Apple Tumbles On China, Service Revenue Miss
The Thursday rebound in the Nasdaq 100 - largely on the coattails of Microsoft and the expectations that further liquidations by that 25 year old Leopold guy are over - has been powerful, though much of the urgency has come from the same high-beta corners punished hardest during the semiconductor rout. That helps stabilize the tape, but it doesn’t resolve concerns around capex spend or Chinese chip capabilities. Amazon speaks directly to the hyperscaler debate through AWS and spending plans. And while Apple is not at the center of concerns about hyperscaler spreads, at nearly $5 trillion in market cap, its results carry enough weight to shape sentiment across a market short on conviction.
Consensus looks for Apple revenue growth of roughly 16% to nearly $109 billion, with the iPhone cycle and services doing the heavy lifting. The broader read-through is whether consumer demand remains firm, whether margins can absorb tariff and chip-cost pressure, and whether one of the world’s largest companies can still generate enough growth to support the premium embedded across mega-cap tech. A set of strong reports would give the rebound something more credible than short covering, even if it leaves the sector’s structural concerns intact.
There’s also some ceremony to the moment. Tim Cook’s final earnings call closes an extraordinary chapter before John Ternus takes the baton, but as Bloomberg's Brendan Fagan notes, nostalgia will not carry the stock or the broader sentiment.
With that in mind, here is what Apple reported for the recently concluded June 30 (fiscal Q3) quarter:
Broken down by product:
... we see that Apple is in desperate need of a new revenue stream: even Services is now rolling over while the rest is a melting ice cube mess, and once AAPL's price hikes kick in, sales will crater.
Mac sales beat expectations as pent up demand for the M5 MacBook Air, M5 Pro/Max MacBook Pro and of course the hot-selling MacBook Neo, should resulted in a big beat. The question is what is the margin on these products now that their components as much, much more expensive.
Yet one place where revenue unexpectedly missed was Apple's heretofore Golden calf, namely Services, which unexpectedly came light by almost $1 billion to estimates, rising just 12% to $30.74 billion, and missing estimate $31.36 billion. Since this is the highest margin product line, any slowdown here will set off alarm bells for the bulls.
Taking a closer look at the Geographic breakdown, China stood out because after several quarters of solid growth (after several years of disappointment) revenues missed again (along with Japan this time):
Here results were a mirror image of last quarter, when the US missed but was more than offset by Chinese sales; this time it's China (and Japan) that missed, in what appears to be another major slowdown in Chinese sales growth.
Putting it all together, it appears that the stock which in recent weeks was priced to perfection - and as a FCF positive substitute to the rest of the AI complex - is getting hit on the Service revenue and China miss. As Bloomberg puts it, "though total revenue topped estimates, the China sales amounted to $18.8 billion in the fiscal third quarter, well short of the $19.6 billion estimated by analysts. Revenue from services was $30.7 billion, compared with a $31.4 billion projection."
Apple’s progress in China has been closely watched by investors and analysts as it recovers from a downturn in that country. The company is still growing in the market, but hasn’t bounced back as quickly as some were looking for, and as shown above, the growth rate is rapidly slowing... again.
Apple also has been struggling with shortages of memory chips and computer processors, a situation that forced the company to raise prices on Macs and iPads last month. The supply crunch has led to extended wait times on key computers like the Mac mini and Mac Studio. Once the new iPhone hits the street with a price some 20% higher, watch for total sales to tumble.
Elsewhere, this quarter serves as a swan song of sorts for CEO Tim Cook, who will hand the reins to hardware head John Ternus on Sept. 1. Cook, Apple’s leader since 2011, diversified the product lineup and increased annual sales to nearly half a trillion dollars.
AAPL stock had been up 23% this year heading into the results, outpacing many tech peers. Apple reclaimed its title as the world’s most valuable company in recent days - overtaking Nvidia - in part because it’s seen as a safe haven from runaway AI spending. The company has a current market value of almost $5 trillion, although it is now again below that after the slide after hours.
The company also is making some changes to how it offers products. On Tuesday, it rolled out a device leasing program called Apple Upgrade, allowing users to essentially subscribe to iPhones, iPads and Macs and trade them in at the end of their lease terms. The program, which resembles car leasing, will likely mitigate the recent price increases for many buyers.
Apple stock slumped more than 4% in after hours action, offsetting some of the surge in Amazon stock.
Tyler Durden Thu, 07/30/2026 - 17:25
Continue reading...
[ H/T ZeroHedge ]
The Thursday rebound in the Nasdaq 100 - largely on the coattails of Microsoft and the expectations that further liquidations by that 25 year old Leopold guy are over - has been powerful, though much of the urgency has come from the same high-beta corners punished hardest during the semiconductor rout. That helps stabilize the tape, but it doesn’t resolve concerns around capex spend or Chinese chip capabilities. Amazon speaks directly to the hyperscaler debate through AWS and spending plans. And while Apple is not at the center of concerns about hyperscaler spreads, at nearly $5 trillion in market cap, its results carry enough weight to shape sentiment across a market short on conviction.
