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After the figures were released, it was time for the explanations. Tim Cook and Kevan Parekh explained in the conference call why the margin was declining, how much money was returned to shareholders in the quarter, and why American school districts are switching en masse from Windows to Mac. The outlook for the current quarter is fixed, down to the tax rate.
Following the release of the third-quarter results, Tim Cook and CFO Kevan Parekh answered questions from six analysts. John Ternus also participated remotely but only made a brief comment. In just over an hour, they shared information that was missing from the press release: on the installed base of devices, the margin breakdown between hardware and services, capital return, and the business with enterprises and educational institutions.
Key figures at a glance
| Key figure | Q3 2026 | Change |
|---|---|---|
| Sales volume | 109.42 billion $ | +16 % |
| Products | 78.68 billion $ | +18 % |
| Services | 30.74 billion $ | +12 % |
| Net profit | 29.79 billion $ | – |
| Diluted EPS | 2,02 $ | +29 % |
| Total gross margin | 50,1 % | +80 basis points compared to the previous quarter |
| Gross margin products | 40,1 % | +140 basis points compared to the previous quarter |
| Gross Margin Services | 75,6 % | -110 basis points compared to the previous quarter |
| Operating expenses | 19.1 billion $ | +23 % |
| Operating cash flow | 34.4 billion $ | June quarter record |
Parekh pointed out that sales, earnings per share and operating cash flow would have been June quarter records even without the effect of customs refunds.
The installed base exceeds 2.5 billion devices
For the first time, Apple reported a figure exceeding 2.5 billion active devices – a record high the company reported across all major product categories and geographic segments. This baseline is the foundation of its services business and explains why the number of paid subscriptions has climbed to over 1.5 billion. According to Parekh, both billing and paying accounts reached all-time highs, with double-digit growth in emerging markets.
Sectors: Records, market shares and a special case
iPhone sales reached $54.3 billion, up 22 percent, with June quarter records in every geographic segment and a record number of switchers. According to IDC figures, Apple has gained market share worldwide. A survey by Worldpanel found the iPhone to be the best-selling model in the US, urban China, the UK, France, Australia, and Japan. 451 Research measured customer satisfaction in the US at 99 percent.
Mac sales reached $10.4 billion, up 29 percent – despite significant supply bottlenecks. In addition to the June quarter record in industrialized countries, Apple achieved an all-time record in emerging markets, and even an overall all-time record in Greater China. Apple also recorded record numbers among upgraded and new customers. Cook highlighted that customers are using the Mac mini as a platform for agent-based AI and utilizing Mac Studio clusters to run large models locally.
iPad: $6.2 billion, down 6 percent. Parekh explicitly cited the difficult comparison with the same quarter last year, when the iPad with the A16 chip was launched, as the reason. Nevertheless, the installed base reached a record high, and more than half of the buyers were purchasing an iPad for the first time.
Wearables, home, and accessories. $7.9 billion, up 6 percent, with growth in all regions. Apple Watch saw a June quarter record for upgrades; over half of buyers were new to the product.
Services. Records in every single category, including all-time records for cloud services and payment services. Parekh attributed the division's performance, which nevertheless fell short of expectations, to several factors.
Records in every region
Apple reported record June quarter revenues in all of the markets mentioned: the US, Latin America, Western Europe, India, mainland China, Japan, and Southeast Asia. The company achieved double-digit growth in every geographic segment and in most emerging markets. Record sales were achieved in both developed and emerging markets.
The margin is almost entirely explained by the storage capacity
In response to an analyst's question about margin development, Parekh was unusually precise. He stated that more than the entire difference in the gross margin – a decline of 120 basis points from 49.3 percent in the March quarter to an adjusted 48.1 percent in the June quarter – could be explained by increased storage costs. Exchange rates, he said, had played only a minor role.
The same applies to the next step: The difference between the adjusted value for the June quarter and the new forecast average of 46.5 percent (excluding tariff effects) represents a further 160 basis points, also primarily attributable to storage. This is partially offset by inventories from previous purchases, lower costs for other components, and a more favorable product mix. Cook explained elsewhere why additional storage suppliers would have little impact on this.
