Apple Inc.

Good afternoon and welcome to the Apple Q3 Fiscal Year 2026 Earnings Conference Call. My name is Suhasini Chandramouli, Director of Investor Relations. Today's call is being recorded. Speaking first today is Apple CEO Tim Cook, followed by CFO Kevan Parekh. Also joining us on today's call is incoming CEO John Ternes. After the prepared remarks, we'll open the call to questions from analysts. Some of the information you'll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expense, taxes, 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 the potential impact to the company's business and results of operations from macroeconomic conditions, tariffs and other measures, and legal and regulatory proceedings. For more information, please refer to the risk factors discussed in Apple's most recently filed reports on Form 10Q and Form 10K and the Form 8K filed with the SEC today along with the associated press release. Additional information will also be in our report on Form 10-Q for the quarter ended June 27, 2026 to be filed tomorrow and in other reports and filings we make with the SEC. Apple assumes no obligation to update any forward-looking statements which speak only as of the date they are made. I'd now like to turn the call over to Tim for introductory remarks.

Thank you, Suhasini. Good afternoon, everyone, and thanks for joining the call. Today, Apple is pleased to report $109.4 billion in revenue, up 16% from a year ago and a June quarter record. We were able to achieve this despite supply constraints and sequential foreign exchange headwinds. We continue to see enormous customer enthusiasm for our most popular lineup ever, with iPhone revenue growing 22% from a year ago to reach a June quarter record. We saw so much excitement around the best MAC lineup we've ever had, growing a strong 29% to achieve a June quarter revenue record. Services also set a June quarter record with $30.7 billion in revenue. We achieved June quarter revenue records in every geographic segment. We were pleased to see strength across the board with June quarter records in the US, Latin America, Western Europe, India, China Mainland, Japan, and Southeast Asia. We also achieved June quarter revenue records in both developed and emerging markets and saw double digit growth in most emerging markets. This year's WWDC was a wonderful showcase of our latest innovations. We were tremendously excited to unveil the all new Siri AI, a completely reimagined version of Siri that is profoundly capable, deeply personal, and integrated seamlessly across our platforms. And we've been absolutely thrilled by the response from people who've been using Siri AI in the developer and public betas. The reviews from early users have been phenomenal, and it's been so wonderful to hear from people who are excited about the capabilities we've built. And it underscores our philosophy that building AI that is private and Based on Personal Context can change how users find information and get things done with our products in a way that truly enriches their lives. We really couldn't be more excited about it, and we are feeling incredibly enthusiastic about the impact it's going to have. At WWDC, we also announced new tools to help parents keep kids safe online, and we were pleased by the overwhelmingly positive reaction. New child safety features like Ask to Browse and Time Allowances will help parents encourage kids to develop healthy digital habits. These new tools integrate guidance from leading clinical and child development research, including the American Academy of Pediatrics. Our goal is to make it easier for parents to manage what their children see, who they interact with, and how and when they can use their devices. We're looking forward to bringing these new capabilities to users this fall, in addition to amazing new updates across our operating systems. Now let me turn to the results for the quarter, beginning with iPhone. iPhone revenue for the June quarter was $54.3 billion, up 22% from a year ago. We achieved June quarter records in every geographic segment and set a June quarter record for upgraders. According to IDC, we gained share globally during the quarter. As I've said before, this is the most powerful and most popular iPhone lineup we've ever had. More people are relying on iPhone every day for AI powered by the outstanding performance of A19 and A19 Pro. Across the lineup, iPhone continues to deliver the performance, battery life, Thank you for joining us. growing an impressive 29% from a year ago despite significant supply constraints. This revenue growth was driven by the incredible strength of our latest lineup with MacBook Pro and the all-new MacBook Neo. According to IDC, we gained share globally. We also set a June quarter revenue record in developed markets and an all-time record in emerging markets with particular strength in Greater China where we had an all-time revenue record. In addition, we achieved all-time records for upgraders and customers new to Mac. With the power of Apple Silicon, the Mac lineup delivers outstanding power-efficient performance, massive memory bandwidth, and next-level AI capabilities. Mac continues to be the ultimate AI powerhouse, excelling at high throughput, on-device inference, and creation across A broad range of AI workloads. And we're seeing customers increasingly put those capabilities to work from using Mac Mini as a powerful platform for agentic AI to deploying clusters of Mac Studio systems to run frontier class models locally. Across the lineup, customers continue to embrace the Mac family. MacBook Neo has been especially popular. with its distinctive design and excellent value resonating with customers around the world. And we're continuing to work hard to meet demand. MacBook Air, the world's most popular laptop, continues to deliver the portability and performance customers love with M5. And MacBook Pro, powered by M5 Pro and M5 Max, remains a go-to choice for professionals tackling the most demanding AI Development, and Creative Workflows. In iPad, revenue was $6.2 billion for the June quarter. iPad continues to be the ultimate go-anywhere, do-anything device for students, entrepreneurs, and creators of all kinds thanks to its incredible power, portability, and versatility. The addition of M4 to iPad Air has made it even more capable, delivering a significant performance boost for everything from personal productivity and immersive learning to advanced creative workflows. Together with the remarkable performance of iPad Pro, the amazing value and versatility of iPad, and the ultra-portable iPad Mini, we're offering customers our strongest iPad lineup ever. Revenue for wearables, home, and accessories was $7.9 billion, up 