Apple Q3 strong courtesy of iPhone, Mac demand

Apple delivered strong third quarter earnings, saw iPhone sales surge 22% and continued to benefit from forgoing heavy AI-related capital expenditures.

The company reported third quarter earnings of $2.02 a share, which got a boost of 11 cents a share from tariff refunds. Apple sales were $109.4 billion, up 16% from a year ago.

Tim Cook, outgoing Apple CEO, said the quarter saw double-digit gains across iPhone, Mac and services. However, services sales lagged estimates.

Wall Street was expecting Apple to report third quarter earnings of $1.89 a share on revenue of $108.65 billion.

CFO Kevan Parekh said the quarter featured June quarter records for earnings per share and operating cash flow.

By the numbers for the third quarter:

• iPhone revenue was $54.25 billion, up from $44.6 billion a year ago.
• Mac revenue was $10.35 billion compared to $8.05 billion a year ago.
• iPad revenue was $6.2 billion, down from $6.58 billion a year ago.
• Wearables revenue was $7.88 billion, up from $7.4 billion.
• Services revenue was $30.74 billion, up from $27.4 billion a year ago.

On the earnings call, Cook noted:

• "During the June quarter, we did experience supply constraints primarily on the Mac and to a lesser extent on iPhone and iPad. These were driven by very high levels of demand. And as we've said before, we are seeing less flexibility in the supply chain than normal. And the constraints were primarily driven by the availability of the advanced nodes that our SoCs are produced on."
• "We paid more per memory in the March quarter than the December quarter. And then as I alluded to last quarter, we expected to pay significantly more in the June quarter than the March quarter, and that is what happened. It was partially offset by the benefit of carry-in inventory. For September, we expect to pay even higher memory costs."
• "We're expecting lower cost on certain non-memory components that are in our BOM. And then if you look beyond September, we see the market pricing for memory continuing to increase, which could drive an increasing impact on our business, and we're continuing to evaluate this."
• "In terms of the sources of supply, primarily the DRAM market has 3 suppliers. And obviously, if there were more suppliers, that would be good, and it would help us on the supply side and perhaps the pricing side."