with a quarter-on-quarter increase of 70 basis points, thanks to a favorable product mix. This includes approximately $1.1 billion in tariff-related costs, consistent with our estimates from the last conference call. We expect the gross margin for the December quarter to be between 47% and 48%, which includes an estimated impact of $1.4 billion in tariff-related costs.
> 
> **Core AI Strategy:** As we continue to expand our investments in AI, we are integrating intelligence into the products and services that people already love, making every experience more personalized, powerful, and effortless. At the core of all this are Apple chips, and we are excited to launch new products powered by the A19 Pro chip and M5.
> 
> **Apple Intelligence Features:** Through Apple Intelligence, we have launched dozens of powerful, intuitive, privacy-focused, and deeply integrated new features, such as real-time translation capabilities that help users communicate across languages in real-time; and visual intelligence, which opens up new ways to understand and explore the world.
> 
> **Private Cloud Computing Center:** In fact, the factory manufacturing servers for Apple Intelligence just began production in Houston a few weeks ago, and we have a plan to enhance capacity there for our data centers. We did incur capital expenditure costs related to building a private cloud computing environment in our own data centers in 2025.
> 
> **AI Performance Leap of M Series Chips:** We launched the unparalleled M5 chip, with each GPU core equipped with a neural accelerator to significantly enhance AI workflows, such as the latest 14-inch MacBook Pro featuring the new M5 chip, which has AI performance 3.5 times that of the M4.
> 
> **Wearable Devices and Health Innovations:** With the latest Apple Watch product line, we are proud to introduce a hypertension notification feature developed using large-scale machine learning models, and we expect to notify over 1 million users of this life-threatening condition.
> 
> **Operating Expenses and AI R&D Investment:** For the December quarter, we expect operating expenses to be between $18.1 billion and $18.5 billion, with the vast majority of the increase driven by R&D, as we are significantly increasing our investment in AI while continuing to invest in our product roadmap.

**Below is the original text from Apple's conference call, translated with the assistance of AI tools:**

> Apple Q4 FY2025 Earnings Call
> 
> Event Date: October 30, 2025
> 
> Company Name: Apple
> 
> Event Description: Q4 Fiscal Year 2025 Earnings Call
> 
> Source: Apple Inc.
> 
> Earnings Call Presentation
> 
> **Suhasini Chandramouli, Director of Investor Relations:**
> 
> Good afternoon, and welcome to Apple’s Q4 Fiscal Year 2025 earnings call. My name is Suhasini Chandramouli, Director of Investor Relations. Today’s call is being recorded. First to speak today is Apple’s CEO Tim Cook, followed by CFO Kevan Parekh.
> 
> After that, we will open the floor for questions from analysts. Please note that some of the information you will hear today will contain forward-looking statements, including but not limited to statements regarding revenue, gross margin, operating expenses, other income and expenses, taxes, capital allocation, and future business outlook. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecasts, including risks related to macroeconomic conditions, tariffs and other measures, and the potential impact of legal and regulatory proceedings on the company’s business and operating performance.
> 
> For more information, please refer to the risk factors discussed in Apple’s most recent 10-Q and 10-K reports, as well as the 8-K report and press release submitted to the U.S. Securities and Exchange Commission today. Additional information will also be included in our annual report on Form 10-K for the fiscal year ended September 27, 2025, which will be submitted tomorrow, as well as in other reports and documents we file with the U.S. Securities and Exchange Commission. Apple Inc. does not undertake any obligation to update any forward-looking statements, which speak only as of the date they are made.
> 
> Additionally, today’s discussion will include certain non-GAAP financial measures. You can find the reconciliation of these measures in our Q4 earnings release, which is available on our investor relations website. Now I will turn the call over to Tim for opening remarks.
> 
> **Tim Cook, CEO:**
> 
> Thank you, Suhasini. Good afternoon, everyone, and thank you for joining today’s call. Today, Apple is proud to announce revenue of $102.5 billion, an 8% year-over-year increase, setting a new record for the September quarter.
> 
> Our services business achieved an all-time revenue record of $28.8 billion, a 15% year-over-year increase. Earnings per share were $1.85, a record for the September quarter. We saw growth in the vast majority of markets we track, setting September quarter revenue records in dozens of markets, including the United States, Canada, Latin America, Western Europe, the Middle East, Japan, South Korea, and South Asia. We also set September quarter revenue records in emerging markets and achieved an all-time revenue record in India.
> 
> **These results mark the end of an extraordinary year for Apple, during which we achieved a historic revenue record of $416 billion.** We set all-time revenue records in both emerging and developed markets. **We achieved an all-time revenue record for iPhone.** In terms of our services business, we set historical records in every geographic region These achievements reflect the immense enthusiasm of customers for Apple products and services, as well as our deep commitment to innovation.
> 
> We are incredibly excited about the strong momentum demonstrated by our products and services, and we expect revenue for the December quarter to set a record for the company, with the iPhone also achieving its best-ever performance. We are welcoming the holiday season with a truly extraordinary lineup of products.
> 
> This includes the largest leap ever for the iPhone, which has received a tremendous response from users worldwide. Our Apple Watch lineup is also stronger than ever, providing users with unprecedented health management options through new features like hypertension notifications and sleep scoring. The next-generation sound quality and active noise cancellation of AirPods Pro 3 are also loved by users.