6% from a year ago. We grew in every geographic segment and achieved a June quarter record for upgraders for Apple Watch. Our Apple Watch lineup brings together the most comprehensive set of health and fitness features we've ever had. We're delivering useful features backed by research to enable users to better understand their health and wellbeing. It's gratifying to receive almost daily reminders of the meaningful impact Apple's health innovations are having for users all over the world, changing, even saving lives. Meanwhile, we continue raising the bar across our AirPods lineup, whether it's the immersive listening experience of AirPods Pro 3 or the premium listening experience and exceptional active noise cancellation of AirPods Max 2. And with live translation powered by Apple intelligence, People are crossing language barriers and connecting like never before. As I mentioned earlier, we're excited about the work we're doing on the next generation of Apple intelligence, including Siri AI and the AI features we're developing across our platforms. These experiences are intuitive and useful, while also deeply integrated in a way that's personal and private with the latest models running on device, and on servers using private cloud compute. We began laying the groundwork for users to have the best possible experience with AI when we introduced the neural engine in 2017. Ever since then, we've innovated and invested deliberately in silicon systems and scalable unified memory architecture designed with AI at their core. What sets Apple apart is the unique combination of massive unified memory bandwidth All built around the customer experience from the ground up. The result is that Apple has created the world's best hardware to experience AI, whether using Apple intelligence, including Siri AI, or third-party offerings. That's why developers and researchers are increasingly using Apple devices to build ever more advanced tools and models. Turning to services, revenue was $30.7 billion, a June quarter revenue record and up 12% from a year ago despite significant sequential foreign exchange headwinds. We also set an all-time revenue record in developed markets and a June quarter record in emerging markets. Apple TV continues to leave audiences spellbound. With new releases like Widow's Bay and Cape Fear alongside returning favorites like Silo and Sugar. And next week, we're excited that Ted Lasso is back for its fourth season. It was wonderful to see Apple TV earn the industry's top honors, adding Tony Awards this year to its Emmy, Grammy, and Oscar wins. We reached that milestone faster than any streamer in history. We're also looking forward to this year's Emmy Awards, where Apple has landed a record 89 nominations, leading all networks in both the major drama and comedy series categories with three outstanding drama series nominations and three outstanding comedy series nominations. Widows' Bay also stands out as the year's most nominated new program, earning 19 Emmy nominations. In the six and a half years since launch, Apple TV has earned more than 850 wins and nearly 3,800 nominations. In time for the World Cup, we expanded Apple Sports to include more than 170 countries and regions worldwide and made it easier than ever for fans to follow every moment of the tournament from the opening game to the final whistle. At the same time, we're halfway through an unforgettable year of F1, and Apple TV subscribers have been tuning in all season to follow their favorite drivers and teams. In retail, we were pleased to announce Apple Upgrade this week for customers in the U.S. Apple Upgrade is a new hardware leasing program launched in partnership with Klarna and makes it even easier for customers to get their hands on Apple's latest products with a plan that's right for them. In all of our work We're thoughtful and intentional in how we show up for our users and across our communities. That means innovating to protect user privacy with the next generation of Apple intelligence or helping parents keep kids safe, as I mentioned earlier. In honor of Global Accessibility Awareness Day, we unveil new features to help users get more out of the products they use every day. New intelligent capabilities are coming to voiceover, magnifier, voice control, and accessibility reader to make them more useful and intuitive. We're also using on-device speech recognition to generate subtitles for video content without captions. And Apple Vision Pro is adding a feature for power wheelchair users to control drive systems using just their eyes. All of these features were born out of Apple's longstanding commitment to ensuring that the benefits of technology are shared with everyone. As we continue to develop new capabilities for users around the world, we're also doing our part to invest in innovation close to home. Last year, we made a $600 billion commitment to the U.S. over four years, and now, as we said before, we plan to reinvest the tariff refunds we've received into the U.S. We're pleased with the progress we've already made advancing the American supply chain. Earlier this month, Apple announced a new agreement with Broadcom to design and produce custom silicon components and cutting-edge wireless connectivity technologies. The new multi-year agreement with Broadcom which is part of Apple's American manufacturing program is expected to exceed $30 billion. This marks our largest ever American manufacturing program commitment. It's also an important step forward in our work to build an end-to-end silicon supply chain here in the U.S. We're excited for the upcoming opening of the Apple Advanced Manufacturing Center in Houston. The Center is located in a facility where we currently assemble advanced AI servers. Later this year, we'll make Mac Mini there too. The Center will teach students, supplier employees, and business of all sizes the same innovative processes we use to make our products. The goal is to empower American manufacturers to take their work to the next level and strengthen the entire advanced manufacturing ecosystem. We have an exciting fall ahead and an incredible future beyond. Our roadmap is phenomenal, and we are so excited about the way Siri AI will enrich our users' lives. Throughout all of it, we will remain guided by our North Star, building the best products and services to enable people to do magical things It's a special privilege to be part of people's lives in lasting and meaningful ways, helping them to create, connect, and experience the world around them. I couldn't be more excited to watch our phenomenal story of innovation continue to unfold, and I've never been more confident that the best is yet to come. With that, I'll turn it over to Kevin.

