Apple Aktie

Good afternoon, and welcome to the Apple Q2 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's CEO, Tim Cook; John Turnes will be joining after that for a brief set of remarks, and he'll be followed by CFO, Kevan Parekh. After that, we'll open the call to questions from analysts.

Please note that 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, capital allocation and future business outlook. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast, 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 10-Q and Form 10-K and the Form 8-K 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 March 28, 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. Before we get into the quarter, I wanted to take a moment to talk about the transition we recently announced. I just celebrated my 28th anniversary of being here at Apple, 15 years as CEO. In fact, this will be my 89th earnings call.

I'll always be proud of the impact Apple has had on our users' lives and I can't begin to express how grateful I am for our amazing teams. It's because of them that there is no company like Apple, and I truly believe there never will be. This moment for the transition is the right 1 for a number of reasons. First, our business has been performing extremely well. The first half of this year was very strong, growing double digits year-over-year. Second, our road map is incredible. And most importantly, we have the right leader ready to step into the role.

As I have said, there is no 1 on this planet I trust more to lead Apple into the future than John Turnes. John is a brilliant engineer, a deep thinker, a person of remarkable character and a born leader. I know he will push us to go further than we think is possible in order to deliver the greatest products and services for our users. I have been so proud to call him a colleague and a friend, and I will be even more proud to call him Apple's CEO.

Over the coming months, John and I will be working closely together to make sure this transition is perfectly smooth. I very much look forward to stepping into the role of Executive Chairman on September 1.

As I've told John, I will be here to support him in any way he needs and in any way I can. I'm incredibly optimistic about Apple's future, and I know we have the right team in place to deliver on the promise of this company.

I also want to take just a moment to share my profound gratitude for our shareholders especially our long-term shareholders for believing in Apple and for your support over the years. It means a great deal to all of us.

With that, I'd like to bring John on the call for a moment to say a few words. John?

Thanks, Tim, and thanks to everyone on the call. In my view, Tim is 1 of the greatest business leaders of all time. Stepping into the role of CEO is an incredible honor and it means a great deal to me to have Tim's trust and confidence.

I want to echo Tim's sentiment about our shareholders, especially those who have been with us for many years. Thank you so much for your confidence in our company. As you know, 1 of the hallmarks of Tim's tenure has been a deep, thoughtfulness, deliberateness and discipline when it comes to the financial decision-making of the company. And I want you to know that is something Kevan and I intend to continue when I transition into the role in September.

This is an especially exciting moment for Apple. As Tim mentioned, we have an incredible road map ahead. And while you're not going to get me to talk about the details of that road map, 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.

For now, let me simply say, I am deeply grateful to Tim, to the executive team and to everyone at Apple, and I look forward to all of the important work ahead.

And with that, let me turn it back over to Tim.

Thanks, John. Now let me turn to the quarter. Today, Apple is proud to report $111.2 billion in revenue up 17% from a year ago and a March quarter record, which was above the high end of our guidance range despite supply constraints. Customer enthusiasm for iPhone has been extraordinary, with revenue growing 22% year-over-year to achieve a March quarter record.

Services reached an all-time revenue record, growing 16% from a year ago, while EPS set a March quarter record of $2.01, up 22% year-over-year.

We set March quarter revenue records and grew double digits in every geographic segment, including strong double-digit growth in Greater China and the rest of Asia Pacific. We also achieved March quarter revenue records in both developed and emerging markets and saw double-digit growth in nearly every emerging market we track, including India.

We recently marked Apple's 50th anniversary with celebrations in our retail stores and with users around the world. It was a special moment for us to reflect on the incredible journey we've shared with our users to thank everyone who's been a part of it and to look forward to writing the next chapter in our story of innovation. We have always believed that people who think different can change the world, and we have been proud to build tools and technologies that allow them to do just that.

In March, we put an amazing showcase of human creativity and ingenuity in action with updates across iPhone, iPad and Mac. Through an unforgettable week of innovation, we also unveiled MacBook Neo, giving us an opportunity to bring the power of Mac to more people than ever before. I'll have more to say on that and all the incredible things we delivered for our customers over the last few months.

Now let's take a closer look at results from across our product line, beginning with iPhone. As I mentioned earlier, iPhone had an excellent quarter with $57 billion in revenue, a March quarter record despite supply constraints. During the quarter, we welcomed iPhone 17e, the newest addition to what is already the strongest iPhone lineup we've ever had. It brings outstanding performance and core iPhone experiences at a remarkable value for everyone from enterprise teams to consumers.

Across the lineup, this is the most powerful, capable and versatile iPhone family we've ever created. That starts with the latest in Apple silicon for iPhone, A19 and A19 Pro, which include neural accelerators in the GPU to deliver a huge boost to AI performance.

With incredible performance in battery life and deep integration of Apple Intelligence, iPhone continues to set the standard for what a smartphone can be. Customers are capturing stunning photos and videos with our most advanced camera system ever on iPhone 17 Pro and Pro Max, including an 8x optical quality zoom and the all-new center stage front camera, unlocking entirely new ways to frame, create and share their moments. In fact, during the recent mission, ARTEMIS 2 astronauts captured some truly other worthy images of earth and space using iPhone 17 ProMax.

Meanwhile, iPhone Air users are tapping into the pro level performance in our slimmest iPhone ever. And with iPhone 17, we're seeing a strong response not only from customers upgrading from previous generations, but also from people choosing iPhone for the very first time.

We've been enormously pleased with how the entire lineup has been received. In fact, the iPhone 17 family is now the most popular lineup in our history when looking at the launch through the March quarter. And according to IDC, we gained market share during the quarter.

Mac revenue was $8.4 billion for the March quarter, up 6% from a year ago despite supply constraints driven by higher-than-expected levels of demand. We're delighted with the reception of what is the most advanced Mac lineup in our history. We set March quarter records for upgraders and customers new to Mac, and according to IDC, we gained market share in the quarter.

From Mac Mini to MacBook Pro and everything in between, Mac is the best platform for AI, with Apple silicon delivering exceptional performance, industry-leading efficiency and the ability to run advanced models locally in ways that simply weren't possible before. It's so exciting to see how strongly users are embracing Mac for these capabilities.

There's tremendous enthusiasm for MacBook Neo, which made its debut during the March quarter, opening up an entirely new way to experience Mac at a breakthrough price. We've also further improved MacBook Air, already the world's most popular laptop with M5, making everyday tests faster and more responsive than ever.

MacBook Pro reaches new heights with M5 Pro and M5 Max delivering extraordinary performance and dramatically advancing what users can do with AI on a portable system.

And for desktop users, studio display pairs beautifully with Mac, while the all-new Studio Display XDR takes things even further, bringing unmatched image quality and an extraordinarily immersive experience to pro workflows.

Turning to iPad, revenue was $6.9 billion, up 8% from a year ago. iPad continues to be a great choice for students, small business owners, artists and so many others because it empowers entirely new ways to work, learn, create and connect.

It's not just about mobility. It's about versatility, delivering a uniquely flexible experience that adapts to whatever users want to accomplish.

Today, our iPad lineup is stronger than ever, led by the arrival of the M4-powered iPad Air. With a remarkable leap in performance, it raises the bar for what users can do on iPad from advanced creative workflows to powerful productivity and immersive learning. And with the addition of our latest Apple silicon along with the N1 wireless networking chip and C1X modem, users can stay seamlessly connected wherever they are.

Across Wearables, Home and Accessories, revenue for the March quarter came in at $7.9 billion, up 5% from a year ago. Apple Watch Ultra 3, Apple Watch Series 11 and Apple Watch SC continue to play an essential role in users' lives going far beyond fitness tracking to deliver meaningful insights and support for their health and well-being.

From helping users stay active and reach their fitness goals to delivering powerful science-backed help insights that can prompt meaningful conversations with care providers, Apple watches with them every step of the way.

It's tremendously meaningful to see how Apple Watch continues to empower users to better understand their health, make more informed decisions and, in many cases, change and even save lives.

During the quarter, we introduced customers to a new level of audio experience with AirPods Max 2, delivering stunning sound quality and our most advanced active noise cancellation yet. At the same time, AirPods Pro 3 combined an incredibly immersive listening experience with intelligent features that adapt to how users move, train and live.

And whether it's a call across town or a conversation across continents, AirPods make it effortless to stay connected.

AirPods can bridge languages too, thanks to live translation powered by Apple Intelligence.

In addition to live translation, Apple Intelligence brings together dozens of powerful capabilities from visual intelligence to cleanup and photos that are seamlessly integrated into the moments that matter most to our users every day. And we look forward to bringing a more personalized Siri to users coming this year.

What truly sets Apple apart is how Apple Intelligence is woven into the core of our platforms powered by Apple Silicon and designed from the ground up to deliver intelligence that is fast, personal and private. This is not AI as a stand-alone feature, but AI is an essential intuitive part of the experience across our devices. It builds on years of innovation from the neural engine to advanced on-device processing, enabling capabilities that are not only incredibly powerful, but also respectful of user privacy.

Increasingly, that same foundation is drawing developers and researchers to our products as powerful platforms for building and running Agentic AI, thanks to the unique combination of performance, efficiency and on device capabilities.

When you combine this level of integration with our relentless focus on the customer experience, it becomes clear why Apple platforms are the best place to experience AI.

Now let's turn to services, which set an all-time revenue record with $31 billion. We saw double-digit growth in both developed and emerging markets and set new all-time revenue records across most of the services categories.

There's no better place to find celebrated storytellers than Apple TV. Audiences are plotting the return to shows like your friends and neighbors shrinking and for all mankind while discovering new favorites like Widow's Bay. Apple TV has also earned its place among the most decorated names in entertainment with more than 800 wins and more than 3,400 nominations in the 6 years since launch.

This is a great time for sports fans on Apple TV, too. Formula One season kicked off in March and Apple TV subscribers in the U.S. have 1 of the best views of the track. The new MLS season is also well underway and subscribers in more than 100 countries and regions can watch every match with no blackouts. And Friday night baseball returned for its fifth year on Apple TV with a full season of marquee matchups.

In retail, we had a March quarter revenue record and saw very high levels of store traffic throughout the quarter. From New York to Chengdu to Paris, it was wonderful to see stores around the world at the center of Apple's 50th anniversary celebrations.

We were also thrilled to open the doors to our sixth store in India. It has been wonderful to see how we've continued to grow in India in recent years, part of our larger efforts to connect with even more customers in emerging markets all over the world.

At Apple, we believe powerful innovation and uncompromising quality can go hand-in-hand with sustainability. Over the last year, we've reached new milestones in the environment, including the use of recycled content in 30% of the materials in all of our products shipped in 2025, the most we've ever had. That includes the use of 100% recycled cobalt in all Apple design batteries and 100% recycled rare earth elements in all magnets. We've also achieved our goal of removing plastic from packaging with every Apple product now shipping in fiber-based packaging.

All of this is a testament to the outstanding forward thinking and innovative work of our teams. We're also making great progress in advancing American supply chain innovation. As part of our $600 billion commitment to the U.S., we were pleased to share recently that Mac Mini production is coming to America later this year expanding our factory operations in Houston with a brand-new facility.

In March, we were thrilled to welcome 4 new companies to our American manufacturing program to help manufacture essential materials and components for Apple products sold worldwide. These include sensors that support key iPhone features like camera stabilization and integrated circuits essential for features like crash detection and activity tracking. These efforts build on the progress we've made in the American manufacturing program, including the work we're doing to advance an end-to-end silicon supply chain across the U.S.

At TSMC's Arizona facility, for example, Apple is on track to purchase well over 100 million advanced chips.

As we're accelerating our long-standing support for U.S. innovation, we're also investing in America's workforce. We're looking forward to opening the doors to an all-new advanced manufacturing center in Houston later this year, which will provide hands-on training led by Apple experts and tailor-made for students, supplier employees and American businesses. Whether around the world or in our own backyard, we're proud of the difference Apple has made to enrich lives and support the communities we serve.

Looking ahead, we're delighted to welcome developers back to Apple Park for WWDC 26. We can't wait to share what we've been working on from AI advancements to exciting new software and developer tools. It's going to be an incredible week. As always, we remain in relentless pursuit of even more powerful innovations guided by our North Star our users. As we celebrated 50 years of Apple, we are even more excited and more optimistic about the next 50 years and beyond.

With that, I'll turn it over to Kevan.

Thanks, Tim. And good afternoon, everyone. Our revenue of $111.2 billion was up 17% year-over-year, a March quarter revenue record. We saw strong performance around the world with March quarter revenue records in every geographic segment.

Foreign exchange was about a 2.5 percentage point tailwind to the March quarter growth rate. We also faced supply constraints on iPhone and to a lesser extent on Mac. We believe if we remove the favorable benefit from foreign exchange, and add back the unfavorable impact from supply constraints, we would have had a higher growth rate for total company revenue for the quarter.