> 
> In October, **we also achieved new breakthroughs in energy efficiency performance, launching the unparalleled M5 chip, with each GPU core equipped with a neural accelerator, significantly enhancing AI workflows.**
> 
> The iPad Pro combines revolutionary features on iPadOS 26 with the powerful performance of the M5, creating the most powerful iPad we have ever made. Meanwhile, the M5 MacBook Pro raises the standard for users' laptop capabilities, and the new Apple Vision Pro powered by M5 opens up amazing possibilities on its infinite canvas.
> 
> We also introduced a brand-new software design that creates a unified experience across all platforms for the first time. This design uses a new material called "Liquid Glass," bringing fluidity, vitality, and flexibility to our products.
> 
> In addition to the new design, we offer powerful new features that allow users to do more with their devices. This includes updates to the phone and messaging apps in iOS 26 to help users stay connected; continuity enhancements in Mac for a more seamless experience across devices; and a powerful new window system in iPadOS 26 that fundamentally changes the user experience.
> 
> As **we continue to expand our investments in AI, we are integrating intelligence into the products and services that people already love, making every experience more personalized, powerful, and effortless. At the core of all this are Apple chips, and we are excited to launch new products powered by the A19 Pro chip and M5.**
> 
> These extremely advanced chips make Apple products the best platform for experiencing the powerful capabilities of AI. Through Apple Intelligence, we have launched dozens of new features that are powerful, intuitive, privacy-focused, and deeply integrated into people's daily use. For example, real-time translation features help users communicate across languages in real-time; and visual intelligence opens up new ways to understand and explore the world.
> 
> We also introduced Workout Buddy, a new experience that uses AI to provide personalized, motivational insights based on users' workout data and fitness history. Additionally, there are many other features, from photo cleanup and new image creation tools to powerful writing tools
> 
> We also see developers using our device-side foundational models to create entirely new experiences for users around the world. We are excited about a more personalized Siri. We have made good progress in this area, and as we have already shared, we expect to launch it next year.
> 
> Now let's take a closer look at the performance of each product line in the September quarter, starting with the iPhone.
> 
> **The iPhone set a revenue record for the September quarter, reaching $49 billion, a year-on-year increase of 6%. Despite facing supply constraints on several iPhone 16 and iPhone 17 models due to strong demand, we achieved growth in the vast majority of markets we track.**
> 
> **The iPhone 17 Pro has been redesigned inside and out, powered by the outstanding A19 Pro chip, making it the most powerful iPhone we have ever made and setting a new standard for the smartphone industry.** The iPhone 17 Pro also offers the best camera system we have ever had, featuring a brand new 8x telephoto camera and bold new colors like Cosmic Orange, which looks stunning.
> 
> The iPhone Air introduces an incredible breakthrough design, while the iPhone 17 features a larger and brighter ProMotion display, making it an excellent upgrade filled with user-favorite features.
> 
> **On the Mac front, we performed strongly in the September quarter, with revenue reaching $8.7 billion, a year-on-year increase of 13%, thanks to the strong performance of the MacBook Air.** The MacBook Air enables users to easily get work done on the world's most popular laptop. Mac mini users love the powerful performance packed into our smallest Mac ever, while Mac Studio customers are pushing the limits of what’s possible, as it is our most powerful Mac. The latest 14-inch MacBook Pro is equipped with the new M5 chip, unleashing incredible speed and next-level performance, with AI performance 3.5 times that of the M4.
> 
> **Turning to the iPad, revenue for the September quarter was $7 billion. Last month, we released one of the most compelling software updates in years—iPadOS 26, and recently we brought even more beloved features to iPad users with the stunning M5 iPad Pro, which has achieved incredible improvements in AI performance.** With an unparalleled combination of performance and versatility, the new iPad Pro, with its lightweight and portable design, makes every interaction delightful.
> 
> **In wearables, home, and accessories, revenue was $9 billion.** As I mentioned earlier, we are excited to open up new possibilities for users with the launch of the latest Apple Watch product line, making the world's most popular watch even better. This includes the Apple Watch Ultra 3, featuring the largest display ever on an Apple Watch, improved battery life, and a satellite emergency SOS feature The Apple Watch Series 11 brings our users the most comprehensive set of health features. The Apple Watch SE 3 offers advanced features at an incredible price-performance ratio. AI and advanced machine learning are at the core of powerful health features such as heart rate monitoring, fall detection, and crash detection.
> 
> **With the latest Apple Watch product line, we are proud to introduce the hypertension notification feature developed using large-scale machine learning models.** Hypertension is one of the major risk factors for heart disease and stroke, affecting over 1 billion adults worldwide. We expect to notify over 1 million users of this life-threatening condition.
> 
> We are also excited about the sleep score, a simple and intuitive way to help users better understand their sleep quality and discover ways to improve it. This is a feature that can benefit all of us.
> 
> Meanwhile, the AirPods Pro 3 have been a great success. You have to hear them to truly understand how amazing they are. Users and critics alike are praising their incredible sound quality and improved fit. They feature the best in-ear active noise cancellation in the world, with noise cancellation that is twice as effective as the previous generation. With Apple Intelligence-driven real-time translation, AirPods provide an incredible new experience for users around the globe.