Thanks, Tim, and good afternoon, everyone. Here's a quick rundown of our key financial metrics. Thank you for joining us. has reached another all-time high across all major product categories and geographic segments. Services revenue was $30.7 billion, up 12% year over year. We set revenue records in every services category, including all-time records in cloud services and payment services. Company gross margin was 50.1% of 80 basis points sequentially. This included a benefit from tariff refunds which had a favorable impact of approximately two percentage points. When you remove this favorable impact, we would have been at the midpoint of the guidance range we provided last quarter. Products gross margin was 40.1%, up 140 basis points sequentially. This also included a benefit from the tariff refunds I just mentioned, which had a favorable impact of over two and a half percentage points. Services gross margin was 75.6%, Down 110 basis points sequentially, driven by a different mix. Operating expenses came in at $19.1 billion, up 23% year-over-year, driven by investments in R&D. Net income was $29.8 billion. Diluted earnings per share was $2.02, up 29% year-over-year, and included 11 cents of favorable impact from tariff refunds. Operating cash flow was very strong at $34.4 billion. All three of these metrics set June quarter records, even when excluding the tariff refund benefit. Now, I'm going to provide some more details for each of our revenue categories. iPhone revenue was $54.3 billion, up 22% year over year, driven by the iPhone 17 family. We grew double digits in the vast majority of markets we tracked. and reached June quarter revenue records across both developed and emerging markets. The iPhone active install base grew to an all-time high and set a June quarter record for upgraders. According to a recent survey from World Panel, iPhone was the top-selling model in the U.S., urban China, the U.K., France, Australia and Japan. We were thrilled with the response to the iPhone 17 family. Customer satisfaction in the U.S. Thank you for joining us. We continue to attract new customers to the product around the world. As Tim mentioned, Mac had its best quarter ever for customers new to the Mac and for upgraders worldwide, including in the U.S., China mainland, and India. And in the U.S., customer satisfaction for Mac was recently measured at 95%. iPad revenue was $6.2 billion, down 6% year over year, driven by the continued difficult compare Thank you for joining us. and we saw growth in both developed and emerging markets. The wearables install base reached a new all-time high. We set a June quarter record for upgraders on Apple Watch and over half the customers purchasing an Apple Watch during the quarter were new to the product. And in the U.S., customer satisfaction on Apple Watch was reported at 95%. Our services revenue reached a June quarter record of $30.7 billion, up 12% year-over-year Thank you for joining us today. Thank you so much for joining us today. by splitting bills with Apple Cash using visual intelligence. Turning now to enterprise and education, organizations are using the Apple platform to drive AI innovation and empower the next generation of students. Starting with enterprise, Morgan Stanley has deployed over 20,000 iPhone 17 devices globally as part of a shift from employee-owned to corporate-owned devices for reliability and security. More companies are choosing Mac for on-device AI advantages, including lower costs, Thank you for joining us. Thank you for joining us today. Peninsula School District 401 moved over 8,000 students from Chromebooks to MacBook Neo. And in Oklahoma, Midwest City, Dell City School District purchased over 6,000 MacBook Neos to become an all-Apple district for students. In fact, in the last quarter, about half of the MacBook Neo large purchases by U.S. education institutions displaced Windows and Chromebook devices. Let's turn to our cash position and capital return program. We ended the quarter with $147 billion in cash and marketable securities and $84 billion in total debt. During the quarter, we returned $33 billion to shareholders. This included $4 billion in dividends and equivalents and $25.8 billion in share repurchases. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Suhasini referred to. The color we're providing assumes that global tariff rates, policies, and their application remain in effect as of this call, and the global macroeconomic outlook does not worsen from today. We also expect our September quarter total company revenue to be impacted by two main factors. First, we expect foreign exchange to be a sequential headwind of about 2.5 percentage points to the year-over-year total company growth rate from the June quarter Thank you for joining us today. Thank you for joining us. We expect gross margin to be between 47% and 48%. This includes an expected benefit of approximately one percentage point related to tariff refunds. We expect operating expenses to be between $19.1 billion and $19.4 billion. We expect OINE to be around $350 million, excluding any potential impact from the market-to-market of minority investments. And our tax rate to be around 16.5%. Finally, today, our Board of Directors has declared a cash dividend of 27 cents per share of common stock payable on August 13th, 2026 to shareholders of record as of August 10th, 2026. Before we take questions, let me turn it back over to Tim.