Products revenue was $80.2 billion, up 17% year-over-year, driven by double-digit growth in iPhone, setting a new March quarter record. Our installed base of over 2.5 billion active devices has reached another all-time high across all major product categories and geographic segments.

Services revenue was $31 billion, up 16% year-over-year. We saw strong performance across the board with double-digit growth in the vast majority of the markets we track.

Company gross margin was 49.3%, above the high end of our guidance range and up 110 basis points sequentially.

Product gross margin was 38.7%, down 200 basis points sequentially.

Services gross margin was 76.7%, up 20 basis points sequentially.

Operating expenses landed at $18.9 billion, up 24% year-over-year. This was slightly above the high end of our guidance range due to a onetime expense in SG&A.

Net income was $29.6 billion and diluted earnings per share was $2.01, up 22% year-over-year.

Both net income and diluted EPS achieved March quarter records and drove a very strong level of operating cash flow at $28.7 billion.

Now I'm going to provide some more details for each of our revenue categories. iPhone revenue was $57 million, up 22% year-over-year, driven by the iPhone 17 family. IPhone grew double digits in the majority of markets we track, including the U.S., Latin America, Greater China, Western Europe, India, Japan and Southeast Asia. The iPhone active installed base grew to an all-time high, and we set March quarter record for iPhone upgraders. According to a recent survey from World Panel, iPhone was a top-selling model in the U.S. Urban China, the U.K., Australia and Japan.

We have been extremely pleased with the positive reception of the iPhone 17 family. In fact, customer satisfaction for the iPhone 17 family in the U.S. was recently measured at 99% by 451 Research.

Mac revenue was $8.4 billion, up 6% year-over-year driven by the strength of the recent product launches, including MacBook Neo. We grew in both developed and emerging markets with double-digit growth in many emerging markets, including India and Indonesia.

As Tim mentioned earlier, we had a March quarter record for customers new to the Mac, and this helped drive a new all-time record for the overall Mac installed base. And in the U.S. customer satisfaction for Mac was recently reported at 97%.

iPad revenue was $6.9 billion, up 8% year-over-year, driven by the continued strength of the A16 powered iPad and the M5 powered iPad Pro. The iPad installed base reached a new all-time high as iPad continued to reach new customers around the world.

During the quarter, over half of the customers who purchased an iPad were new to the product. Many of these customers are in our emerging markets where we grew iPad revenue by double digits, including in India, Mexico and Thailand. And based on the latest reports from 451 Research, customer satisfaction was 98% in the U.S.

Wearables, Home and Accessories revenue was $7.9 billion, up 5% year-over-year, driven by strength in wearables and accessories. We were pleased to see strength in our emerging markets where we set a new March quarter revenue record. The wearables installed base reached a new all-time high, with over half of the customers purchasing Apple Watch during the quarter being new to the product. And in the U.S., customer satisfaction on Apple Watch was measured at 96%.

Our services revenue reached an all-time high of $31 billion, up 16% year-over-year. The strong performance was broad-based, with all-time records in both developed and emerging markets. And as Tim mentioned, we also set all-time revenue records in most of the services categories.

We are optimistic about the future of our services business, with our large installed base of over 2.5 billion active devices, we have an incredibly strong foundation for growth opportunities.

Both transacting and paid accounts reached new all-time highs in the quarter, as we continue to see more customers leveraging our services offerings. And we continue to improve the quality and expand the breadth of our services from the expansion of features like Tap to Pay now available in over 50 markets, to deeper support for enterprise customers.

Building on this, we launched Apple Business, a new all-in-one platform that combines our hardware, software and enterprise services enabling companies to efficiently manage their deployments and scale their business. We continue to see more organizations in enterprise, choosing Apple's devices for performance and productivity.

Marsh, a leading professional services firm deployed a large-scale refresh of corporate devices to iPhone 17 as part of a commitment to security alongside adopting Mac for internal AI development.

With Apple Silicon and its powerful unified memory architecture, leading AI developers like Perplexity are choosing Mac as a preferred platform to build enterprise-grade AI assistance that power autonomous agents and boost workplace productivity.

Across the Mac lineup, customers are finding the right device for their needs. From MacBook Pro and MacBook Air, to our newest addition, MacBook Neo, which delivers an unprecedented combination of quality, value and industry-leading security that is resonating strongly in enterprise and education.

Kansas City Public Schools, for example, is switching their high school students from Windows laptops and Chromebooks to MacBook Neo, completing their transition to an all apple district. And in India, leading enterprise software provider, Freshworks, deployed over 5,000 MacBook Pro and MacBook Air to accelerate their AI development.

Let's turn to our cash position and capital return program. We ended the quarter with $147 billion in cash and marketable securities. We had $5.8 billion of debt maturities and commercial paper remain unchanged at $2 billion, resulting in $85 billion in total debt. Therefore, at the end of the quarter, net cash was $62 billion.

During the quarter, we returned $15 billion to shareholders. This included $3.8 billion in dividends and equivalents and $11 billion through open market repurchases of 42 million Apple shares.

Our repurchase activity at any time can be affected by a number of factors that we take into account. And as you're aware, we recently announced a CEO transition.

Taking a step back, we plan to continue our capital allocation philosophy, but first, making all the necessary investments needed to support the business and then returning excess cash to shareholders over time.

Net cash neutral has been a valuable framework for our capital structure. And since 2018, we have significantly rightsized our balance sheet and reduced net cash by over $100 billion.

As we move ahead, we are no longer providing net cash neutral as a formal target, and we will independently evaluate cash and debt.

Capital returns will continue to be important to our overall approach of delivering long-term shareholder value.

Accordingly, our Board has authorized an additional $100 million for share repurchases and we're also raising our dividend by 4% to $0.27 per share of common stock. This cash dividend will be payable on May 14, 2026, to shareholders of record as of May 11, 2026.

As we move ahead into the June quarter, I'd like to review our outlook, which includes the types of forward-looking information that Suhasini referred to.

Importantly, 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 expect our June quarter total company revenue to grow by 14% to 17% year-over-year, which comprehends our best view of constrained supply.

On iPad, keep in mind, we face a difficult compare driven by the launch of the A16 powered iPad in the prior year. We expect services revenue to grow at a year-over-year rate similar to what we reported in the March quarter, after removing the favorable year-over-year impact from foreign exchange tailwinds. Keep in mind, during the March quarter, FX was a 2.5 percentage point tailwind to the total company growth rate and for services, that impact was slightly more favorable. We expect gross margin to be between 47.5% and 48.5%. We expect operating expenses to be between $18.8 billion and $19.1 billion. We expect OI&E to be around $250 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 17%.

With that, Tim and I will take questions.

Thank you, Kevan. [Operator Instructions] Operator, may we have the first question, please?

Certainly. We'll go ahead and take our first question from Erik Woodring with Morgan Stanley.

Tim, I'll save the congrats and the au revoir for next quarter, but it's been a pleasure working together. I would love, maybe, Tim, if I could ask you just to maybe contextualize the supply constraints you alluded to in your prepared remarks, meaning how much did demand outpace supply for iPhone and Mac in the March quarter? And does your June quarter guidance also reflect supply constraints for those segments? Or is that kind of an unconstrained guide as you see it today? And then a quick follow-up, please.

Yes. Erik, thanks for your comments. We were constrained during the March quarter. This was primarily on iPhone and to a lesser extent on the Mac. And as we talked about in the last call, the constraints were primarily driven by the availability of the advanced nodes our SoCs are produced on. If you look forward to the June quarter, the majority of our supply constraints will be on several Mac models given the continued high levels of demand that we're seeing. And we have less flexibility in the supply chain than we normally would.

For Mac in the June quarter, there's 2 factors that are driving the constraints. One is that on the Mac Mini and the Max Studio, both of these are amazing platforms for AI and a genetic tools and the customer recognition of that is happening faster than what we had predicted. And so we saw higher-than-expected demand.

The second reason is that the customer response to Mac Neo has just been off the charts with higher-than-expected demand and the March quarter record for customers, we set a March quarter record for customers new to the Mac, partly due to the Neo. We think looking forward that the Mac Mini and the Mac Studio may take several months to reach supply-demand balance. And so hopefully, that gives you a view of both Q2 and Q3 on the supply side.

Awesome. And then Kevan, I'd love to maybe turn to you and kind of a surprise little announcement there talking about net cash neutral still great still a great path, but we're no longer providing this as a formal target. Could you maybe expand on that update? Are we thinking about any different type of capital return policy, it doesn't seem so, but maybe give a little bit more detail when you talk about making investments. Is that organic versus inorganic? Just maybe tease that comment out a little bit more for us, so would be super helpful.

Yes. Sure, Erik. Thanks for the question. Yes, let me just kind of reiterate what we said, which is really kind of more of a comment on the capital structure. But our goal of net cash neutral has really served us well, has been a valuable framework for us and for our capital structure since 2018. We believe we're at a stage where we're evaluating cash and debt independently is really the right approach for us and allows us to make more optimal economic decisions around how we best utilize our debt and cash portfolios to support the business based on business factors and market conditions. We also believe we can manage this flexibility with -- while also being very efficient, remaining disciplined.

So with all that being said, we remain very committed to returning excess cash to shareholders. And as we talked about our investment in the business, I think, as you know, we invest in the business, first and foremost, and then look to kind of return excess cash to shareholders.

I think we have a very good track record of being disciplined. We've returned over $1 trillion to shareholders from the start of the program. Over $850 billion of which has been through share repurchases.

And so -- and the other piece as well that's really important is as part of that, we also have increased our buyback authorization by another $100 million. And that's on top of the leftover capacity from the prior authorization. So you can see the capital return piece is something very important to us. And as we talked about in the prepared remarks, important to the overall approach to delivering long-term shareholder value.

Thank you, Erik. Operator, could we get the next question, please?

Our next question is from Ben Reitzes with Melius Research.

I'll ask 2 myself. The first 1 is, there's just been a lot of talk, and it's great too, by the way, to speak with you, Tim and John and Kevan. The first question is around -- there's been some commentary around Agentic smartphone -- by the way, I don't even know what that means, but there's comments that about AI on the edge and that agents could catalyze smartphones, but also shift the smartphone kind of form factor or maybe not. I was just wondering with the rise of agents, how you would like us to think about that? Does this mean there's new products coming of a totally new form factor? Or does it change the game? Or anything high level you might want to say about that and that trend or potential nontrend?

Ben, it's Tim. We don't get into our future road map, and so I don't want to give too much info there. But I would just say that we're thrilled with how the iPhone is doing, growing 22% in the quarter and followed up from an incredible Q1 and having the strongest cycle that we've ever had in our history from the launch through March quarter, we could not be happier with it.

Okay. Well, I appreciate that. I'm sure we'll hear a lot more. Then with regard to, I guess, the question around constraints and whatnot. And Tim, I may push you 1 more time, try to do it nicely, though, just given my age. The big concern out there is maybe how margins go after the June quarter, given even the components and trends and what all these constraints. I mean, is there some kind of overarching philosophy that you want us to think about? Do you feel -- and maybe Kevan wants to weigh in on this. Do you see a lot of variability in the model? Or is 47, 48 kind of a range you think you might be able to stay in? Or is there just no visibility beyond June to answer this question? I think any comfort level there as we go throughout the calendar year would be so helpful.

Yes, Ben, let me talk about memory specifically, which I think is the root of the question. So -- and I'll go back to December for a moment and just walk you through the chronology. And in the December quarter, we really had a minimal impact due to memory. And you can kind of see that in the gross margin results. We said it would be a bit more in the March quarter, and we did see higher memory costs in the March quarter, and they were partially offset by benefits from carry in inventory that we had.

For the June quarter and what's embedded in the guidance that Kevan went through earlier, we expect significantly higher memory costs. They are also partly offset by the benefit of carrying inventory. And then where we don't give color beyond June, I can tell you that beyond the June quarter, we believe memory costs will drive an increasing impact on our business. And we'll continue to evaluate this. And as we've said before, we'll look at a range of options.

Thank you, Ben. Operator, could we have the next question, please?

Our next question comes from Michael Ng with Goldman Sachs.

I have 2 as well. First, given the success of the MacBook Neo, I was wondering if you could talk a little bit about how it's helped drive penetration with new customer segments whether that be education or value or emerging markets? And then how do you think about opportunities in underpenetrated markets more broadly? And how will your future product road map inform that strategy?

Yes. Right now, we are supply constrained on the MacBook Neo. The response has been -- we were very bullish the product before announcing it. And -- but we undercalled the level of enthusiasm that would be with it. And it's very much focused on getting the Mac to even more people than we were reaching before. We're very focused on customers new to the Mac and customers that have been holding on to their Mac a very long period of time. We're doing well with both of those.