> 
> Turning to our services business. **As I mentioned earlier, revenue for the September quarter was $28.8 billion, a 15% year-over-year increase, setting a new record. We achieved double-digit growth in both developed and emerging markets, and set all-time highs in advertising, the App Store, cloud services, music, payment services, and video.**
> 
> Apple TV shone at this year's Emmy Awards, winning 22 awards. The studio took home 13 awards that night, making it the most awarded comedy series in Emmy history. "Severance" ranked first among all drama series, winning 8 awards, adding to the accolades of this landmark series.
> 
> Today, Apple TV productions have accumulated over 600 awards and 2,800 nominations, thanks to strong original storytelling. We are thrilled that audiences can discover new works like "Pluribus" and watch returning hits like "Slow Horses" and "The Morning Show."
> 
> Soon, Apple TV will become the go-to platform for F1 fans across the U.S. on race days, thanks to a new partnership with F1. F1 is one of the most exciting and fastest-growing sports in the world, and starting next year, Apple TV will be the place for subscribers to track every twist of the new season. Additionally, one of the year's biggest box office hits, "The F1 Movie," will premiere on Apple TV on December 12.
> 
> In the September quarter, we also celebrated the 10th anniversary of Apple News. Apple News provides front-page news from around the world, putting hundreds of publications at users' fingertips
> 
> Transitioning to retail business. We are welcoming the busiest time of the year with the best product lineup ever. In the past few months, we have opened new stores in emerging markets such as India and the UAE, as well as new locations in the United States and China.
> 
> Last month, I also visited Tokyo to attend the opening ceremony of the redesigned and renovated Apple Ginza store, and the energy in the crowd was truly remarkable. When it first opened, it was our first store outside the United States, so it was particularly meaningful to return and welcome customers to this beautiful new space.
> 
> Wherever we operate and whatever we do, we strive to provide the best products for our users while upholding our values, whether it's building new accessibility features in the latest software version, advancing our environmental efforts by using more recycled materials in our latest product line, or providing free educational training and support for U.S. businesses through our new Apple Manufacturing Academy in Detroit.
> 
> We will continue to invest in innovations and user experiences that will change our future. A great example is the work we are doing in the United States, **where we are committing to invest $600 billion over the next four years, focusing on innovations in strategic areas such as advanced manufacturing, silicon engineering, and artificial intelligence.** These commitments build on our long-term investment foundation in the U.S. while supporting over 450,000 jobs across thousands of suppliers in all 50 states.
> 
> For instance, we are building a new factory in Houston for advanced AI services, which has just begun shipping its first products, and we are leading the creation of a nationwide end-to-end silicon supply chain.
> 
> In recent months, I have connected with developers, innovators, artists, entrepreneurs, and many others around the world who are passionate about innovation and all the things they can do with Apple products. Each one has reminded us once again why we do what we do. We are committed to empowering people to do more of what matters most to them and enriching their lives in the process.
> 
> As we welcome the holiday season with the strongest product lineup ever, I am incredibly excited about everything to come.
> 
> With that, I will hand the microphone over to Kevan.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Thank you, Tim, and good afternoon, everyone. Our revenue was $102.5 billion, an 8% year-over-year increase, setting a new record for the September quarter. We **set September quarter records in the Americas, Europe, Japan, and other Asia-Pacific regions, and achieved growth in the vast majority of markets we track. Product revenue was $73.7 billion, a 5% year-over-year increase, driven by growth in iPhone and Mac, reaching a record for the September quarter.**
> 
> Thanks to our outstanding customer satisfaction and strong loyalty, our active device install base has reached an all-time high across all product categories and geographic regions. Service revenue was $28.8 billion, a 15% year-over-year increase, setting a new all-time high. This performance is broad-based, with the vast majority of markets we track achieving double-digit growth, and most of our service categories also achieving double-digit growth The company's gross margin is 47.2%, exceeding the upper limit of our guidance range, with a quarter-over-quarter increase of 70 basis points, thanks to a favorable product mix.
> 
> **This includes approximately $1.1 billion in tariff-related costs, consistent with our estimates from the last conference call. The product gross margin is 36.2%, with a quarter-over-quarter increase of 170 basis points, benefiting from a favorable product mix. The service gross margin is 75.3%, with a quarter-over-quarter decrease of 30 basis points. Operating expenses were $15.9 billion, an 11% year-over-year increase, due to increased R&D investments.** These strong business performances led to record net income and diluted earnings per share for the September quarter. Net income was $27.5 billion, and diluted earnings per share were $1.85, representing a 13% year-over-year increase on an adjusted basis (excluding a one-time charge we will recognize in Q4 2024). Operating cash flow also set a record for the September quarter, reaching $29.7 billion. Now I will provide more details for each revenue category. iPhone revenue was $49 billion, a 6% year-over-year increase, driven by the iPhone 16 series.
> 
> The iPhone achieved growth in the vast majority of markets we track, setting records for the September quarter in many emerging markets, including Latin America, the Middle East, and South Asia, and reaching an all-time high in India. The active install base of iPhones grew to a historic high, and we set a record for upgrade users in the September quarter. According to a recent survey by World Panel, the iPhone is the best-selling model in the United States, urban China, the United Kingdom, France, Australia, and Japan.
> 
> We continue to see customer satisfaction in the U.S. remain at a very high level, measured at 98% by 451 Research. Mac revenue was $8.7 billion, a 13% year-over-year increase, driven by the MacBook Air. We achieved growth in every geographic region, with strong double-digit growth in emerging markets.
