Originally published at: Apple Propelled to Record Q1 2026 Financials by iPhone and Services - TidBITS
From the perspective of a long-time Apple observer, the company appears to be struggling a bit. Its AI story remains weak, the promised Siri upgrade is still in the future, and the ill-conceived Liquid Glass continues to draw criticism. But you know what? People buy Apple products because the hardware is great, the ecosystem is unparalleled, and the ease of use outpaces the competition. And that’s why Apple just blew past its previous Q1 revenue record, generating $143.8 billion in revenue, a whopping 16% gain over the year-ago quarter. Earnings per share rose to $2.84, an increase of 19% year over year. It was a record-breaking quarter across all geographic segments, with iPhone and Services leading the way, and leaving Apple with an installed base of more than 2.5 billion active devices.
In terms of the product mix, the iPhone and Services segments put the squeeze on Apple’s other product lines. The Mac and Wearables both fell slightly, and although the iPad improved on last year’s Q1 results, its overall share also dropped.
iPhone
For the first time since 2021, Apple’s iPhone accounted for more than 59% of the company’s revenue during the quarter, a total of $85.3 billion. CEO Tim Cook described the iPhone demand, up 23% year over year, as “simply staggering” and said that it “exceeded our expectations to say the least.” The iPhone was particularly popular with upgraders worldwide, suggesting a shorter-than-usual replacement cycle. The iPhone fared especially well in the Greater China market, where it posted its best quarter ever. Cook attributed its success there to “product strength,” noting double-digit growth among switchers. “Product strength” is likely a coded way of saying the iPhone’s sales weren’t driven by government subsidies, which Apple said had been a factor in its last two earnings calls. While we’re reading between the lines, Apple’s gross margin increased to 48.2%, which may indicate a disproportionate share of high-margin models, such as the iPhone 17 Pro and iPhone 17 Pro Max.
Mac
Sales of the Mac declined 7% year over year to $8.4 billion, a drop that Apple CFO Kevan Parekh attributed to one of Apple’s “difficult compares.” Although the company introduced an M5 version of the 14-inch MacBook Pro in late 2025 (see “New M5 Chip Accelerates the MacBook Pro, iPad Pro, and Vision Pro,” 15 October 2025), that wasn’t as much of a boost to Apple’s Q1 revenues as late 2024’s introduction of the M4-powered MacBook Pro, Mac mini, and iMac. The high initial sales of those new models inevitably reduced subsequent Mac demand. No matter: Cook said that, taking the year in context, Mac market share is growing. The further integration of Apple’s M5 chips into the 16-inch MacBook Pro, Mac mini, and iMac, along with the near-certain introduction of the M5 Pro and M5 Max chips, bodes well for future quarters.
iPad
For the third year in a row, iPad sales during Q1 surpassed the previous year’s number, up 6% from the same quarter last year, bringing in $8.6 billion. The tablet also set a record for upgrades from previous iPad models, perhaps driven by higher-volume sales of the inexpensive A16-powered iPad and higher-margin sales of the premium M5-powered iPad Pro models.
Wearables, Home, and Accessories
Although this product category, which generated $11.5 billion in revenue in Q1, declined 2% year over year, the decline was not due to decreased demand. Along with his usual praise for the current Apple Watch models, Cook said the “response to AirPods Pro 3 has been amazing,” and Parekh went further, saying Apple believes the category “would have grown had it not been for” supply constraints on the AirPods Pro 3. Nonetheless, the Wearables segment has not seen Q1 revenue this low since 2020, and Apple didn’t even see fit to mention the Apple TV hardware, the HomePod, or the Vision Pro.
Services
For the first time in a while, Services was not quite the biggest star in Apple’s revenue firmament during the quarter: that role fell to the iPhone. Nonetheless, Services was an exceedingly popular co-star, achieving gross margins of nearly 77% and generating $30 billion in revenue, with year-over-year growth of 14%. Troublingly for those who disapprove of the proliferation of ads, Parekh said “additional ads coming to search in the App Store” contributed to the strong results. Cook seemed particularly pleased by the showbiz side of the Services segment, citing a first-time Best Picture Academy Award nomination for its “F1” feature film and the return of its Ted Lasso series for a fourth season later this year. Everyone wants to be in pictures…
Regional
During the quarter, revenues increased in every geographic region served by Apple. Especially gratifying to Apple’s executives was the revenue performance in Greater China, which, thanks to robust iPhone demand there, grew 38% year over year after it had fallen in three of four quarters in 2025. Apple also highlighted the massive Indian market, noting particularly strong quarterly performance across the iPhone, iPad, and Mac segments, as well as an all-time record in Services revenue. Cook described the growing popularity of Apple devices and services in India as a huge opportunity for Apple.
Costs, Collaboration, and Constraints
Last quarter, tariffs cost Apple about $1.1 billion; this quarter, the impact of tariffs reached $1.4 billion, much as Apple had predicted. But how much tariffs will cost Apple and its users in the quarters to come depends on political whims and bullying, which Apple seems intent on minimizing through obsequiousness.
Regarding AI, Cook reiterated that the more personalized Siri is coming later this year, said “the majority of users on enabled iPhones are actively leveraging the power of Apple Intelligence” and noted the recently announced collaboration with Google to base future versions of the Apple Foundation Models on Gemini (see “Apple Turns to Google’s Gemini to Power Siri and Apple Intelligence,” 14 January 2026). None of that suggests that Apple Intelligence is actively driving sales, but it certainly isn’t hurting them.
Finally, another impact of AI is the dramatic rise in memory prices and shortages as suppliers send their chips to AI companies—the analysts urgently wanted Apple to comment further on that. All Cook would say is that memory pricing wasn’t a material factor in this quarter’s earnings, but acknowledged that it would impact gross margin next quarter and potentially in the future. All other technology providers are in the same boat, and the real fear—unacknowledged by Apple—is that memory shortages could prevent Apple from meeting demand or cause it to raise prices. We’ll see what happens throughout the rest of 2026.
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