In the -- and as Kevan alluded to in his comments, we're seeing school systems like the Kansas City public schools that are switching from Chromebooks and Windows PCs to the MacBook Neo. And I'm hearing anecdotally more and more of those kind of stories, both happening at the school system level and at the individual consumer level. And so we could not be happier with how things are going at the moment.

Great. And for the second question, I wanted to ask about advertising within services. I think Apple introduced new inventory to ads on the App Store earlier this year. Has that new ad inventory on the App Store been a notable contributor to the services growth and outperformance in the quarter? And then could you talk more broadly about your ad strategy, given the plans to also introduce ads to Maps this summer?

Yes, Mike, it's Kevin. Thanks for the question. In advertising, we did see year-over-year growth in our advertising business. As you alluded to, we recently did introduce additional ads across the App Store search results to provide developers with more ways to drive downloads and platforms that users trust. And this summer, as you said, in the U.S. and Canada, Apple Maps will feature ads during key search and discovery moments, creating a new way for local businesses to reach customers and explore new places.

But importantly, I think we believe it's possible to help businesses of all sizes grow via advertising, while still delivering a great customer experience, while also importantly, respecting people's fundamental right to privacy.

Thank you, Mike. Operator, can we get the next question, please?

Our next question is from Wamsi Mohan with Bank of America.

Tim, you noted higher impact from memory as you look beyond the June quarter. Clearly, you guys have a lot of scale, supply chain efficiencies, relationships from a long time. As you think about product position relative to your competitors. So when you think about product position and pricing, relative to competition, do you think in such times of dislocation that Apple would be strategically more focused on share gain or where potentially, you don't raise pricing and perhaps lower ends of the portfolio where your competitors are struggling or more focused on profitability? Like what's the right framework for us to think through as you enter that period? And I have a follow-up.

Wamsi, we will look at a range of options with memory costs increasing. And so I really don't want to go beyond that at this point.

Okay, Tim. On -- as a follow-up here, how is Apple thinking about the broader monetization, maybe following Ben's question here in the agent AI world? So what parts of the stack do you think Apple will be focused on internally versus maybe leveraging your partners? I mean we have some early looks into where you are developing relationships. But as we think longer term, do you think Apple will invest more where will Apple invest more heavily over the next several years? And is this at all related to your net cash comments in terms of perhaps building out more infrastructure as we enter an AI-centric work.

We are clearly investing more. You can see that in the OpEx numbers. And if you click down on those a step deeper and look at the R&D area separate than SG&A, you'll find that R&D is even accelerating much higher than the company is. And so we are clearly investing. We're investing in products and services and we see opportunities in both of those. And we could not be more excited about how the future is playing out.

Yes. And I think Wamsi, as we've talked about building on what Tim said, from the start, we said we believe AI is a really important investment area for Apple, and we're going to be doing that incrementally on top of what we normally invest in our product road map. And so I think I want to reiterate that point as well.

Thank you, Wamsi. Operator, can we get the next question, please?

Our next question is from Amit Daryanani with Evercore.

I have 2 as well. I guess first one, maybe just going back to the iPhone performance, which for a couple of quarters, you folks have had 20% plus growth despite the supply constraint. And I think the guide sort of implies the momentum will continue in June. I'd love my folks to just maybe double click and talk about what are the levers that's driving this sort of impressive iPhone growth despite the supply constraints? And then so what is the durability of this growth?

Yes. If you look at it, it's the iPhone 17 family that's driving it. And that is, as you point out, is despite the supply constraints that we're experiencing, and it's the things that are driving people to the 17 or people love the design. People love the performance. They love the durability. They love the camera. They love center stage. And they love that Apple Intelligence is integrated across the platform. From a -- where we're seeing the growth, it is amazing. We're seeing double-digit growth in the majority of the markets we track. From the U.S. to Latin America to Greater China to Western Europe to India to Japan to Southeast Asia. And we set a new March quarter record for upgraders as well. And what's driving all this is that the customer satisfaction for the 17 family in the U.S., as an example, is 99%. These numbers are just unheard of. And so we're thrilled with how things are going.

Perfect. And then, Tim, I think we have you for 1 more earnings call, but I would really appreciate if you could kind of share a bit about the upcoming transition. You have historically, I think, talked about the advice that Steve gave you when you took over, and I might be paraphrasing this, but it was around, don't ask what I would do, just do the right thing. That's really been a big win, I think, for Apple and shareholders over the last 15 years. I would love to understand what advice are you giving John to help him build on Apple's strengths while shaping up the next chapter for the company?

Well, I think Steve's advice to me lifted a huge burden. And so that advice did well for me in over the 15 years. For John, I think my advice is that -- what I told him is that 1 of the most important decisions will make us where to spend his time. And I would spend it where the greatest benefit to the company and the users are and never forget the North Star for the company. We're about making the best products in the world that really enrich other people's lives. And if you keep focusing on that and make your decisions around that, it will produce a great business, and we'll be able to build more products and do it all over again. Thank you for the question.

Thanks, Amit. Operator, could we get the next question, please?

Our next question is from David Vogt with UBS.

Maybe Tim, I want to come back to the supply chain for a second. I don't think I heard you state in your prepared remarks or in response to a question that the iPhone is constrained in the June quarter. So can you walk through kind of how you're thinking about your ability to secure not just SoC, but also memory. Are you thinking about using alternative sources of memory outside of sort of the traditional partners that you have? And just what's kind of driving that confidence that the iPhone isn't constrained given the amount of share, it sounds like you're taking in that market? And then I have a follow-up as well.

Yes. David, the current constraint for well, the constraint in the March quarter and the June quarter, the primary constraint is the availability of the advanced nodes our SoCs are produced on. Not memory. And so I don't want to predict our ability for supply and demand to match because if I look at it realistically, I think on the Mac Mini and the Mac Studio, I believe it will take several months to reach supply-demand balance. And so we're not at the point where we're saying this is going to end anytime soon. And it's not because of a problem per se other than we just undercalled the demand. And there are lead time to this as you well understand, and it takes a while to correct that. And the primary constraint from a product point of view in the -- or the majority of it for this quarter for the June quarter will be on the Mac. And it's Mac Mini, Mac Studio and the MacBook Neo. It's all of those.

And then maybe just maybe on services real quick. Obviously, relatively strong gross margins yet again. Are we getting to a point, given sort of the product mix within services? I know a lot of different offerings are growing double digits that were sort of asymptotically getting to a level where we're seeing increasingly more challenging to scale that business from a profitability perspective? Or is there still sort of low-hanging fruit in terms of volume leverage in some of the offerings or maybe lower losses in some different categories that can continue to scale gross margin across the services space?

Yes, David, it's Kevan. Thanks for the question. Look, as you know, our services portfolio contains a wide range of businesses that have different business models and profitability profiles and also are growing at different rates. So at any given time, right, the relative performance of those can impact the gross margin. This time, in particular, we look at the Q2 services margin, we talked about the fact that it increased 20 basis points sequentially. That's primarily driven by mix. And so Again, I think it's hard to speculate how that evolves over time, but we're encouraged by what we're seeing. We do have some services that are improving in profitability as they gain scale. But again, I think we have a wide portfolio that has different characteristics and can grow at different rates at different times. But overall, we're encouraged by the overall trajectory that we've seen.

Thank you, David. Operator, could we get the next question, please?

Our next question is from Samik Chatterjee with JPMorgan.

Tim, for my first question. Last quarter, you did talk about Apple Foundational models and sort of the two-pronged strategy there of the collaboration with Google as well as continuing to internally sort of work on your own models hoping you can sort of give us an update in terms of how you're able to balance those 2 priorities as well as do you feel like you need to double down and invest more to be able to balance those 2 priorities side by side? And I have a follow-up.

Yes, it's a good question. We are investing more. You can see that in the OpEx numbers. And as I've mentioned before, the R&D in particular, is -- has scaled rather significantly on a year-over-year basis. The collaboration with Google is going well. We're happy with where things are, and we're happy with the work that we're doing independently as well.

Okay. Great. And my follow-up for Kevan. Kevan, the sequential moderation in the product gross margin this year is relatively muted compared to what you've historically seen at least over the last couple of years. Is it primarily mix? Or what was the -- maybe the FX tailwind as well? How would we sort of break it down in terms of what was different this year relative to what we typically see? And if you could sort of also clarify what the impact on gross margin was for the quarter?

Sure, Samik. Let me start on products for Q2. Basically, products gross margin did decrease by 200 basis points sequentially, driven by seasonal loss of leverage and higher memory costs, as Tim alluded. If I zoom out, though, I think it's important just to look at what drove the overall company gross margin performance. And let me just give you a quick kind of rundown of that. If you look at our overall performance, right, our sequential gross margin impact was 110 basis points positively and that was driven by favorable mix, lower tariff-related costs, and that was partly offset by a seasonal loss of leverage and higher memory costs. And I do want to turn it over to Tim because we do want to provide some clarity around the lower tariff-related costs and just make a comment on that as well.

Yes. Thanks, Kevan. For the March quarter, the gross margin of 49.3% did include the impact of tariff-related costs. However, tariffs in the March quarter versus the December quarter were lower because our -- we had lower product volume, as you know, sequentially from Q1 to Q2, and there was the full quarter benefit from a reduction in the IIFA tariff rates as well as the reduced global tariff rate under Section 122.

In terms of applying for a refund of tariffs paid, we're following the established processes, and we plan to reinvest any amount we receive back into U.S. innovation and advanced manufacturing. These would be new investments and would be in addition to our prior commitments in the U.S.

And then 1 last point on your FX question. We really didn't see any sequential impact related to foreign exchange as a factor going from Q1 gross margin in Q2.

All right. Thank you. Operator, could we get the last question, please?

We'll go ahead and take our last question from Aaron Rakers with Wells Fargo.

Congrats on the quarter. I wanted to ask about a few of the end markets. I guess, particularly, Tim, if you could comment a little bit on what you're seeing specifically in China I guess from a competitive perspective, are you seeing advantages from supply constraints impacting some of your competitors? Any thoughts on the China market? And I do have a quick follow-up.

Yes. We are thrilled with the performance in Greater China. The first half of the year grew at 33%. In the March quarter, revenue was up 28%. It's a quarterly revenue record for us. The performance is really driven by iPhone, which was also a March quarter record. If you look at the individual products, iPhone was the top-selling model in urban China, the Mac Mini was the top selling desktop in China and the MacBook Air Mar was the top-selling laptop model. And so we're really doing well pretty well across the board there. And I was over there in March. The traffic in our stores grew by double digit. We were celebrating the Apple's 50th anniversary there, and it was just amazing to be a part of the community there. And so I'm really happy with how things have gone in the first half of this year.

Yes. And then maybe I'll stick with a similar theme kind of the same question on the India market. It seems like that continues to be a focal point on these last several quarterly conference calls. I mean, how are you seeing the market in India evolve around the base of iPhones and the opportunity of kind of a rising middle class, just the overall opportunity set in that large mobile market?

Yes. I think it's a huge opportunity for us. We've been focused on this for a while. It's the second largest smartphone market in the world and the third largest PC market. And despite doing extremely well there for quite some time, we still have a modest share. And so I think there's -- that really speaks to the opportunity that we have. There are a lot of people moving into the middle class there. And we've got some great products for them, both currently and coming. And if you look at the majority of customers in all of our categories from the iPhone to the Mac to the iPad to the Watch are new to that product there. And so it speaks very well to growing the installed base there. Net-net, I'm over the moon excited about India.

Thank you, Aaron. A replay of today's call will be available for 2 weeks on Apple podcast, as a webcast on apple.com/investor and via telephone. The number for the telephone replay is (866) 583-1035. Please enter confirmation code 2803309 followed by the pound sign. These replays will be available by approximately 5 p.m. Pacific Time today. Members of the press with additional questions can contact Josh Rosenstock at (408) 862-1142. And financial analysts can contact me, Suhasini Chandramouli with additional questions at (408) 974-3123. Thanks again for joining us today.

Once again, this does conclude today's conference. We do appreciate your participation.

Good afternoon, and welcome to the Apple Q1 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's CEO, Tim Cook, and he'll be followed by CFO, Kevan Parekh. After that, we'll open the call to questions from analysts.

Please note that 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, capital allocation and future business outlook. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast 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 10-Q and Form 10-K and the Form 8-K 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 December 27, 2025, 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. I am proud to say that we just had a quarter for the record books. We are reporting our best-ever quarter with $143.8 billion in revenue, up 16% from a year ago and exceeding our expectations. The demand for iPhone was simply staggering with revenue growing 23% year-over-year and all-time records across every geographic segment.

Service has set an all-time revenue record as well, up 14% from a year ago, and EPS reached an all-time record of $2.84, growing a robust 19% year-over-year. We set all-time revenue records in the Americas, Europe, Japan and rest of Asia Pacific and grew in the vast majority of markets we track. We continue to gain momentum in emerging markets which includes India, where we saw strong double-digit revenue growth. Greater China also grew 38% year-over-year, driven by iPhone, which had record upgraders and double-digit growth on switchers.