> 
> **The Mac install base reached a historic high, with nearly half of the customers purchasing a Mac being new users of the product, and the latest customer satisfaction report for Macs in the U.S. was 96%.** iPad revenue was $7 billion, flat year-over-year. Please remember that we faced a tough comparison due to the full-quarter impact of last year's iPad Air and iPad Pro launches, but the iPad performed better than expected, offsetting this impact. **The install base reached a historic high, and upgrade users set a record for the September quarter, with over half of the customers purchasing an iPad this quarter being new users of the product.**
> 
> According to the latest report from 451 Research, customer satisfaction in the U.S. is at 98%. Revenue from wearables, home, and accessories was $9 billion, flat year-over-year. This was due to growth in watches and AirPods, but offset by accessories, which were impacted by the strong performance of the iPad released in the same period last year. The install bases for Apple Watch and AirPods both reached historic highs More than half of the customers who purchased the Apple Watch this quarter are new users of the product, and we also set a record for Apple Watch upgrade users in September. In the United States, customer satisfaction was recently measured at 95%. Our service revenue reached a historic high of $28.8 billion, a year-on-year increase of 15%.
> 
> **We set historical revenue records in the Americas, Europe, Japan, and other regions in Asia-Pacific, and achieved a record for the September quarter in Greater China.** Most categories saw sequential acceleration, and as Tim mentioned, we set many historical revenue records, including payment services, where we achieved a historic revenue record, with Apple Pay active users experiencing double-digit year-on-year growth. This strong momentum in the September quarter drove our service revenue for the entire fiscal year to exceed $100 billion, a year-on-year increase of 14%, marking our best performance ever. The growth of our active device install base continues to provide significant opportunities for our future.
> 
> Customer engagement with our service products is also continuing to grow. Both transaction accounts and paid accounts reached historic highs, and we continue to improve the quality of our service products and expand their coverage. From more markets for Apple Pay (now available in nearly 90 countries) to AppleCare One, which is a great new way to cover multiple Apple products in a single plan. Speaking of the enterprise market, we see accelerated adoption of Apple products across various industries to enhance productivity and drive innovation.
> 
> BMW Group has deployed tens of thousands of iPhones (including for factory employees) to further enhance its digital capabilities and advance the company's innovation. Capital One expanded its MacChoice program by adding thousands of MacBook Airs to its workforce. In the Czech Republic, its largest bank, Česká spořitelna, continues to invest in the Apple ecosystem, adding over 5,000 iPhones in addition to the existing thousands of iPads and Macs. Purdue University launched a spatial computing center built around Vision Pro, aimed at helping students prepare for leading the next wave of innovation in critical industries such as semiconductor and pharmaceutical manufacturing.
> 
> Let’s turn to our cash position and capital return program. We ended the quarter with $132 billion in cash and marketable securities. We have $1.3 billion in debt maturing and reduced $1.9 billion in commercial paper, bringing total debt to $99 billion. Therefore, at the end of the quarter, net cash stood at $34 billion.
> 
> In this quarter, we returned $24 billion to shareholders. This includes $3.9 billion in dividends and equivalents, as well as $20 billion through the repurchase of 89 million shares of Apple stock in the open market. Looking back, we are very pleased with our record performance for fiscal year 2025. As Tim mentioned, total company revenue for the year was $416 billion, with growth in iPhone, Mac, iPad, and services, setting historical records in the vast majority of markets we track
> 
> **This revenue performance has brought very strong annual operating results, with net profit and diluted earnings per share reaching historic records, achieving double-digit growth year-over-year on an adjusted basis.** As we enter the December quarter, I want to revisit our outlook, which includes the kind of forward-looking information that Suhasini mentioned. Importantly, the information we provide assumes that global tariff rates, policies, and applications remain in effect as of this conference call, and that the global macroeconomic outlook will not be worse than it is today. We expect total company revenue for the December quarter to grow by 10% to 12% year-over-year, which will be our best quarter ever.
> 
> We **expect iPhone revenue to achieve double-digit growth year-over-year, which will be our best iPhone quarter ever.** Regarding Mac, please remember that we expect to face a very tough comparison against last year's M4 MacBook Pro, Mac Mini, and iMac releases. We expect service revenue to grow at a year-over-year growth rate similar to what we reported in fiscal year 2025. We **expect gross margin to be between 47% and 48%, which includes an estimated $1.4 billion impact from tariff-related costs.**
> 
> As we mentioned before, while we continue to invest in our product roadmap, **we are significantly increasing our investment in artificial intelligence.** Therefore, for the December quarter, **we expect operating expenses to be between $18.1 billion and $18.5 billion.** We expect OI&E (Other Income and Expenses) to be approximately $150 million, excluding any potential impact from minority equity investments measured at fair value, and our tax rate to be around 17%. Finally, today our board has declared a cash dividend of $0.26 per share of common stock, payable on November 13, 2025, to shareholders of record as of November 10, 2025.
> 
> With that said, let's start taking questions.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Thank you, Kevan. We ask that you limit your questions to two. Operator, can we hear the first question?
> 
> **Q&A Session**
> 
> **Operator:** Certainly. We now have the first question from Eric Woodring at Morgan Stanley. Please go ahead.
> 
> **Erik Woodring:** Hey, good afternoon, everyone. Thank you for taking my question. Congratulations on your achievements. Tim, could you share more details on why you think the iPhone 17 has been so successful so far? The key to this question is whether you believe this is the start of a replacement cycle for old device users, or if there are specific features or characteristics of this generation of products that stand out more to consumers than in the past? And then just a quick follow-up question, thank you.
