Apple Tops Estimates After Tariff-Fueled Phone Shopping Rush

Apple Inc. reported its fastest quarterly revenue growth in more than three years, easily topping Wall Street estimates, after demand picked up for the iPhone and products in China.

Revenue rose 9.6% to $94 billion in the fiscal third quarter, which ended June 28, the company said in a statement Thursday. Analysts estimated $89.3 billion on average, according to data compiled by Bloomberg. Apple also predicted that fourth-quarter revenue would be up by a percentage in the mid- to high-single digits — better than the 3% that analysts had forecast.

“We saw an acceleration of growth around the world in the vast majority of markets we track, including Greater China and many emerging markets,” Chief Executive Officer Tim Cook said on a conference call with analysts.

Though US tariffs have increased Apple’s cost of doing business, they provided a sales benefit last quarter — with consumers rushing to stores to get out ahead of expected price increases. Still, this effect only amounted to 1 percentage point of the 10-point sales gain, Cook said.

The company also has been staging a comeback in China, a market where local phone brands have made inroads with consumers. Services were another bright spot, topping Wall Street projections.

Bloomberg's Sarah Frier and Tigress Financial Partners CIO Ivan Feinseth join Bloomberg Businesswek Daily to discuss.

Apple shares rose about 1.6% in premarket trading on Friday after closing at $207.57 in New York. They had been down 17% this year, putting the company well below Nvidia Corp. and Microsoft Corp. among the world’s most valuable businesses.

Apple had projected a $900 million headwind from tariffs during the third quarter, saying that revenue would grow in the low- to mid-single digits. Ultimately, the levies cost the company $800 million, Apple said Thursday. It sees tariffs adding $1.1 billion in expenses during the current period.

Third-quarter earnings rose to $1.57 a share, beating the average estimate of $1.43. In China, Apple reported revenue of $15.4 billion, up 4.4% from a year earlier. Wall Street had been looking for sales of $15.2 billion from that crucial market.

The Cupertino, California-based company generated $44.6 billion from iPhone sales during the June quarter, topping estimates of $40.1 billion. Beyond the tariff-spurred spending, the iPhone business got a boost in February from a new low-end model dubbed the 16e.

That device costs $599, far exceeding the price of the model it replaced, the $429 iPhone SE. Apple will announce its next iPhones in September, and the next-generation devices typically go on sale in the final weeks of the fiscal fourth quarter.

Services continue to be the company’s biggest growth driver, with sales rising 13% to $27.4 billion in the third quarter. Apple didn’t provide guidance for the segment when the company discussed its March results, citing uncertainty from “several factors,” but Wall Street had been looking for about $26.8 billion.

Though it’s been a bright spot for Apple, the services business faces a variety of threats. Regulators around the world are proposing changes to its App Store policies, potentially reducing revenue from software and subscriptions. Separately, the US Justice Department is likely to upend an agreement with Google that makes the search engine Apple’s default option. That arrangement generates roughly $20 billion a year for the iPhone maker.

Apple also is struggling to keep up with rivals in artificial intelligence. The company is even considering outsourcing its large language models, or LLMs, the technology underpinning generative AI, Bloomberg has reported.

On the conference call, Cook was upbeat about Apple’s progress in AI, saying the company is upping its investment in the technology. He declined to comment on whether he believes LLMs will become commoditized, saying it would give away some of Apple’s strategy. That suggests a shift toward outside technology may be in the cards.

Cook also said he was open to acquisitions if they can accelerate Apple’s road map.

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