Apple's December quarter results underscore our relentless commitment to innovation to our customers and to our mission to build the best products and services in the world.

Now I'd like to take a closer look at results from across our lineup, beginning with iPhone. As I mentioned earlier, it was a fantastic quarter for iPhone with an all-time revenue record of $85.3 billion, up 23% year-over-year. This is the strongest iPhone lineup we've ever had and by far, the most popular. Throughout the quarter, customer enthusiasm for iPhone was simply extraordinary. Users were incredibly excited about everything enables them to do. iPhone 17 Pro and 17 Pro Max delivered the ultimate iPhone experience. They feature the best ever performance in battery life on an iPhone, the most advanced camera system and a striking design. iPhone Air, our slimmest and lightest smartphone yet, as powerful capabilities into an ultra slim and sleek design.

And iPhone 17 is a truly fantastic upgrade and an incredible value.

Turning to Mac. Revenue was $8.4 billion for the December quarter. We were pleased to see the Mac installed base reach another all-time high with nearly half of customers who purchased the Mac being new to the product. The M5 powered 14-inch MacBook Pro takes a huge leap in AI performance, thanks to the next-generation GPU architecture and a faster neural engine. From the world's most popular laptop for consumers and businesses in MacBook Air to the small and spectacular Mac Mini, every Mac in our lineup has something special to offer users. And with the recently released Apple Creator Studio available across Mac, iPad and iPhone, creators have more tools at their fingertips to make incredible music or turn their devices into a video production studio.

Meanwhile, iPad saw December quarter revenue of $8.6 billion, up 6% from a year ago with an all-time record for upgraders. We are proud to have our strongest lineup ever from iPad powered by A16, which is proving to be incredibly popular to iPad Air with its amazing versatility to the unbelievably powerful M5 iPad Pro with its remarkably thin and light design. It's no wonder that iPad continued to be the most popular tablet in the world. Across Wearables, Home and Accessories, revenue was $11.5 billion, with Apple Watch Ultra 3 and Apple Watch Series 11, users are tapping into a comprehensive set of health and wellness features to help them meet their health goals.

In a recent survey, we see an increasing number of users telling us they're wearing their watch to sleep, which allows them to check their sleep scores each morning and find ways to improve their sleep quality. And Apple Watch alerts are enabling important conversations between users and their doctors regarding potential signs of hypertension. These are just some of the many ways that watch is helping people live healthier lives. The response to AirPods Pro 3 has been amazing. Customers are raving about the rich immersive sound quality, the unmatched level of active noise cancellation and the noticeably improved comfort that makes them effortless to wear.

Features like live translation are also changing the way people can communicate by helping users connect across languages in real time and making everyday conversations feel more natural and accessible. Together, these innovations create an experience that feels both powerful and personal and the enthusiasm we are seeing reflects just how strongly AirPods Pro 3 are resonating with customers.

Across our product categories, we are seeing very high levels of customer satisfaction, and we are proud to report that we have a new record for our installed base with more than 2.5 billion active devices. During the quarter, we were excited to see that the majority of users on enabled iPhones are actively leveraging the power of Apple Intelligence. Since the launch of Apple Intelligence, we've introduced dozens of features, including writing tools and cleanup and made it available in 15 languages. These AI experiences are personal private, integrated across our platforms and relevant to what our users do every day. We are bringing intelligence to more of what people already love about our products so we can make every experience even more capable and effortless.

One of our most popular features is visual intelligence which helps users learn and do more than ever with the content on their iPhone screen, making it faster to search, take action and answer questions across their apps. And as I touched on earlier, we are hearing powerful stories of people using live translation to communicate seamlessly across languages. And these are just some of the many powerful AI features that are enabling our users to do remarkable things with our products, which are far and away the best platforms in the world for AI. That's a no small part because of the extraordinary power and performance of Apple Silicon. Building on our efforts in the AI space, we are also collaborating with Google to develop the next generation of Apple Foundation models. This will help power future Apple intelligence features, including a more personalized series coming this year. We're incredibly excited for what's to come with so many new experiences to unlock.

Turning to services. We achieved an all-time revenue record of $30 billion 14% higher from a year ago. Services also set all-time revenue records in both developed and emerging markets. Apple TV has seen fantastic momentum with December seeing a 36% increase in viewership over the previous year. It's no wonder with shows like Pluribus which are creating landmark cultural moments that audiences are loving. Anticipation is building for upcoming new productions like Cape Fear from Steven Spielberg and Martin Scorsese. And we are thrilled to announce that Ted Lassa will be returning for a fourth season this summer.

Six years since launch, we're excited by the growing enthusiasm viewers have for Apple TV, and we are grateful for the accolades that have followed, most recently at the Critic's Choice and Golden Globe Awards. To date, Apple TV productions have earned more than 650 wins and more than 3,200 nominations, including a recently announced Oscar nomination for best picture for F1, the movie. And speaking of F1, we're also approaching the start of a new Formula One season, and for F1 fans in the U.S., Apple TV will be the place to watch every practice qualifying, Sprint and Grand Prix. MLS fans will also be able to watch every regular and postseason game with their Apple TV subscription this year, and we're looking forward to kick off in the coming weeks.

Looking back, 2025 was a fantastic year for services as we rolled out amazing new features and broke records. Apple Music climbed all-time highs in both listenership and new subscriber growth. Apple Pay eliminated more than $1 billion in fraud for our partners last year, and we've made it available in more markets than ever before. And last year, we welcomed more than 850 million users every week on average to the App Store, the world's safest and most innovative at marketplace. Developers have now earned more than $550 billion on our platform since 2008.

In retail, we continue to bring a magical experience to our customers all around the world, and we were thrilled to have our best ever results in retail during the quarter. We were excited to open our fifth store in India in December and have plans to open another store in Mumbai soon. Wherever we are, we see ourselves as part of a larger hole. That's why we show up with our values in everything we do. That means working with partners in places like Vietnam to bring more clean water to rural areas. It means celebrating graduations of new classes of innovators from our developer academies in places such as Brazil, Indonesia and South Korea. It means 3D printing titanium cases for Apple Watch using recycled materials so that they're better for the planet without compromising quality and so much more.

We're especially proud of the work we're doing to support American innovation. Last year, we committed to invest $600 billion over 4 years in vital industries like advanced manufacturing, silicon engineering and artificial intelligence. As we're building on our long-standing investments in America, we're supporting nearly 0.5 million jobs with thousands of suppliers across all 50 states. In the year since we made our initial commitment, we're making great progress. Today, we're shipping servers to power Apple intelligence from our new manufacturing facility in Houston. Through our advanced manufacturing program, we're working with Corning in Kentucky to make 100% of cover glass for iPhone and Apple Watch. We're working with Micron, which broke ground on a new advanced chip packaging and test facility, and we continue to advance the development of an end-to-end silicon supply chain across the country sourcing 20 billion U.S. chips in 2025.

Through our Apple Manufacturing Academy in Detroit, we're already training American businesses and innovators on the latest smart manufacturing and artificial intelligence techniques. 6 months since opening, the academy is already making an enormously positive impact for businesses working alongside Apple engineers to drive productivity, efficiency and quality in their supply chains. As I said at the beginning of my remarks, this was in so many ways, a remarkable quarter for Apple. And we're excited for all the opportunities we'll have in the year ahead to deliver innovations that have never been seen before and enrich the lives of users every step of the way.

With so much to look forward to in the weeks and months ahead, I have every confidence that our best work is yet to come.

With that, I'll turn it over to Kevan.

Thanks, Tim, and good afternoon, everyone. Our revenue of $143.8 billion was up 16% year-over-year, our best quarter ever. Across the world, we set all-time revenue records in both developed and emerging markets. And we saw double-digit growth year-over-year across the majority of the markets we track, including the U.S., Latin America, Western Europe, Greater China, India and South Asia. Products revenue was $113.7 billion, up 16% year-over-year, driven by double-digit growth in iPhone, setting a new all-time record. And as Tim mentioned, thanks to our strong levels of customer loyalty and satisfaction, our installed base of active devices has now surpassed $2.5 billion, reaching another all-time high across all product categories and geographic segments. .

Services revenue was $30 billion, up 14% year-over-year. This performance continues to be broad-based with double-digit growth in almost every market we track. We also reached all-time revenue records for advertising, cloud services, music and payment services with December quarter records on the App Store and video. Company gross margin was at 48.2% above the high end of our guidance range and up 100 basis points sequentially, driven by favorable mix and leverage. Products gross margin was 40.7%, up 450 basis points sequentially driven by favorable mix and leverage. Services gross margin was 76.5%, up 120 basis points sequentially, driven by mix.

Operating expenses landed at $18.4 billion, up 19% year-over-year. This was within the range we provided and driven by increased investment in R&D. Net income was $42.1 billion and diluted earnings per share was $2.84, up 19% year-over-year. Both net income and diluted EPS were all-time records and these incredibly strong business results drove an all-time record for operating cash flow coming in at $53.9 billion.

Now I'm going to provide some more details for each of our revenue categories. iPhone revenue was $85.3 billion, up 23% year-over-year, driven by the iPhone 17 family. iPhone saw strength around the world reaching all-time revenue records in many of the markets we track, including the U.S., Greater China, Latin America, Western Europe, the Middle East, Australia and South Asia as well as a December quarter record in India. The iPhone active installed base grew to an all-time high and set a new all-time record for upgraders in aggregate and across many countries, including the U.S., China Mainland, Japan and India.

According to a recent survey from World Panel, iPhone was a top-selling model in the U.S., Urban China, the U.K., Australia and Japan. Customers are loving the latest iPhone lineup. The latest customer satisfaction for the iPhone 17 family in the U.S. was measured at 99% by 451 Research. Mac revenue was $8.4 billion, down 7% year-over-year. As we described in the last call, we faced a very difficult compare against an M4 MacBook Pro Mac Mini and iMAC launches in the year ago quarter. Despite this difficult compare, we continue to see growth in several emerging markets, including Brazil, India, Malaysia, Vietnam and more.

And as Tim mentioned earlier, the MAC installed base reached another all-time high with nearly half of the customers who purchased the MAC being new to the product. And in the U.S. Customer satisfaction for MAC was measured at 97%. iPad revenue was $8.6 billion, up 6% year-over-year, driven by the M5 powered iPad Pro and the A16 powered iPad. We continue to add new users to the iPad. In fact, over half the customers who purchased the iPad during the quarter renewed to the product. This helped the iPad installed base to reach an all-time high and we also reached an all-time high for upgraders.

Based on the latest reports from 451 Research, customer satisfaction was 98% in the U.S. Wearables, Home and Accessories revenue was $11.5 billion, down 2% year-over-year. During the quarter, we experienced constraints on the AirPods Pro 3, and we believe the overall category would have grown had it not been for these constraints. The Wearables installed base reached a new all-time high, with over half of customers purchasing an Apple Watch during the quarter being new to the product. And in the U.S., customer satisfaction was recently reported at 96%.

Our services revenue reached an all-time high of $30 billion, up 14% year-over-year. As we said earlier, we had all-time revenue records on advertising, music, payment services and cloud services where we saw a double-digit growth in paid subscribers. We continue to be optimistic about the future of our services business with our installed base of over 2.5 billion active devices, we have an incredibly strong foundation for new growth opportunities. We saw increased customer engagement across our service offerings with both transacting and paid accounts reaching all-time highs in the quarter. And we continue to improve quality and expand the breadth of our services offerings.

From new wallet features like digital ID, which provides a way for users to create an ID and wallet using information from their U.S. passport to additional ads coming to search in the App Store, which provides advertisers more ways to drive downloads from search.

Turning now to enterprise. Organizations are continuing to expand their fleet of Apple devices to drive productivity while remaining secure. Snowflake has deployed over 9,000 Mac devices company-wide establishing MAC as a primary laptop across all business units, resulting in increased performance and a reduction in support tickets. AstraZeneca is rolling out over 5,000 M5 powered iPad Pros to its pharmaceutical sales team to take advantage of AI capabilities, including Apple Intelligence, while meeting with clinicians daily.

And in Mexico, Copel, the country's largest domestic retailer recently added MacBook Air in addition to a growing fleet of over 10,000 iPad devices.

Let's turn to our cash position and capital return program. We ended the quarter with $145 billion in cash and marketable securities. We had $2.2 billion of debt maturities and decreased commercial paper by $6 billion, resulting in $91 billion in total debt. Therefore, at the end of the quarter, net cash was $54 billion. During the quarter, we returned nearly $32 billion to shareholders. This included $3.9 billion in dividends and equivalents and $25 billion through open market repurchases of 93 million Apple shares. As we move ahead into the March quarter, I'd like to review our outlook which includes the types of forward-looking information that Suhasini referred to.