> 
> **Tim Cook, CEO:** Eric, thank you for your comments. I believe it is entirely due to the product itself. The product lineup is extremely strong. They are more powerful than ever before The 17 Pro is the most professional phone we have ever made. It is amazing, and the design is outstanding. The iPhone Air feels thin and light in hand, almost like it could fly away. Then, **the 17 model offers great value for money, bringing some features that were previously exclusive to the Pro series into the consumer product line.** Overall, this is the most powerful iPhone product lineup ever, resonating around the world.
> 
> **Erik Woodring:** Great, thank you. Thank you, Tim. Then I might have a follow-up question for Kevan. Could you discuss how you managed the rising component costs during this period? Clearly, you have significantly increased memory capacity in your devices. At the same time, memory prices are experiencing quite a substantial increase. So how have you navigated this cycle? Thank you very much, everyone.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Yes, hey, Eric, thanks for your question. You know, we have a pretty outstanding world-class procurement team, so we are constantly looking for ways to continue driving cost optimization. Currently, in terms of commodities, I would say we have seen a slight tailwind (favorable factor) in memory and storage prices, and there’s nothing particularly noteworthy to mention in that regard. From our gross margin performance, we are doing quite well, achieving 47.2%, which is above the upper end of the guidance range we provided, while our guidance was 47% to 48%. So I think we are managing costs quite well. You should remember that when we discuss this point in the product cycle, we have just launched a bunch of new products. The cost structure of these new products is indeed slightly higher than that of the products they are replacing, but the team has done a great job focusing on reducing these costs over time, and we are quite satisfied with the overall performance we are seeing in material cost savings.
> 
> **Erik Woodring:** Great, thank you very much. Good luck, everyone.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Okay. Thank you, Eric. Host, can we move on to the next question?
> 
> **Host:** The next question comes from Ben Reitzes of Melius Research. Please go ahead.
> 
> **Ben Reitzes:** Hey, everyone. Thank you. Tim, can you talk about the situation with the iPhone in China? Specifically, what trends do you expect in the December quarter? Have you turned the situation around there? How do you see the growth trajectory? And I have a brief follow-up question. Thank you.
> 
> **Tim Cook, Chief Executive Officer:** Okay, Ben, I just got back from there. It is very vibrant and dynamic. Store traffic has significantly increased year-over-year. The iPhone 17 series is receiving a very positive response there. We do believe that the first quarter (December quarter) will see a return to growth. This is primarily based on the popularity of the iPhone there So I am very satisfied with the early progress.
> 
> **Ben Reitzes:** Okay, great. And regarding the services business, there has been fantastic outperformance, a bit surprising, right? Just a few quarters ago we were a bit concerned about this business. I wonder if there are any tax-related items in there, or if what we are seeing is boosted by an antitrust settlement with one of your partners, or if that played a role, or if it really is just the organic outperformance of many businesses you mentioned. Thank you.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Okay, Ben. I'm Kevan. Let me answer that question. You mentioned, I want to clarify, when you refer to the antitrust part, are you talking about the Google case, is that correct?
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Yes, sir.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Okay. There are no tax-related impacts. What I want to say is that our strong performance this quarter is indeed organically driven. To reiterate, we **set a record for the highest revenue in history this quarter, reaching $28.8 billion. At the same time, we surpassed $100 billion, marking the best year ever, with a year-over-year growth of 14%. So this is really all organic growth.** As Tim outlined, and as I outlined in my prepared remarks, we see continuous acceleration across most categories, and we set many records for the highest revenue ever. But there are absolutely no anomalies, **it’s really almost all organic growth.**
> 
> **Ben Reitzes:** Thank you.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Thank you, Ben. Host, can we move on to the next question?
> 
> **Host:** The next question comes from Michael Ng. Please go ahead.
> 
> **Michael Ng:** Hi. Good afternoon. Thank you for taking my questions. I also have two questions. First, as a follow-up to the previous question, I believe service revenue growth is the fastest among many categories, and certainly the fastest in the past two years. I just wanted to know if you could analyze in more detail the drivers of this accelerated growth. Is there cross-selling from the new iPhone release? Is it just the growth of the install base? I know you have been doing a lot of bundling with Apple One and AppleCare One, so any thoughts on that would be very helpful, and then I have a brief follow-up question. Thank you.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Hi, Michael. I'm Kevin. Thank you for your question. Yes, let me add to that answer. I think the way we look at this is that there isn't one thing that can be pointed to as the reason driving this higher performance. You are right, it is indeed slightly higher than what we have seen in the past few quarters But as you know, our service portfolio is very broad, encompassing a wide range of business areas, all of which have different growth profiles and performance characteristics. So these may vary in any given quarter. What I want to say is that our strengths are again very broad, whether across categories or geographical regions. So I won't point to any specific factors driving any outperformance. We are just very pleased to see this result.
> 
> **Michael Ng:** Great. Thank you. Regarding iPhone sales, I would like to know if you have seen any significant changes in the sales trends between upgrade users and switch users (users switching from other brands). Has the competitive dynamics among U.S. carriers helped in terms of promotional activities? Any thoughts on channel inventory? Thank you.