Consensus looks for Apple revenue growth of roughly 16% to nearly $109 billion, with the iPhone cycle and services doing the heavy lifting. The broader read-through is whether consumer demand remains firm, whether margins can absorb tariff and chip-cost pressure, and whether one of the world’s largest companies can still generate enough growth to support the premium embedded across mega-cap tech. A set of strong reports would give the rebound something more credible than short covering, even if it leaves the sector’s structural concerns intact.
There’s also some ceremony to the moment. Tim Cook’s final earnings call closes an extraordinary chapter before John Ternus takes the baton, but as Bloomberg's Brendan Fagan notes, nostalgia will not carry the stock or the broader sentiment.
With that in mind, here is what Apple reported for the recently concluded June 30 (fiscal Q3) quarter:
- EPS $2.02 vs. $1.57 y/y, beating estimates of $1.89
- Revenue $109.42 billion, +16% y/y, beating estimates of $108.85 billion
- Products revenue $78.68 billion, +18% y/y, beating estimate $77.25 billion
- IPhone revenue $54.25 billion, +22% y/y, beating estimate $53.6 billion
- Mac revenue $10.35 billion, +29% y/y, beating estimate $8.62 billion
- IPad revenue $6.19 billion, -5.9% y/y, missing estimate $6.89 billion
- Wearables, home and accessories $7.88 billion, +6.5% y/y, beating estimate $7.87 billion
- Services revenue $30.74 billion, +12% y/y, missing estimate $31.36 billion
Broken down by product:
... we see that Apple is in desperate need of a new revenue stream: even Services is now rolling over while the rest is a melting ice cube mess, and once AAPL's price hikes kick in, sales will crater.
Mac sales beat expectations as pent up demand for the M5 MacBook Air, M5 Pro/Max MacBook Pro and of course the hot-selling MacBook Neo, should resulted in a big beat. The question is what is the margin on these products now that their components as much, much more expensive.
Yet one place where revenue unexpectedly missed was Apple's heretofore Golden calf, namely Services, which unexpectedly came light by almost $1 billion to estimates, rising just 12% to $30.74 billion, and missing estimate $31.36 billion. Since this is the highest margin product line, any slowdown here will set off alarm bells for the bulls.
Taking a closer look at the Geographic breakdown, China stood out because after several quarters of solid growth (after several years of disappointment) revenues missed again (along with Japan this time):
- Greater China rev. $18.82 billion, +22% y/y, missing estimate $19.58 billion
- Americas rev. $45.78 billion, +11% y/y, beating estimate $45.42 billion
- Europe revenue $29.40 billion, +22% y/y, beating estimate $27.58 billion
- Japan revenue $6.55 billion, +13% y/y, missing estimate $7.49 billion
- Rest of Asia Pacific revenue $8.87 billion, +16% y/y, beating estimate $8.71 billion
Here results were a mirror image of last quarter, when the US missed but was more than offset by Chinese sales; this time it's China (and Japan) that missed, in what appears to be another major slowdown in Chinese sales growth.
Putting it all together, it appears that the stock which in recent weeks was priced to perfection - and as a FCF positive substitute to the rest of the AI complex - is getting hit on the Service revenue and China miss. As Bloomberg puts it, "though total revenue topped estimates, the China sales amounted to $18.8 billion in the fiscal third quarter, well short of the $19.6 billion estimated by analysts. Revenue from services was $30.7 billion, compared with a $31.4 billion projection."
Apple’s progress in China has been closely watched by investors and analysts as it recovers from a downturn in that country. The company is still growing in the market, but hasn’t bounced back as quickly as some were looking for, and as shown above, the growth rate is rapidly slowing... again.
Apple also has been struggling with shortages of memory chips and computer processors, a situation that forced the company to raise prices on Macs and iPads last month. The supply crunch has led to extended wait times on key computers like the Mac mini and Mac Studio. Once the new iPhone hits the street with a price some 20% higher, watch for total sales to tumble.
Elsewhere, this quarter serves as a swan song of sorts for CEO Tim Cook, who will hand the reins to hardware head John Ternus on Sept. 1. Cook, Apple’s leader since 2011, diversified the product lineup and increased annual sales to nearly half a trillion dollars.
AAPL stock had been up 23% this year heading into the results, outpacing many tech peers. Apple reclaimed its title as the world’s most valuable company in recent days - overtaking Nvidia - in part because it’s seen as a safe haven from runaway AI spending. The company has a current market value of almost $5 trillion, although it is now again below that after the slide after hours.
The company also is making some changes to how it offers products. On Tuesday, it rolled out a device leasing program called Apple Upgrade, allowing users to essentially subscribe to iPhones, iPads and Macs and trade them in at the end of their lease terms. The program, which resembles car leasing, will likely mitigate the recent price increases for many buyers.
Apple stock slumped more than 4% in after hours action, offsetting some of the surge in Amazon stock.
Tyler Durden Thu, 07/30/2026 - 17:25
Continue reading...
[ H/T ZeroHedge ]