Importantly, 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 expect our March quarter total company revenue to grow by 13% to 16% year-over-year, which comprehends our best estimates of constrained iPhone supply during the quarter. We expect services revenue to grow at a year-over-year rate similar to what we reported in the December quarter. We expect gross margin to be between 48% and 49%. We expect operating expenses to be between $18.4 billion and $18.7 billion, which is at a similar level to what we reported in the December quarter and driven by higher R&D on a year-over-year basis. We expect OI&E to be around $100 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 17.5%.

Finally, today, our Board of Directors has declared a cash dividend of $0.26 per share of common stock payable on February 12, 2026, to shareholders of record as of February 9, 2026.

With that, let's open the call to questions.

Operator, may we have the first question, please?

Certainly. We'll go ahead and take our first question from Amit Daryanani of Evercore.

Yes, I have 2. Maybe to start with -- there's a lot of focus on the impact of memory to hosted companies and I'd love to kind of get your perspective when you folks are guiding gross margins up into the March quarter. Just talk about, a, your comfort in securing the bits that you need for shipment? And b, how do we think about memory inflation flowing through Apple's model over time?

Yes, Amit, it's Tim. Let me back up a bit and talk about the constraints that Kevan referred to in his remarks and memory try to get both of these out at once. First of all, we were thrilled with the customer response on the latest iPhone lineup. It exceeded our expectations to say the least. And iPhone grew 23%. And what the result of that was that we exited the December quarter with very lean channel inventory due to that staggering level of demand. And based on that, we're in a supply chase mode to meet the very high levels of customer demand. We are currently constrained. And at this point, it's difficult to predict when supply and demand will balance.

The constraints that we have are driven by the availability of the advanced nodes that our SoCs are produced on. At this time, we're seeing less flexibility in supply chain than normal, partly because of our increased demand that I just spoke about. From a memory point of view, to answer your question, memory had a minimal impact on the Q1, so the December quarter gross margin. We do expect it to be a bit more of an impact to the Q2 gross margin and that was comprehended in the outlook of 48% to 49% that Kevan gave earlier.

Beyond Q2, we don't obviously provide outlooks beyond the current quarter. But we do continue to see market pricing for memory increasing significantly. As always, we'll look at a range of options to deal with that. So hopefully, that gives you the full view.

I appreciate all the clarity on that, Tim. Maybe the other second question I have for you is maybe just touch on the China strength you folks had. I think this is very close to all-time high revenues we've had in China. What's driving the strength over here? And just sort of the durability of the growth rate we saw in the December quarter would be helpful to understand.

Sure. Greater China was up 38% year-on-year. It was driven by iPhone where we set an all-time revenue record. So it was the best iPhone quarter in history in Greater China. That's driven by the customer enthusiasm for the iPhone 17 lineup. And I would tell you that during the quarter, traffic in our stores in China grew by strong double digits year-over-year. it was a terrific quarter. Our installed base reached an all-time high in both Greater China and Mainland China. And we set an all-time record for the upgraders and we saw strong double-digit growth on switchers.

And according to a survey from World panel, iPhones were the top 3 smartphones in Urban China during the quarter. So it was -- and it's really driven primarily by the product strength and the customer response to the product strength. We do see on non-iPhone products that the majority of customers that are buying a Mac and iPad or watch are still new to that product. So that's a very good sign for us. And if you look at iPad on that same survey iPad was the top tablet model in Urban China.

And according to counterpoint the MacBook Air was the top-selling laptop model, and MacMini was the top selling desktop model in the December quarter. So Overall, a great quarter in China, we could not be more happy with it.

Awesome. Thank you, Amit. Operator, can we get the next question, please?

Our next question is from Erik Woodring of Morgan Stanley.

Tim, congrats on announcing the partnership with Google, and we're all excited to what you bring to market later this year. When I think about your AI initiatives, it's clear there are added costs associated with that. We're obviously seeing that flow through in OpEx. Can you help us understand maybe what the revenue upside potential that exists with many of your competitors have already integrated AI into their devices. And it's just not clear yet what incremental monetization they're seeing because of AI, but you're always disciplined with investing. You obviously have a differentiated product. So how do you monetize AI? And what's the time line to realizing that ROI? Then a quick follow-up.

Well, let me just say that we're bringing intelligence to more of what people love, and we're integrating it across the operating system in personal and private way. And I think that by doing so, it creates great value and that opens up a range of opportunities across our products and services. And we're very happy with the collaboration with Google as well as said.

Okay. And then maybe just a follow-up. Now that you have kind of more time in data to evaluate this cycle, can you maybe help us understand what the primary factors are driving strength in the iPhone? I'm sure there's a number of factors. But if you had to point to 1 or 2, just what would they be? And how sustainable do you think those are?

I think it's different for different cohorts of where people are coming from in the device that they have. But it's a combination of things always that make the product same. It's the display. It's the camera, it's the performance. It's the new selfie camera. It's the design. The design is beloved. And so it's all of these things that come together at once and have -- are producing a very strong product cycle as witnessed by our December quarter results.

Awesome. Thank you, Eric, operator. Can we get the next question, please?

Will now go to Michael Ng of Goldman Sachs.

Wonderful I have 2 as well, if I could. First, it was encouraging to hear about the revenue growth outlook of 13% to 16% for the March quarter. I was just wondering if you could talk about any comps that we should be particularly aware of as we kind of think about each of the product categories? I know last year, you guys had MacBook Air with M4, the iPhone 16E the iPod A16 and the iPod with M3. So just wanted to ask if those things would create tough comps or is it just less of an issue just given the new product outlook?

Yes, Mike, it's Kevan. Thanks for the question. Yes, I wouldn't say there's any particular comp issue that we'd note. As you recall, last quarter, we talked about the difficult comparison we had on MAC. But there's nothing that rises to that kind of color that we'd outlined in the outlook. And so I think it's just a continuation of the strong cycle. We're seeing subjects to the constraints that I had mentioned in the prepared remarks, and that Tim alluded to a little earlier as well.

Great. Wonderful. And then just on services, advertising, strong in the quarter. I wanted to ask about some of the new growth opportunities in advertising. I know you guys are doing the new ad slots in the App Store. Maybe you could just talk a little bit about that? And then any plans to do more in advertising across other products like Maps or TV?

Yes, sure. Like what I would say, just as I step back in general, I think as we outlined, we saw really good broad-based performance in our crosser services business, so ranging from all-time records in advertising, music, payment services and cloud services. So I think we see really good opportunities across a lot of our service categories. And we continue to add new service offerings. We talked about what we added to the wallet like digital ID, and you referenced the additional kind of additional ads coming into search in the App Store, which we are excited about, it provides advertisers in more ways to be discovered.

And so I think we'll continue to look for ways to expand opportunities to add value to users and also create opportunities for Apple. I think as we talked about, we created across really significant milestone at 2.5 billion active devices. So we really feel excited about the opportunity that provides for our services business as well.

Thank you, Mike. Operator, can we get the next question, please?

The next question will be coming from Ben Reitzes of Melius.

Tim. First question is on Google partnership again. I wanted to understand how you came to that decision with regard to the AI and SRI in particular? And if there's an opportunity for you guys to share in revenue too with that partnership like you do in search.

Yes. We basically determined that Google's AI technology would provide the most capable foundation for AFM -- I'm sorry, Apple Foundation Models. And we believe that we can unlock a lot of experiences and innovate in a key way due to the collaboration. We'll continue to run on the device and run in private cloud compute and maintain our industry-leading privacy standards and doing so. In terms of the arrangement with Google, we're not releasing the details of that.

Bummer. Okay. I tried. So yes, it would be me. So the next question is on gross margin. I'm pretty shocked. I got to hand it to you, Tim, that you're able to do 48% to 49%. What's really going on there? How are you doing that with this memory, the NAND prices, is it due to mix that there's a good -- less hardware and more services and services margins are going up. How are you doing it to go to keep it at 48% to 49%?

Yes, Ben, this is Kevan. Let me start maybe by just reflecting on the Q1 gross margin. I think we talked about the fact that we landed at 48.2%. So just above the high end of the range. that we provided on the last call. And I think if you look at that performance, we were up 100 basis points sequentially. We talked about the fact that we had favorable mix. I mean, as you know, when we have a good product cycle, a strong price cycle we're seeing for iPhone, that does lend itself to a bit more favorable opportunity on the mix and leverage side. So we're having a strong iPhone cycle, as Tim outlined. And so that also transit itself. We talked about products sequentially went up by 450 basis points.

So I think, in general, I think we're just seeing favorable mix dynamics as well. Services continues to contribute as well. That business is growing double digits. So that also is a contributor. And I think that as we looked at our guidance, we're providing a similar range to where we reported in December. And there's going to be a few puts and takes. We do expect to see favorable mix in the services. As you know, when we move from Q1 to Q2, that tends to be the case, and that's partly offset by a seasonal loss of leverage. So there will be puts and takes. But again, we feel pretty good about the guide of 48% to 49%, which is similar to the range we reported in December.

All right. Thanks, Ben. Operator, could we get the next question, please?

Next question will be coming from David Vogt of UBS.

Maybe Tim or Kevan, if we could pull out a little bit, can you help us understand how you're thinking about the overall kind of smartphone market demand, particularly given where memory prices are headed, and we've heard some conversations with some other OEMs as well as component providers that are worried about either the availability of components, potential market weakness in terms of demand destruction and some of the actions to offset or higher prices? I know you don't give outlook for the full year, but how are you thinking about all of those different vectors and what that might mean for the overall smartphone market?

And then ultimately, what that might mean for demand for iPhones as we move through the rest of this calendar year?

Yes. On the supply side, I had made comments earlier about the constraint that we are seeing in Q2. We -- and that's reflected in the revenue guidance that Kevan gave earlier. The constraint, as I'd mentioned, is due to the advanced node capacity. And it's really a result of growing so well in Q1 with 23% and having less flexibility partly due to that in the process to increase it as much as we would like to increase it. Beyond Q2, I don't really want to comment on supply. Its -- supply is a function of a lot of things in the industry that move around a lot. So I wouldn't want to comment on that.

And I commented before on the -- on memory pricing. And so hopefully, that answers your question. In terms of smartphone demand we believe that based on the information that we've got is we gained share in the December quarter. Obviously, the market wasn't growing at 23%. So we feel good about doing that. And -- but I don't -- I wouldn't want to predict how the market reacts in the future. It's very difficult to do that.

Got it. At the risk of not getting this answer, I'm going to follow up with. Can you maybe help us understand, you mentioned there's a range of options that you're looking at -- how do -- how should we think about kind of like LTAs in the marketplace? I mean, is that an option as we move through the year? Or is it more spot-based from -- on a perspective, particularly around memory. Just want to get a better sense for how we should think about kind of the dynamics in the marketplace.

It's a range. And so I don't want to get more specific than that. I mean there are different levers that we can push and who knows how successful they'll be, but there's just a range of options.

Thank you, David. Operator, could we get the next question, please?

Well now we take questions from me Wamsi Mohan from Bank of America.

That's fine. Tim, on services, you grew a pretty impressive 14%. And I know you said that the App Store was a record for the December quarter but third-party data is showing a notable deceleration in app store growth, maybe 7% in the December quarter relative to your 14% growth. I was hoping if you could maybe confirm that? And secondarily, if it's correct, what might be some of the drivers of that? And what could be things that you could do to reverse that in future quarters? And I have a follow-up.

Wamsi, it's Kevan here. Look, I think I want to reiterate the fact that during December quarter, we had a quarterly record on the App Store. As you know, we don't provide specific color on how the individual services categories have done. But again, if we step back, I think we saw, again, broad-based growth across all the different categories, also across various geographies. We had all-time records in both developed and emerging markets as well. So -- and double-digit growth in both of those 2. And so I think in general, we don't provide the color at the detailed services level.

Okay. I guess back to the memory price. I appreciate you have a range of options to address that. Historically, Apple is not used a pricing lever unless FX markets got maybe very dislocated to prevent arbitrage or issues like that. But -- given some of these unprecedented moves in memory, would pricing be a lever that you would be willing to pull or push outside of every other thing that outside of everything else that you can do?

Yes, I wouldn't want to speculate on that one.

Thanks, Wamsi. Operator, could we have the next question, please?

Will now go to Samik Chatterjee of JPMorgan.

Maybe for the first one, I'm just looking at your capital investment in the first quarter, which did moderate from the last one. And wondering if the partnership with Google on Gemini and sort of help collaboration to develop the next generation of Apple Foundation and models, does that have any near-term sort of impact on your intent to use Apple private cloud? I know you emphasize sort of the rule Apple private cloud plays in the long term. But -- are there any changes on that front through this collaboration? Any thoughts around that? And I have a quick follow-up.