> 
> **Tim Cook, CEO:** Okay. We **did set a record for upgrade users in the September quarter. So from that perspective, it was a great quarter. Now for the iPhone 17 series, it's still too early to comment on upgrade users or switch users. Regarding channel inventory, we were at the low end of our target range at the end of the quarter, clearly due to supply constraints on several models of the iPhone 16 and 17.** To be completely transparent and clear, we are still constrained on several models of the iPhone 17 today. This is not a capacity ramp issue. It's just that our demand is very strong. We are working very hard to fulfill all the orders we have received.
> 
> **Michael Ng:** Great. Thank you, Tim. Thank you, Kevan.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Okay. Thank you, Mike. Host, can we move to the next question?
> 
> **Host:** The next question comes from Amit Daryanani at Evercore. Please go ahead.
> 
> **Amit Daryanani:** Thank you very much. I would like to ask, Kevan, perhaps we can start with gross margin, can you elaborate on the expectations for the December quarter? I think this implies a sequential increase of about 30 basis points. Considering that there is indeed considerable operating leverage this quarter, can you discuss the positive and negative factors regarding gross margin? It would be very helpful if you could talk about these positive and negative factors.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Okay, sure. Amit, let me elaborate on the outlook. As we mentioned in the outlook, our target range is 47% to 48%. If we take the midpoint of this range, it is 47.5%. What you mentioned is about a 25 basis point to 30 basis point increase. In fact, there are many positive and negative factors here. As I mentioned earlier, this is a quarter where we are launching a lot of new products. These new products tend to have a higher cost structure than the products they replace, so there is definitely an impact on costs, but this is offset by a favorable product mix, especially in terms of products, as you pointed out, we typically see higher leverage in this quarter So I would say these are the two main driving factors, and thus the month-on-month growth will actually be driven by a favorable product mix, particularly from the product side.
> 
> **Amit Daryanani:** Understood. If I could go back to the discussion about China for a minute. The performance in China, at least in the September quarter, was a bit lackluster. Can you talk about the reasons for the weakness there? Do you think it’s more like a pause, considering that, for example, the iPhone Air only launched a few weeks ago? So please discuss the reasons for the weakness in September and whether the better expectations for December are solely due to the launch of the iPhone Air or if there are other factors as well? Thank you.
> 
> **Tim Cook, CEO:** Yes, **revenue from Greater China declined by 4% year-on-year in the September quarter. It was driven by iPhone. If you look at the year-on-year changes for iPhone, most of it is due to the supply constraints I mentioned earlier. So basically, the supply constraints led to this outcome. We are excited about what we are seeing currently, with significant year-on-year increases in foot traffic and the response to the 17 series. We expect to see growth restored this quarter.**
> 
> **Amit Daryanani:** Great. Thank you.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Thank you.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Thank you, Amit. Moderator, can we move to the next question?
> 
> **Moderator:** The next question comes from Wamsi Mohan of Bank of America. Please go ahead.
> 
> **Wamsi Mohan:** Yes, thank you very much. Tim, if I could follow up on your comments about supply constraints this quarter, considering the strong demand for iPhones. Based on your visibility into demand and supply, do you think by the end of December we will reach a state of no longer being constrained, or do you still expect there may be limitations at the end of the December quarter? Is there any way to quantify what the revenue for this quarter might be if there were no constraints?
> 
> **Tim Cook, CEO:** Yes, if you look at the supply constraints, we are currently constrained on a few of the 17 models. We do not predict when supply and demand will balance. We are obviously working very hard to achieve that because we want to get as many of these products into the hands of customers as possible. But I won’t make any predictions today.
> 
> **Wamsi Mohan:** Okay. Okay. Thank you, Tim.
> 
> **Tim Cook, CEO:** Yes.
> 
> **Wamsi Mohan:** Then as a follow-up question. I heard you talk about new records in many categories and services. I didn’t hear a clear mention of search. So perhaps this is a small follow-up to Ben's question, but considering some concerns that search volume may be slowing due to AI, how do you view the sustainability of these very strong service growth rates in the double digits over a longer period, not just your obvious guidance for 14 in the next quarter?
> 
> **Tim Cook, CEO:** This is Tim. The advertising category, a combination of third-party and first-party, indeed set a record this quarter.
> 
> **Wamsi Mohan:** Okay, sorry, just to clarify, did Apple's own internal advertising and licensing internally both set records separately?
> 
> **Tim Cook, CEO:** Actually, I didn't say that. I just said the combination set a record. I am intentionally avoiding that question because we won't break it down to that level.
> 
> **Wamsi Mohan:** Okay. Got it. Thank you.
> 
> **Tim Cook, CEO:** Yes. Thank you.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Okay. Thank you, Wamsi. Host, can we move on to the next question?
> 
> **Host:** The next question comes from Samik Chatterjee at JP Morgan. Please go ahead.
> 
> **Samik Chatterjee:** Hi. Thank you for taking my question. The first question, Tim, you mentioned the strong momentum seen in China, which also drives your confidence for the December quarter. Can you talk about the role of smartphone subsidies in that region in driving this momentum? How do you view the proportion of consumers who are using or taking advantage of these subsidies? Can you provide more insights? I have a follow-up question as well. Thank you.
> 
> **Tim Cook, CEO:** Yes, the subsidies have played a positive role. As you know, these subsidies cover multiple categories, from personal computers to tablets, smartwatches, and smartphones. However, it's important to note that they only apply to specific price ranges. So there is a maximum price limit, and we have several products priced above that limit, thus not qualifying for the subsidies. But it has indeed had a positive impact. At least from our perspective, it is clearly driving a portion of consumer demand.
