Originally published at: iPhone and Services Drive Apple to Record Q2 2026 Despite Supply Constraints - TidBITS
Tim Cook led off Apple’s Q2 2026 earnings call by talking briefly about how he’s moving from CEO to executive chairman of the board in September, and he brought on incoming CEO John Ternus to say a few words. It was another building block in Apple’s carefully choreographed transition messaging, designed in this case to minimize investor uncertainty. Both thanked Apple shareholders, particularly long-term shareholders, as a not-so-subtle way of reassuring institutional investors.
Ternus seems ready to step into the CEO role in these calls, with the requisite superlatives (“incredible roadmap”), an acknowledgment that he’ll be dodging analyst questions, and Cookian phrasing (“couldn’t be more optimistic”). He said:
As Tim mentioned, we have an incredible roadmap ahead. And while you’re not going to get me to talk about the details of that roadmap, suffice it to say, this is the most exciting time in my 25-year career at Apple to be building products and services. There are so many opportunities before us, and I couldn’t be more optimistic about what’s to come.
Back at the actual results, Apple announced net profits of $29.6 billion ($2.01 per diluted share) on revenues of $111.2 billion, a record for the March quarter. The company’s revenues are up 17% compared to the year-ago quarter, with earnings per share up by 22% (see “Apple Q2 2025 Financials Solid Despite Upcoming Tariff Uncertainty”). With a March quarter revenue record for iPhone sales (up 22% from the year-ago quarter) and yet another all-time record for Services income (up 16%), Apple achieved double-digit revenue growth across every geographic segment.
As in Q1 2026, the iPhone and Services revenues squeezed Apple’s other product lines, even as those other segments posted healthy growth (see “Apple Propelled to Record Q1 2026 Financials by iPhone and Services,” 30 January 2026). The iPhone share of the product mix grew 2% to 51%, and Services held strong at 28%.
iPhone
Unsurprisingly, the iPhone revenues of $57 billion, up 22% from the year-ago quarter, came from strong sales of the iPhone 17 family. Equally unsurprisingly, Cook enthused that Apple’s usual 451 Research survey pegged iPhone customer satisfaction at 99%, saying, “These numbers are just unheard of.” That’s silly, considering he has touted similar numbers at every earnings call for years, so much so that an analyst once declared them nearly impossible. (Perhaps Apple is Cooking these numbers?) Regardless, the iPhone 17 is doing really well, setting a March quarter record both overall and among upgraders, despite some supply constraints in chip manufacturing capacity. Cook was delighted to point out that the astronauts aboard the recent Artemis voyage around the Moon used the iPhone 17 Pro Max to capture many of their photos.
Mac
Apart from the pandemic-driven spikes in 2021 and 2022, the Mac segment reached a new high of $8.4 billion in revenue, up 6% from the year-ago quarter. Cook ascribed some of the gain to demand for the MacBook Neo being “off the charts” and said that Apple set—wait for it—a March quarter record for customers new to the Mac. These stellar revenues came despite supply constraints stemming from Apple’s underestimation of demand for the MacBook Neo, the Mac mini, and the Mac Studio.
The MacBook Neo seems to be giving Apple a foot in the door in markets where it was previously priced out of competition. Cook made a point of mentioning that the Kansas City public schools were dropping Windows laptops and Chromebooks in favor of the MacBook Neo—as The Verge recently pointed out, the MacBook Neo is crushing the other kids’ Windows laptops.
As for why there’s so much demand for the Mac mini and the Mac Studio, Cook pitched the Mac broadly as being “the best platform for AI” and said that those desktop models were “amazing platforms for AI and agentic tools.” That’s in part an acknowledgment that people are buying Mac minis to run OpenClaw agents; our best guess is that the Mac Studio demand stems from it being a competitive platform for running LLMs locally.
iPad
With revenues of $6.9 billion, the iPad posted its best results since the pandemic spikes in 2021 and 2022, rising 8% year over year. The recent models seem to be doing well, but Apple CFO Kevan Parekh warned that the next quarter’s results would fall into the “difficult compare” category for the iPad, given the release of the A16-powered iPad a year ago (see “Apple Speed Bumps iPads: iPad Air Goes M3, iPad Gets an A16,” 4 March 2025). That suggests we won’t see any iPad announcements soon.
Wearables, Home, and Accessories
The $7.9 billion in revenue in the Wearables, Home, and Accessories category represented 5% growth from the year-ago quarter, with Apple saying it was driven by strength in Wearables and Accessories. Pay no attention to the Home part of the category—the Apple TV and HomePod are feeling distinctly long in the tooth. Rumor has it that Apple is sitting on multiple smart home products that are waiting for Siri, like the Scarecrow, to get a brain.
Services
With $31 billion in revenue, up 16% year over year, Apple set all-time records in Services and most of its subcategories during the quarter, which is not entirely surprising given that the company now boasts over 2.5 billion active devices. The more devices in active use, the more people rely on Apple’s services, and the more the Services segment rakes in.
Troublingly, Apple is pushing harder into advertising. In the Q&A with analysts, Parekh said the company had added more ad inventory to the App Store and would bring ads to Apple Maps in the US and Canada this summer. Apple spins the increase in ads as helping developers and local businesses, but even Apple’s pet 451 Research firm won’t be able to come up with double-digit numbers for customer satisfaction with ads.
Regional
Apple revenues were up across every geographic segment, with Greater China in particular growing 28% year over year and the Rest of Asia Pacific not far behind with a 25% growth rate. In part, the gains were due to “2.5 percentage point tailwind” from favorable foreign exchange rates, a flip from recent quarters when exchange rates worked against Apple. Cook also noted “double-digit growth in nearly every emerging market we track, including India,” which he said is the second-largest smartphone market in the world and the third-largest PC market. Apple is clearly working to increase its market share there.
Looking Ahead
So what’s coming? More money, as always. Parekh said he expected the June quarter’s revenue to grow by 14–17%, but the more revealing guidance came from Cook, who warned that memory costs would be “significantly higher” next quarter due to memory manufacturers redirecting output to AI chips. It’s going to get worse before it gets better, as Cook noted, saying, “beyond the June quarter, we believe memory costs will drive an increasing impact on our business.” Apple can absorb some of that impact thanks to its scale and margins, but only up to a point.
So the real question becomes whether Apple can keep prices at current levels or will be forced to raise them to maintain margins. What’s important to realize, however, is that even if Apple is forced to raise prices, it’s much less exposed to memory price increases than PC and smartphone competitors that rely on the commodity RAM market, where prices have doubled or tripled this year alone. To the extent Apple can keep its prices lower, it can take market share from competitors who pass high memory costs on to consumers. We’ll see in the coming quarters whether Apple chooses to sacrifice margins to do so.