Yes, sure. I think -- this is Kevan here. I think in general, as Tim outlined, we weren't going to provide any details on our arrangement and collaboration with Google. Just speaking of CapEx, in general, as you know, we have a hybrid model for CapEx. And so I think that what happens is our CapEx can be volatile, independent of kind of the volume performance of our business. And as you know, our CapEx is made of several different line items that include tooling, our facilities, retail investments in our retail store, data centers. And on tooling and data centers, we leverage this hybrid model that I mentioned before, which we leverage a combination of first and third-party capacity.

So in general, it's hard to read into the CapEx and draw any conclusions. And so I think I would just say there's going to be some ebbs and flows in CapEx. Last year, remember, we did build out our private cloud compute environment. And so we did have CapEx spending related to that in our results in December.

Got it. Got it. And my follow-up probably is for you again. You did mention product gross margin and the sort of drivers there for the product gross margin improvement. When you sort of highlighted mix as a driver, can you just sort of talk through what are the big differences in mix you're seeing for iPhone 17 versus 16? And the tariffs and tariffs coming in more favorable player role at all and what you're expecting for tariffs for the next quarter?

Yes. So there's a few things to unpack there. So on the overall margin and product side, I think I mentioned that we had favorable mix of products and leverage. I think given the strong iPhone cycle we're seeing, that was, I would say, probably a higher favorability than you might have seen in maybe other cycles. And as well, as you know, in Q1, typically, we do see the impact of the cost structure of our new products that we launch. And in this case, we are seeing a more favorable offset from mix of products and leverage versus historical -- sequential changes from Q4 to Q1.

On the tariff piece, we had outlined an amount of $1.4 billion for the December quarter and we landed roughly in that range at that level.

Thank you, Samik. Operator, could we have the next question, please?

Now go to Krish Sankar of TD Cowen.

The first 1 I had was for Tim. I think you touched upon this earlier on the Gemini integration an Apple foundation model, how to think about kind of like the difference between Apple foundational model functionality and third-party models, like does the Apple Foundation model evolved to a different layer in the AI software stack? How to think about it as you partner with third-party frontier models? I had a follow-up.

Yes. Krish, you should think of it as a collaboration and we'll obviously independently continue to do some of our own stuff. But you should think of what is going to power the personalized version of SIRI is the collaboration with Google.

Got it. then, a quick follow-up for maybe Kevan or Tim, just a lot of discussion on memory pricing. Given that the memory constraint or commodities casts impacting both the smartphone and the PC markets, and Apple, arguably having more purchasing power. Do you think this is a chance for you to increase your market share, both in iPhone and MAC at the expense of competition who might have more constraints in getting access to memory?

Yes. I don't only want to talk about kind of what has happened. And we do believe, as I had shared that iPhone gained share in the December quarter. And if you look at MAC for the full year of full calendar year '25, we also believe we gained share. And so we feel very good about our position.

Thank you, Krish. Operator, could we have the next question, please?

We will now go to Atif Malik calling from Citi.

The first 1 for Tim. I think some of the industry pundits are comparing the iPhone 17 upgrade cycle to the 2020, 2021 years as some of the iPhone 12, 13 users upgrade. Curious if you agree with that view? And also, if you can layer on the impact from Apple intelligence to the refresh rate.

I think each iPhone cycle has its own unique characteristics. And so I wouldn't compare it to a specific one. I think iPhone 17, the family of 17 is a unique product that brings several very compelling features in 1 product, and it has done extremely well. And so we feel quite good about it. .

Atif, I'll just add to Tim's comment that we talked about the fact we have a large and diverse installed base of customers. And so this product has really resonated with multiple cohorts, whether you're on older devices or newer iPhones as well. So we've seen really strong reaction to the product lineup.

Great. As my follow-up, there was a blood discussion supply constraints. And I'm surprised that you guys are constrained on advanced packaging as you generally get your share at the big foundry. How long will these supply impact your ability to ship to true demand?

It's difficult to estimate demand when you haven't met the demand. And so we've -- obviously, we have internal estimates on that, but I don't want to share those. But it's very difficult. And just to be clear, it's the advanced nodes that we -- like 3-nanometer to be specific, where our SoCs or the latest SoCs are produced on as to what is gating the Q2 supply. And it's a direct result of the 23% growth, and that far outstripping what we had internally estimated and having more limited flexibility in the supply chain for some period of time. But I don't want to estimate when supply and demand will balance at this point.

Thank you, Atif. Operator, can we have the next question, please?

The next question will be coming from Aaron Rakers coming from Wells Fargo.

I have 2 as well, and I'll try and stay away from the memory question. I'm curious and obviously, a lot of focus on the China demand, but I'm curious, you also called out India. And so -- can you maybe unpack some of the things that you're seeing in the Indian market as far as iPhone traction? Any kind of color on what is a very large installed base in India that seems to be a good growth opportunity for Apple still?

Yes. Thanks for the question. We did set a quarterly revenue record during the December quarter. And to go a little further down, we set quarterly revenue records on iPhone and Mac and iPad and an all-time revenue record on services. So it was a terrific quarter in India. We really like what we see there. It's the second largest smartphone market in the world and the fourth largest PC market. So -- and we still have, despite a very nice growth history. We have modest share there. And so we think there's a huge opportunity for us there. and we could not be more excited about it.

If you look at the -- the other thing that I would point out is the that the majority of customers that are buying iPhone and Mac and iPad and watch are all new to that product. And so it speaks very well to opportunity there.

Yes. Aaron. I'd add, you mentioned the installed base, we're seeing strong double-digit growth in the installed base in India as well, which is really encouraging.

Yes. And then as a quick follow-up, kind of tied to memory, maybe not so much. But part of this current generation iPhone cycle is you clearly deepened some of your own internal silicon capabilities on the device. I'm curious if that -- if we should think about that as a lever and maybe a supportive factor to gross margin that might be underappreciated and -- any thoughts on where we go from here as far as continued opportunities of internalizing your own silicon?

Yes. I'll let Kevan talk about the gross margin. But in terms of the product, which is at the heart of what we think about in the user. Apple Silicon has just been an incredible game changer for us. starting with iPhone and then on iPad and of course, the MAC as of a few years ago. And so we believe it's a game changer and a major competitive advantage.

Yes. And as far as impact on gross margin, we have been, as you know, investing in core technologies like our own silicon, our own modem. And certainly, while those do provide opportunities for cost savings and can be let margins, they also importantly provide the differentiation that's really important for our products as well and give us more control of our road map. So I think there's a lot of strategic value to it, but also we are seeing investments in our core technologies impacting gross margin in a positive way.

Awesome. Thank you, Aaron. Operator, could we have our last question, please?

Most certainly. Our last question will be coming from Richard Kramer calling from Art Research.

I have 2 questions. Tim, when you think about how Apple might manage AI, do you see that evolving towards more edge AI or on device services versus cloud-based. And are you confident you've reserved sufficient data center capacity to support the widespread SIRI adoption, especially given that you're not following the other hyperscalers and sharply increasing CapEx?

The answer is that we see both being important, the on-device and the private cloud compute. And so we don't see it as an either/or we see it as a both and we believe it's a differentiator because of our privacy approach. In terms of do we have enough capacity. It's hard to estimate with precision what the demand will be. But we've done the -- sort of the best job that we can do and either have or are putting capacity in for it.

Okay. And you also -- you mentioned the $2.5 billion active device number but Apple Intelligence features have only been available since the 15 Pro. So can you speak at all to roughly what portion of your iPhone or overall active device installed base is now AI capable. And has this been a factor in maybe a more gradual pace of launching wider AI services?

Yes, Richard, this is Kevan. We don't provide that specific number, but it is a growing number, as you can imagine in our installed base. And so we're encouraged by the amount of devices now that are capable, but we're not going to provide a specific figure on that today.

All right. Thank you, Richard. A replay of today's call will be available for 2 weeks on Apple podcast as a webcast on apple.com/investor and via telephone. The number for the telephone replay is 866 583-1035. Please enter confirmation code (890-2968) followed by the pound sign. These replays will be available by approximately 5 p.m. Pacific Time tonight. Members of the press with additional questions can contact Josh Rosenstock at (408) 862-1142. And financial analysts can contact me, Suhasini Chandramouli with additional questions at (408) 974-3123. Thanks again for joining us today.

Once again, this does conclude today's conference. We do appreciate your participation.

Good afternoon, and welcome to the Apple Q4 Fiscal Year 2025 Earnings Conference Call. My name is Suhasini Chandramouli, Director of Investor Relations. Today's call is being recorded. Speaking first today is Apple's CEO, Tim Cook, and he'll be followed by CFO, Kevan Parekh. After that, we'll open the call to questions from analysts.

Please note that 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, capital allocation and future business outlook. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast, 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 10-Q and Form 10-K and the Form 8-K filed with the SEC today, along with the associated press release. Additional information will also be in our report on Form 10-K for the year ended September 27, 2025 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. Additionally, today's discussion will refer to certain non-GAAP financial measures. You can find a reconciliation of these measures in our fourth quarter earnings release, which is available on our Investor Relations website. 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 proud to report $102.5 billion in revenue, up 8% from a year ago and a September quarter record. Services achieved an all-time revenue record of $28.8 billion, growing 15% from a year ago. EPS came in at $1.85 setting a September quarter record. We grew in the vast majority of markets we track and had September quarter revenue records in dozens of markets, including the U.S., Canada, Latin America, Western Europe, the Middle East, Japan, Korea and South Asia. We also set a September quarter revenue record in emerging markets and an all-time revenue record in India. These results come at the close of an extraordinary year for Apple in which we achieved an all-time revenue record of $416 billion for the fiscal year.

We set all-time revenue records in emerging and developed markets. We set an all-time revenue record for iPhone. And in Services, we achieved all-time records across every geographic segment. These results reflect the tremendous customer enthusiasm for Apple products and services as well as our deep commitment to innovation. We are incredibly excited about the strength we're seeing across our products and services and we expect the December quarter's revenue to be the best ever for the company and the best ever for iPhone.

We are heading into the holiday season with a truly remarkable lineup. That includes the biggest leap ever for iPhone, which has had a tremendous response from our users around the world. Our Apple Watch lineup is more capable than ever to giving users ways to take charge of their health like never before, through new features like hypertension notifications and sleep score. And the next level sound quality and active noise cancellation of AirPods Pro 3 are hitting all the right notes for our users.

In October, we also broke new ground and power-efficient performance with the uncomparably fast M5 chip, packed with neural accelerators in each GPU core to supercharge AI workflows. iPad Pro combines game-changing features in iPad OS 26 with the power of M5 to create our most capable iPad ever. At the same time, the M5 MacBook Pro raises the bar for what users can do with a laptop while the new M5 powered Apple Vision Pro opens up amazing possibilities on its infinite canvas.

We also launched a beautiful new software design that creates a unified experience across all of our platforms for the very first time. The design is crafted with a new material called liquid glass that brings fluidity, vitality and flexibility to our products. Along with the new design, we delivered powerful new features to enable users to do even more with their devices. That includes updates to the phone and messages apps in iOS 26 to help users stay connected, continuity enhancements in MAC to deliver an even more seamless experience across devices and a powerful new windowing system that fundamentally transforms the user experience in iPad OS 26.

As we continue to expand our investment in AI, we're bringing intelligence to more of what people already love about our products and services, making every experience even more personal, capable and effortless. At the heart of it all is Apple Silicon, and we were thrilled to launch new products powered by the A19 Pro chip and M5. These incredibly advanced chips make Apple products the very best place to experience the power of AI. With Apple Intelligence, we've introduced dozens of new features that are powerful, intuitive, private and deeply integrated into the things people do every day. Features like live translation, which help users communicate across languages in real time and visual intelligence, which opens new ways to learn about and explore the world. We also introduced Workout Buddy, a new experience that uses AI to provide personalized motivational insights based on a user's workout data and fitness history.

And these joined so many others from cleanup and photos and new image creation tools to powerful writing tools, we're also seeing developers take advantage of our own device foundation models to create entirely new experiences for users around the world. We're also excited for our more personalized Siri. We're making good progress on it. And as we've shared, we expect to release it next year.

Now let's take a closer look at the September quarter results across our lineup, starting with iPhone. iPhone set a revenue record for the September quarter at $49 billion, up 6% from a year ago, with growth in the vast majority of markets we track despite supply constraints we faced on several iPhone 16 and iPhone 17 models given strong demand. Redesigned from the inside out and powered by the outstanding A19 pro chip, the iPhone 17 Pro is by far the most powerful iPhone we've ever made, setting a whole new standard for the smartphone industry. The iPhone 17 Pro also offers our best camera system ever with an all-new ADEX telephoto camera and look stunning with bold new finishes like COSMIC Orange. The iPhone Air introduces an incredibly breakthrough design and with a bigger and brighter display with promotion, the iPhone 17 is a fantastic upgrade packed with features users will love.