> 
> **Samik Chatterjee:** Okay, got it. Then a follow-up question for Kevan. Regarding the increase in operating expenses entering the December quarter, the increase is quite significant. Can you elaborate on what this number is primarily spent on? Moreover, the year-over-year growth in operating expenses has indeed outpaced your revenue growth. So, is this something we should expect in the future as well, that you may need to invest more in the near term? Thank you.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Yes, Amit (note: should be Samik). Thank you for the question. As we have been stating and reiterated in the last conference call, we **are increasing our investment in AI. We will also continue to invest in our product roadmap. Therefore, the vast majority of the increase in operating expenses is driven by R&D.** While we continue to manage the company in a thoughtful and disciplined manner, we are also managing the business for the long term and are very excited about all the future opportunities we see Regarding the issue of operating expenses and revenue growth, although the growth rate of operating expenses is faster than that of revenue, we have seen an expansion in gross margin. Therefore, when we look at it comprehensively, it indeed gives us healthy operating leverage. Over the past few years, our operating income growth has generally outpaced revenue growth.
> 
> **Samik Chatterjee:** Okay. Thank you. Thank you very much.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Thank you, Samik. Host, can we have the next question?
> 
> **Host:** The next question comes from David Vogt of UBS Group. Please go ahead.
> 
> **David Vogt:** Great. Thank you for answering my question. So, Kevan, can I first ask if you could help us understand the quarter-over-quarter changes in tariff impacts from the September quarter to the December quarter, particularly around the iPhone supply constraints? Because I think I heard you say that tariffs increased from $1.1 billion to $1.4 billion, but the quarter-over-quarter growth in iPhone revenue, considering the production growth due to supply chain constraints, is much larger. So could you help us understand how to view the timing of these tariff pressures and their connections? Then I have a follow-up question.
> 
> **Tim Cook, CEO:** David, I'll take that. You're right. It **increased from $1.1 billion to an expected $1.4 billion. This $1.4 billion is based on what we know now and the current tariff rates and policies.** So it assumes a stable environment for this quarter. It does include the recent changes, and we **are pleased to see that tariffs in China have decreased from 20% to 10%. That has been accounted for.** That's also one of the reasons why it doesn't have a linear relationship with sales. Is that clear?
> 
> **David Vogt:** Understood. No, that's exactly what I wanted to ask, whether this change is reflected in the outlook. Then as a follow-up question, I know not many have asked about Macs; you mentioned the tough comparison base, but you are entering the holiday season. I understand that. But when considering the likelihood of associated purchases of other products during the holiday season with the iPhone, how do we view consumer sentiment and wallet conditions during this cycle? I know the comparison base is high, but from the perspective of associated purchase rates, given the strong performance of the iPhone product line, is there an opportunity to see some unexpected growth?
> 
> **Tim Cook, CEO:** We always like to remind people who buy iPhones that we also offer all other products, so you can be sure we are doing that. From the Mac perspective, the challenge is that last year was arguably the grandest release of all Macs. From the Mac Mini to the iMac to all MacBook Pros, all of these products were released almost simultaneously, while this year, in comparison, only the 14-inch MacBook Pro was released, so the comparison is very difficult. Of course, **I am very optimistic about the Mac in the long run.** You can see that Mac once again outperformed market growth last quarter. **So we feel very good about the positioning of Mac, but the comparison for this particular quarter is indeed extremely difficult.**
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Tim, let me add that last year we also upgraded the memory (DRAM) for the Mac product line, which is another factor.
> 
> **Analyst:** Great. Thank you, Tim. Thank you, Kevin.
> 
> **Tim Cook, Chief Executive Officer:** Hmm.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Of course.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Thank you, David. Host, can we have the next question?
> 
> **Host:** The next question comes from Krish Sankar of TD Cowen. Please go ahead.
> 
> **Krish Sankar:** Yes. Thank you for taking my question. My first question is about iPhone constraints. Is there any way to quantify how much business you lost because of these constraints? Did producing iPhones in two different regions lead to these constraints? Then I have a follow-up question.
> 
> **Tim Cook, Chief Executive Officer:** It’s important to clarify that this constraint is not related to manufacturing capacity itself. Rather, our forecast for the number of iPhone 16s to be produced was a bit lower than actual demand. So, we could have sold more. We won’t publicly estimate a specific number. Then **regarding the iPhone 17 series, demand is very strong. So, clearly, we have a lot of backlog orders as we end the fourth quarter.**
> 
> **Krish Sankar:** Got it. Thank you, Tim. Then a quick follow-up. You know, given the popularity of chatbots and now these AI-infused web services. Do you think this will change consumer behavior in the mobile app ecosystem? Or have you seen this happening? Will this impact your App Store?
> 
> **Tim Cook, Chief Executive Officer:** I think there’s an opportunity for AI on the App Store. So I believe that as we provide device-side models to developers, we’ve already seen developers starting to adopt them, so I think as this trend spreads, both developers and Apple have the opportunity to benefit from it, such as adding features to their apps, etc.
> 
> **Krish Sankar:** Thank you very much, Tim.
> 
> **Tim Cook, Chief Executive Officer:** Hmm. Thank you.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Thank you, Krish. Host, can we have the next question?