Cash and shareholders
Apple ended the quarter with $147 billion in cash and securities and $84 billion in total debt. $33 billion was returned to shareholders during the quarter – $4 billion as dividends and $25.8 billion through share buybacks. The dividend for the current quarter is $0.27 per share, payable on August 13 to all shareholders listed on the stock certificate as of August 10.
Businesses and schools are switching to Mac
Parekh dedicated one of the most interesting sections to the business with organizations. Morgan Stanley has rolled out over 20,000 iPhone 17s worldwide, transitioning from personal to company-owned devices. At Disney, creative teams are increasingly working on Macs to execute AI tasks locally and reduce cloud costs. The French banking giant Crédit Agricole is using on-device AI on the MacBook Pro and has reduced manual effort in regulatory processes by over 80 percent.
In the education sector, the trend is even more pronounced. Pinellas County Schools in Florida is transitioning 25,000 students at 18 high schools from Windows to MacBook Neo. Peninsula School District 401 in Washington has switched over 8,000 students from Chromebooks to MacBook Neo. Midwest City-Del City County in Oklahoma has purchased over 6,000 MacBook Neos.
The most telling figure comes at the end of this section: Roughly half of the large MacBook Neo orders placed by US educational institutions last quarter replaced Windows or Chromebook devices. The entry-level model, which has cost €799 instead of €699 since June, is thus opening up a market to Apple that the company hadn't reached for years.
Investments in the USA
Cook reaffirmed the commitment of over $600 billion to the United States over four years and reiterated that the refunded tariffs would be reinvested there. Specifically, he mentioned a multi-year agreement with Broadcom for Apple's own chip components and wireless connectivity technology, the value of which is expected to exceed $30 billion – according to Apple, the largest single commitment in its American manufacturing program.
In addition, Apple is opening an Advanced Manufacturing Center in Houston, where it is already assembling AI servers and plans to manufacture the Mac mini later this year. The company will source over 100 million components from Arizona this year.
Apple TV receives record nominations
Apple's streaming service has garnered 89 Emmy nominations, a record high. In both major categories, the service has three nominated series in each, surpassing all other providers. The new series "Widow's Bay" received 19 nominations, making it the most nominated new program of the year. In six and a half years, Apple TV has achieved over 850 awards and nearly 3,800 nominations; with this year's Tony Award win, the service is the fastest streamer to collect all four major awards. Apple Sports was expanded to over 170 countries and regions just in time for the World Cup.
The outlook in figures
Parekh outlined the following expectations for the September quarter, subject to unchanged tariffs and no deterioration in the economic environment:
| Size | Expectation |
|---|---|
| Total revenue growth | 9 to 11 % |
| Exchange rate effect | -2.5 percentage points compared to the June quarter |
| iPhone growth | middle tens range |
| Services growth | like the June quarter, after adjusting for the exchange rate effect |
| Gross margin | 47 to 48 %, including approximately 1 percentage point from customs refunds |
| Operating expenses | 19.1 to 19.4 billion $ |
| Other income | approximately 350 million $ |
| Tax rate | approximately 16.5 % |
Cook explained the significant increase in supply shortages this quarter by citing demand that exceeded Apple's own forecasts. Regarding the surcharge for storage on existing inventory prices, he referred to the logic behind Apple's pricing decisions.
What remained open
When asked about the December quarter, Parekh explicitly declined to provide an outlook. Cook remained noncommittal about whether the price increases for Macs and iPads would dampen demand, stating that retailers needed time to adjust and it was too early to make a judgment. Regarding a potential surge in iPhone sales, he said that the data did not indicate such an effect.
The answer regarding the capital intensity of Siri AI also remained vague: Apple uses a hybrid model of its own data centers and third-party cloud capacity, and how the costs will compare to potential revenues from higher-tier iCloud+ subscriptions is currently unpredictable. It was Cook's last conference call as CEO; the next one will be led by John Ternus. (Image: Shutterstock / iwonder TV)
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- Apple warns of significantly larger supply shortages
- Tim Cook's last conference call as Apple CEO
- Customs refunds boost Apple's margin
- Apple invests $11.73 billion in research – a new record
- Apple has 1.5 billion paid subscriptions
- Apple Q3 2026: $109.4 billion in the best June quarter