In MAC, we had a strong September quarter with revenue of $8.7 billion, up 13% year-over-year driven by the strength of the MacBook Air. The MacBook Air enables users to get things done easily on the world's most popular laptop. Mac mini users are loving how much performance is packed into our smallest Mac ever made while Mac Studio customers are pushing the envelope of what's possible with our most powerful Mac ever, and the latest 14-inch MacBook Pro unlocks incredible speed and next level performance with the all-new M5 chip, which delivers 3.5x faster AI performance than M4.

Turning to iPad. Revenue was $7 billion for the September quarter. Last month, we released 1 of the most attention grabbing software updates we've had in years with iPad OS 26 and we recently gave iPad users even more to love with the launch of the incredible M5 iPad Pro, which offers an incredible boost in AI performance. With an unmatched combination of power and versatility, the new iPad Pro makes every interaction delightful with its thin, light and portable design. In Wearables, Home and Accessories revenue was $9 billion. As I mentioned earlier, we were excited to unlock new possibilities for users with the launch of our newest Apple Watch lineup, making the world's most popular watch even better. That includes Apple Watch Ultra 3 with the largest display ever in an Apple watch, improved battery life and emergency SOS via satellite.

Apple Watch Series 11 brings our users the most comprehensive set of health features yet. And Apple Watch SC3 delivers advanced capabilities at an incredible value. AI and advanced machine learning are at the core of powerful health features like heart rate monitoring, fall detection, crash detection and more. With our latest Apple Watch lineup, we were proud to introduce hypertension notifications, developed using large-scale machine learning models. Hypertension is one of the leading risk factors for heart attack and stroke affecting more than 1 billion adults worldwide, and we expect to notify more than 1 million users of this life-threatening condition. We're also excited about sleep score, a simple, intuitive way to help users better understand their sleep quality and discover ways to improve it. That's something I'm sure we can all benefit from.

Meanwhile, AirPods Pro 3 have been a huge hit. You have to hear them to really understand just how remarkable they are. users and reviewers alike are praising their incredible sound quality and improved fit. They feature the world's best in-ear active noise cancellation, removing up to 2x as much noise as the previous generation. And with live translation powered by Apple Intelligence, AirPods deliver an incredibly new and exciting experience for users around the world.

Turning to Services. As I mentioned earlier, revenue was $28.8 billion for the September quarter, 15% higher year-over-year and an all-time record. We saw double-digit growth in both developed and emerging markets and set new all-time records across advertising, App Store, cloud services, Music, payment services and video. Apple TV celebrated a big night at this year's Emmy Awards with 22 wins. The studio led the night with 13 wins the most of any comedy series in Emmy's history. Severance topped all dramas with 8 wins, adding to the accolades for this landmark series. To date, Apple TV productions have now earned over 600 wins and 2,800 nominations in total, driven by powerful original storytelling. And we're excited for audiences to discover new productions like Pluribus and to catch returning favorites like slow horses and the morning show.

And soon, Apple TV will be the destination for F1 fans across the U.S. on track Day, thanks to a new partnership with Formula One. F1 is one of the most exciting and fastest-growing sports in the world. And starting next year, Apple TV will be the place for subscribers to follow every twist and turn of the new season. And in addition, F1, the movie, one of the year's biggest blockbusters will be coming to Apple TV on December 12.

During the September quarter, we also marked the 10-year anniversary of Apple News. Apple News provides access to front page news from all around the world, putting hundreds of publications right at users' fingertips.

Turning to retail. We're heading into our busiest time of year with our best ever lineup. In the last few months, we've opened new stores in emerging markets like India and the UAE and new locations in the U.S. and China. I was also in Tokyo last month for the opening of the redesigned and reimagined Apple Ginza store and the energy among the crowd was truly remarkable. When it originally opened, it was our first store outside the United States, and so it was especially meaningful to come back to welcome customers to the beautiful new space.

Everywhere we operate, and in everything we do, we strive to give the best to our users while living by our values, whether that's building new accessibility features into our most recent software releases or advancing our environmental work by using even more recycled materials in our latest lineup or providing free educational programming to train and support American businesses with our new Apple Manufacturing Academy in Detroit. And we're continuing to invest in innovation and user experiences that will transform our future.

A great example is the work we're doing in the U.S. where we're committed to invest $600 billion over the next 4 years with a focus on innovation in strategic areas like advanced manufacturing, silicon engineering and artificial intelligence. These commitments build on our long-standing investments in America, while supporting more than 450,000 jobs with thousands of suppliers across all 50 states. We built a new factory in Houston for advanced AI service, for example, which just started shipping its first products off the line, and we're leading the creation of end-to-end silicon supply chain across the country.

In recent months, I've connected with developers, innovators, artists, entrepreneurs and so many others around the world, people passionate about innovation and all the things they can do with Apple products. Each one is another reminder of why we do what we do. We're driven to empower people to do more of the things that matter most to them and enrich their lives along the way. As we head into the holiday season with our most powerful lineup ever, I couldn't be more excited for what's to come.

With that, I'll turn it over to Kevan.

Thanks, Tim, and good afternoon, everyone. Our revenue of $102.5 billion was up 8% year-over-year and is a new September quarter record. We set some temporal quarter records in the Americas, Europe, Japan and the rest of Asia Pacific and grew in the vast majority of markets we track. Products revenue was $73.7 billion, up 5% year-over-year, driven by growth across iPhone and MAC and reached a September quarter record. Thanks to our exceptional customer satisfaction and strong levels of loyalty, our installed base of active devices has reached another all-time high across all product categories and geographic segments. Services revenue was $28.8 billion, up 15% year-over-year and an all-time record. The performance was broad-based, with double-digit growth in the vast majority of the markets we track and double-digit growth across most of our services categories. Company gross margin was 47.2%, above the high end of our guidance range and up 70 basis points sequentially, driven by favorable mix.

This includes approximately $1.1 billion of tariff-related costs, which is in line with what we had estimated on our last call. Products gross margin was 36.2%, up 170 basis points sequentially driven by favorable mix. Services gross margin was 75.3%, down 30 basis points sequentially. Operating expenses landed at $15.9 billion, up 11% year-over-year, driven by increased investment in R&D. These strong levels of business performance led to September quarter records for both net income and diluted earnings per share.

Net income was $27.5 billion and diluted earnings per share was $1.85, up 13% year-over-year on an adjusted basis, excluding the onetime charge we recognized during the fourth quarter of 2024. Operating cash flow was also a September quarter record at $29.7 billion.

Now I'm going to provide some more details for each of our revenue categories. iPhone revenue was $49 billion, up 6% year-over-year, driven by the iPhone 16 family. iPhone grew in the vast majority of the markets we track with September quarter records in many emerging markets, including Latin America, the Middle East and South Asia and an all-time record in India. The iPhone active installed base grew to an all-time high, and we set a September quarter record for upgraders.

According to the recent survey from World Panel, iPhone was a top-selling model in the U.S., Urban China, the U.K., France, Australia and Japan. We continue to see very high levels of customer satisfaction in the U.S. at 98% as measured by 451 Research. Mac revenue was $8.7 billion, up 13% year-over-year, driven by MacBook Air. We grew in every geographic segment with strong double-digit growth in emerging markets. The Mac installed base reached another all-time high with nearly half of customers who purchased a Mac being new to the product. And the latest customer satisfaction for Mac in the U.S. was reported at 96%.

iPad revenue was $7 billion, flat year-over-year. Keep in mind, we faced a difficult compare against the full quarter impact of the iPad Air and iPad Pro launch from last year, offset by the better-than-expected performance on the iPad. The installed base reached an all-time high with a September quarter record for upgraders and over half of the customers who purchased an iPad during the quarter were new to the product. Based on the latest reports from 451 Research, customer satisfaction was 98% in the U.S. Wearables, Home and Accessories revenue was $9 billion, flat year-over-year. This was driven by growth on Watch and AirPods, offset by accessories, which was impacted by strong performance in the year ago quarter, driven by the iPad launches.

Both the Apple Watch and AirPods installed bases reached new all-time highs. Over half of the customers purchasing Apple Watch during the quarter were new to the product, and we also set a September record for upgraders an Apple Watch. And in the U.S., customer satisfaction was recently measured at 95%. Our services revenue reached an all-time high of $28.8 billion, up 15% year-over-year. We achieved all-time revenue records in the Americas, Europe, Japan and rest of Asia Pacific as well as a September quarter record in Greater China.

The majority of categories saw a sequential acceleration. And as Tim mentioned, we set many all-time revenue records, including payment services, where we reached an all-time revenue record and saw a double-digit growth year-over-year on Apple Pay Active Users. This strong momentum in the September quarter drove our total fiscal year services revenue to surpass $100 billion, up 14% year-over-year and our best ever. The growth of our installed base of active devices continues to offer us great opportunities for the future.

Customer engagement across our services offerings also continue to grow both transacting and paid accounts reached new all-time highs, and we continue to improve the quality and expand the reach of our services offerings. From additional markets for Apple Pay, now available in nearly 90 countries, to AppleCare One, a great new way to cover multiple Apple products in a single plan.

Turning to enterprise. We are seeing an adoption of Apple products accelerate across industries to improve productivity and drive innovation. The BMW Group has been deploying tens of thousands of iPhones, including the factory employees to further strengthen its digital capabilities and advance innovation at the company. Capital One has expanded its Mac Choice program by adding thousands more MacBook Airs across its workforce. In the Czech Republic, its largest bank, [indiscernible], continues to invest in the Apple ecosystem with over 5,000 iPhones in addition to its existing thousands of iPads and Macs. And Purdue University has launched a spatial computing hub built around Vision Pro, designed to help prepare students to lead the next wave of innovation in critical industries like semiconductor and pharmaceutical manufacturing.

Let's turn to our cash position and capital return program. We ended the quarter with $132 billion in cash and marketable securities. We had $1.3 billion of debt maturities and decreased commercial paper by $1.9 billion, resulting in $99 billion in total debt.

Therefore, at the end of the quarter, net cash was $34 billion. During the quarter, we returned $24 billion to shareholders. This included $3.9 billion in dividends and equivalents and $20 billion through open market repurchases of 89 million Apple shares. Taking a step back, we are very pleased with our record fiscal year 2025 results. As Tim mentioned, total company revenue for the year was $416 billion with growth in iPhone, Mac, iPad and Services and all-time records in the vast majority of markets we track. This revenue performance led to very strong full year operating results with all-time records for net income and for diluted EPS, which grew double digits year-over-year on an adjusted basis.

As we move ahead into the December quarter, I'd like to review our outlook, which includes the types of forward-looking information Suhasini referred to. Importantly, the color we're providing assumes that the global tariff rates, policies and application remain in effect as of this call and the global macroeconomic outlook does not worsen from today. We expect our December quarter total company revenue to grow by 10% to 12% year-over-year, which will be our best quarter ever.

We expect iPhone revenue to grow double digits year-over-year, which would be our best iPhone quarter ever. On Mac, keep in mind, we expect to face a very difficult compare against the M4 MacBook Pro, Mac Mini and iMac launches in the year ago quarter. We expect services revenue to grow at a year-over-year rate similar to what we reported in the fiscal year 2025.

We expect gross margin to be between 47% and 48%, which includes an estimated impact of $1.4 billion of tariff-related costs. And as we've said before, we are significantly increasing our investments in AI, while continuing to invest in our product road map. And so for the December quarter, we expect operating expenses to be between $18.1 billion and $18.5 billion. We expect OI&E to be around $150 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 17%. Finally, today, our Board of Directors has declared a cash dividend of $0.26 per share of common stock payable on November 13, 2025, to shareholders of record as of November 10, 2025. With that, let's open the call to questions.

[Operator Instructions]

Operator, may we have the first question, please?

Certainly, we will go ahead and take our first question from Erik Woodring with Morgan Stanley.

Congrats on the results. Tim, can you maybe share a bit more detail on why you think the iPhone 17 is having the degree of success that it is at this point. And really, the question is, do you believe this is the aged installed base replacement cycle kicking in? Or are there specific features or functionality you believe stand out this cycle versus past cycles that consumers are really looking for? And then just a quick follow-up.

Eric, thanks for your comments. I think it's all about the product. The product lineup is incredibly strong, our strongest ever. The 17 Pro is the most pro phone we've ever done. It's incredible in the design things. The iPhone air is -- feels so thin and so light in your hand, it feels like it's going to fly away. And then the 17 phone is an incredible value and takes several of the features that were reserved for Pro before and brings them down to the consumer lineup. So overall, strongest iPhone lineup ever, and it's resonating around the world.

Great. And maybe a follow-up for you, Kevan. Can you maybe just discuss your approach to managing component cost inflation during this time, you're obviously increasing the memory content in your devices quite substantially at the same time. Memory prices are going through some pretty significant inflation. So just how are you managing through this cycle.