> 
> **Host:** The next question comes from Aaron Rakers of Wells Fargo. Please go ahead.
> 
> **Aaron Rakers:** Okay, thank you for taking my question. I have two questions as well. I think the first question is, when we look at the demand for the iPhone 17, you have repeatedly emphasized that the demand is very strong. I'm curious if there are any noticeable changes in the sales mix between the Pro and Pro Max versions of the iPhone 17 compared to previous cycles?
> 
> **Tim Cook, CEO:** To be honest, it's too early to judge the sales mix right now, and for competitive reasons, we don't like to disclose that information publicly. But frankly, we really don't know what the sales mix will look like because we have supply constraints on both ends of the ledger, both at the high end and the entry level. So, we'll see what happens when we get more supply.
> 
> **Aaron Rakers:** Okay. And then as a quick follow-up, I'm curious, as we continue to build the AI narrative, can you provide some updates on Apple's private cloud computing buildout and how we should look at that going forward?
> 
> **Tim Cook, CEO:** Yes, we are obviously using PCC, which is our private cloud computing, for many queries for Siri today, and we will continue to build it out. In fact, the factory for manufacturing servers for Apple Intelligence just started production a few weeks ago in Houston, and we have a plan to ramp up capacity there for our data centers. And it's powerful.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Yes, I might add that since you asked about private cloud computing, we did incur capital expenditure costs related to building a private cloud computing environment in our own data centers in 2025. So you will see that in some of this year's capital expenditure investments.
> 
> **Aaron Rakers:** Thank you.
> 
> **Kevan Parekh, Senior Vice President and Chief Financial Officer:** Thank you.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Thank you, Aaron. Host, can we take the next question?
> 
> **Host:** Our next question comes from Atif Malik of Citigroup. Please go ahead.
> 
> **Atif Malik:** Hi. Thank you for taking my question. Great execution. The first question is about the iPhone Air. Has the consumer response to the iPhone Air given you insights into the foldable phone market, or are these two form factors very different?
> 
> **Tim Cook, CEO:** I'm not sure one can represent the other. What I would say is that at a high level, we don't delve into the demand for specific models, but we are very excited about the popularity of the iPhone This is why we expect double-digit growth this quarter.
> 
> **Atif Malik:** Great. Tim, as a follow-up question. It's good to know that the personalized series is progressing well and is expected to launch next year. Will you continue to use a three-pronged approach, namely using your own foundational models and collaborating with other LLM providers, possibly with potential mergers and acquisitions? Or is one strategy more valued than the other?
> 
> **Tim Cook, CEO:** We are obviously creating Apple's foundational models internally. We deploy them on devices and also use them in private cloud computing. We have several in development as well. So, we are also continuously monitoring the M&A market, and if we believe it will advance our roadmap, we are willing to pursue acquisitions.
> 
> **Atif Malik:** Thank you.
> 
> **Tim Cook, CEO:** Alright. Thank you.
> 
> **Suhasini Chandramouli, Director of Investor Relations:** Thank you, Atif. Moderator, can we take the last question?
> 
> **Moderator:** Our last question comes from Richard Kramer at Arete Research. Please go ahead.
> 
> **Richard Kramer:** Thank you very much, Tim. We often see Apple as a fast follower in new technologies, whether it's large screens or 4G or 5G. But with all the hype around AI now, do you see any evidence that AI capabilities or features are an important consideration for consumers when making purchases? Or are the record sales levels you reported simply reflecting other factors, such as the retention of the iOS user base?
> 
> **Tim Cook, CEO:** I think there are many factors that influence people's purchasing considerations. So, we haven't done a deep dive on the current iPhone 17 yet, as it's still new in the cycle, and we give it some time to form. But I would say Apple Intelligence is a factor. We are very optimistic about it becoming a more important factor. That's our view.
> 
> **Richard Kramer:** Okay, thank you. Then a question for Kevan, as almost all other large tech companies have significantly increased capital expenditures ahead of AI demand and mentioned their capacity constraints, do you expect Apple to change its long-term mix approach to its own and third-party data centers? Perhaps you can talk about how you see Apple chips playing a role in the new M5 series chipsets?
> 
> **Kevan Parekh, Senior Vice President and CFO:** Yes, Richard. Thank you for your question. Overall, I think, as we've discussed before, we expect capital expenditures related to AI investments to increase. For example, as I mentioned earlier, we did indeed invest in building our private cloud computing environment this year. We truly believe this hybrid model serves us well, and we will continue to look to leverage it So I don't think we will give up this hybrid model, where we leverage both our own capacity and third-party capacity. As Tim outlined, over time, as we have more usage there, we will continue to hope to build private cloud computing. But I think overall, we will want to continue to maintain this hybrid model.
> 
> **Richard Kramer:** Okay, thank you.
> 
> Suhasini Chandramouli, Director of Investor Relations: Thank you, Richard. The replay of today's conference call will be available on Apple Podcasts for two weeks, as a webcast at apple.com/investor, and also via phone. The phone replay number is 866-583-1035. Please enter the confirmation code 0689794, then press the pound key. These replays will be available today around 5 PM Pacific Time. Media members with other questions can contact Josh Rosenstock at 408-862-1142, and financial analysts can reach me, Suhasini Chandramouli, at 408-974-3123 for any other questions. Thank you all for participating again.
> 
> **Host:** Once again, this concludes today's meeting. We appreciate your participation. The event has ended

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