Erik, thanks for the question. Look, as you know, we've got a pretty incredible world-class procurement team as we're constantly finding ways to continue to drive cost opportunities. Right now on the commodity side, I would say we're seeing a slight tailwind on memory in storage prices and nothing really to note there. And as we saw from our gross margin performance, we landed in a pretty good spot above the high end of the guidance range we provided at 47.2%. And as well, we're guiding at 47% to 48%. So I think we're managing costs pretty well. As you'll recall, when we talked about this time in the cycle, we just launched a bunch of new products. Those new products do have a slightly higher cost structure than the products they replace, but the team does a very good job of focusing our efforts on getting those costs down over time. And we feel pretty good about the performance we're seeing right now overall on material cost savings.

Operator, can we get the next question, please?

Our next question is from Ben Reitzes with Melius Research.

Tim, can you talk a little bit about iPhone in China specifically? How is that going to trend in the December quarter? And have you turned the corner there? And how do you think that trajectory is going? And then I have a quick follow-up.

Yes. Ben, I was just there. It's incredibly vibrant and dynamic. The store traffic is up significantly year-over-year. The iPhone 17 has been -- the family has been very well received there. We do believe that we'll return to growth in Q1, and that is largely based on the reception of the iPhone there. And so I couldn't be more pleased with how things are going there in the early going.

All right. That's great. And then services, great upside there, a little surprising, right? We were a little worried about that one only a few quarters ago. I was wondering if there were any [indiscernible] payments in there or if the resolution that we saw with the antitrust ruling with one of your partners was a boost and and if that played a role or if it was all really just organic outperformance with many of the things you mentioned.

Ben, it's Kevan here. Let me try to answer that question. You're referring -- I just wanted to clarify, when you're referring to the antitrust piece, you're talking about the Google trial? Is that what you're referring to?

Yes. Yes, sir.

Okay. Yes, there was no tax-related impact. And what I would say is our strong performance for the quarter is really organically driven. And again, just to reiterate, we had an all-time revenue record here for the quarter at $28.8 billion. And as well, we surpassed $100 billion, so best year ever at 14% year-on-year. So really that was all organic growth. As Tim outlined and I outlined in the prepared remarks, we saw a majority of the categories have sequential acceleration, and we had many all-time revenue records. But nothing abnormal at all, really pretty much all organic growth.

Operator, could we get the next question, please?

Our next question is from Michael Ng.

I just have two as well. First, just to follow up on the last one. the services revenue growth, I think, was the fastest across many categories and certainly the fastest in the last 2 years. I was just wondering if you could just unpack a little bit more of the drivers of the acceleration, was there kind of cross-selling with the new iPhone launch? Was it just installed base growth? I know you've been doing a lot of bundling with Apple One and Apple Care One. So any thoughts on that would be very helpful. And then I just have a quick follow-up.

Michael, it's Kevan. Thanks for the question. Yes, let me build on the answer there. I think that the way we look at it is not one thing to point to that would have driven this higher performance. You're right that it is slightly higher than we've seen in the last few quarters. But as you know, our services portfolio is very broad with a broad range of businesses, all that have different growth profiles and different performance characteristics. So those can vary in any given quarter. I would say our strength, again, was very broad-based, both across categories and also geographically. So I wouldn't point to any particular factor that drove any kind of outperformance at all. We were just very pleased to see that result.

Great. And just on iPhone sell-through, I was wondering if you were seeing any notable shifts in trends between the sell-through coming from upgraders versus switchers? Is the U.S. carrier competitive dynamic helping at all in terms of promotional activity? And any thoughts on channel inventory.

Okay. We did set a September quarter record for upgraders and so it was a great quarter from that point of view. It's really too early in the cycle on 17 to make any comments about upgraders or switchers. In terms of channel inventory, we ended the quarter toward the low end of the targeted range. Obviously, because we had constraints on several models of the 16 and 17. And for complete transparency and clarity, we're constrained today on several models of the iPhone 17. There's not a ramp issue. It's just we have very strong demand. And we're working very hard to fulfill all the orders that we have.

Operator, could we get the next question, please.

Our next question is from Amit Daryanani with Evercore.

I guess Kevan, maybe just start with gross margins. Can you just walk through the expectations for the December quarter. I think it implies up 30 basis points or so sequentially. Can you just talk about the puts and takes on gross margin given you do have very sizable operating leverage in the quarter. So just maybe what are the puts and takes around that would be really helpful.

Yes, sure. Amit, let me walk through the outlook. As we mentioned in our outlook, we are targeting a range of 47% to 48%. You take the midpoint of that range at 47.5%, you said it's roughly 25 basis points, 30 basis points higher. Really, there's a lot of puts and takes. As I talked about earlier, this is a quarter we launched a lot of new products. Those new products tend to have a higher cost structure than the products they replaced. So there's definitely an impact from the cost side of thing, but that was more than offset by a favorable mix, especially on the product side as well as you outlined, we typically see higher leverage in this quarter. So I would say those are the 2 big drivers. And so the sequential increase is really going to be driven by favorable mix particularly from the product side.

Got it. And then if I just go back to the China discussion for a minute, the performance in China, at least in September quarter was a bit muted. Could you just talk about what resulted in the weakness over there? And do you think it was a bit more of a pause given iPhone Air, for example, I don't think was available until a few weeks ago. So just somewhat what drove the weakness in September? And is the uptick of that expectation for December there just from the iPhone Air coming out? Or are there other factors as well?

Yes. The Greater China revenue was down 4% in the -- year-over-year in the September quarter. It was driven by iPhone and if you look at the iPhone, the majority of the sequential year-over-year change was due to supply constraints that I mentioned earlier. And so it was basically supply constraints that drove the results. We're thrilled with what we're seeing right now with traffic being up significantly year-over-year and the reception of the 17 family we expect to return to growth this quarter.

Operator, could we have the next question, please?

Our next question is from Wamsi Mohan with Bank of America.

Tim, if I can follow up on your comments about the constrained supply in the quarter, just given the very strong demand for iPhones. Do you expect that as you can see your visibility across demand and supply, do you think that you will be exiting December at a point where you wouldn't be constrained anymore? Or do you still expect that there could be constraints as you exit the December quarter? And any way to quantify sort of what revenue could have been in this quarter without constraints?

Yes. If you look at the supply constraints, today, we are constrained on several 17 models. We're not predicting when the supply/demand will balance. We're obviously working very hard to achieve that because we want to get as many of these products out to the customers as possible. But today, I'm not going to predict.

Okay. Okay. And then as a follow-up, how do you talk about new records across a lot of categories and services. I didn't hear Search explicitly called out. So maybe it's a little bit of a follow-up to Ben's question, but given that there are some concerns around search volumes decelerating at the expense of AI. How do you think about the broader sustainability of these very strong mid-teens growth rates for services or an extended period of time, not just for next quarter where you're obviously guiding to [ 14 ].

This is Tim. The advertising category, which is a combination of third-party and first-party did set a record during the quarter.

Okay. And sorry, just to be clear, both Apple's own internal advertising and within the licensing individually set records?

Actually I'm not saying that. I'm just saying that the combination of the 2 set of record. We don't -- I'm dodging the question intentionally because we don't split it at that level.

Operator, could we get the next question, please?

Our next question is from Samik Chatterjee with JPMorgan.

Maybe for the first one, Tim, you talked about the strong momentum you're seeing in China, which is also driving your conference for the December quarter. Any thoughts on the role that the smartphone subsidies in that region are playing in this momentum? And how do you think about sort of what portion of consumers are maybe using some of those subsidies, leveraging the subsidies at this point? Any more insights into that? And I have a follow-up.

Yes, the subsidies play a favorable role. The subsidies, as you know, are sort of across multiple categories from PCs to tablets, smart watches and smartphones. And however, it's important to note they only apply to certain price ranges. And so there's a maximum price, and there's several of our products that are -- that sell above that price and therefore, are not eligible for a subsidy, but it does have a favorable effect. And it's clearly and at least from our vantage point, driving some consumer demand.

Okay. Got it. And a follow-up for Kevan here. On the OpEx increase going into the December quarter, a fairly sizable step-up. So if you could just dig into that number a bit more what are sort of the components towards what you're spending? And then that increase year-over-year in OpEx does sort of exceed your revenue growth. So is that sort of what we should expect on a going forward basis as well where you probably need to invest a bit more in the near future?

Yes, Samik, thanks for that question. As we've been outlining and reiterated in our last call, we are increasing our investments in AI. We're also continuing to invest in our product road map. So the vast majority of the increase to our operating expenses are driven by R&D. While we continue to manage the company in a thoughtful and disciplined way, we're also managing the business for the long term and are super excited about all the opportunities that we see ahead. As it relates to the question around OpEx and revenue growth, while OpEx has been growing at a faster rate than revenue, we have seen gross margin expansion. And so when we look at that on a combined basis, it does allow us to have healthy operating leverage, and our operating income growth has been generally outpacing revenue growth for the past several years.

Operator, could we get the next question, please?

Our next question is from David Vogt with UBS.

So maybe, Kevan, can I ask first. Can you help us understand sort of the tariff impact sequentially from the September quarter to the December quarter, particularly around iPhone supply constraints because I think I heard you say tariffs go from $1.1 billion to $1.4 billion, but the sequential uplift in iPhone revenue and presumably production given supply chain constraints is dramatically bigger. So you can help us understand how to think about the timing of those tariff headwinds as we move forward and sort of that correlation? And then I have a follow-up.

David, I'll take this one. You're right, it goes from $1.1 billion to a projection of $1.4 billion. And the $1.4 billion is based on sort of what we know right now and where the tariff rates and policies and so forth are. So it assumes a stable kind of environment for the quarter. It does comprehend the change that was just made, which we're very encouraged to see with the tariffs moving from 20% to 10% in China. And so that is factored in. And that is one of the reasons why the it's not linear to volume, if you will. Does that make sense?

No, that's helpful. That's what I was asking if the change is reflected in that outlook. And then just as a follow-up, when you think about -- I think on the Macs, I know people aren't asking about it, you talked about the tough comp, but you're going into sort of a holiday season, I understand that. But when you think about the attached possibility for other products to the iPhone in the holiday season, how do we think about sort of where the consumers heads that and their wallet is at this point in the cycle and granted it is a tough comp, but is there an opportunity to see some maybe upside from an attach rate perspective given the strength in the iPhone portfolio?

We always like to remind people that buy an iPhone, all the other things that we offer. And so you can bet that we're doing that. From a Mac point of view, the challenges that last year was sort of the mother of all Mac launches. All of these from Mac mini to iMac to all the Macbook Pros, all launched literally at the same time. And this year, that compares to launching the 14-inch MacBook Pro. And so there's a very difficult compare. Of course, in the long run, I'm very bullish on the Mac. And you can see that the Mac again last quarter outgrew the market. And so we feel really well about how Mac is positioned, but this certain quarter is an extremely difficult compare.

Yes. And Tim, I'll add to that, that we also have the DRAM upgrades last year for the Mac lineup also is another factor.

Operator, could we get the next question, please?

Our next question is from Krish Sankar with TD Cowen.

My first one is on the iPhone constraints. Is there a way to quantify how much this is you left on the table because of those constraints? And is the different iPhone manufacturing from 2 different regions contributing to the constraint? And then I have a follow-up for you.

To be clear, the constraint was not related to manufacturing capacity per se. It was that we called the number of iPhone 16s that we were going to make, and we're a bit short of where the demand really was. So we could have sold more. We're not publicly at least estimating the extent of that. And then on iPhone 17 family, the demand is very strong. And so we obviously came out of the Q4 time frame with lots of back orders.

Got it. And then a quick follow-up. Given like the prevalence of chatbots and now some of these AI-infused services, do you think that could change the consumer behavior on mobile app ecosystems or are you seeing any of that? And would that have any impact on your App Store?

I think there are opportunities on the App Store with artificial intelligence. And so I think as we have made our on-device models available for developers, and we've seen developers begin to adopt them and so I think as you -- as that proliferates, there's an opportunity to -- for developers and for Apple to benefit from that from adding features to their apps and so forth.

Operator, could we get the next question, please?

Our next question is from Aaron Rakers with Wells Fargo.

I have two as well. I guess the first question is when we look at the iPhone 17 demand, which you've repeatedly highlighted is very strong. I'm curious if there's been any discernible kind of change in the mix within the iPhone 17 categories between the Pro and the Pro Max versions relative to prior cycles?

It's really too early to call the mix, to be honest. And we don't like to publicly disclose that because of -- for competitive reasons. But frankly, we don't really know what the mix will be yet because we have constraints on both sides of the ledger at the top and at the entry. And so we'll see what happens as we get more supply.

Yes. And then as a quick follow-up. I'm curious, as we kind of work through kind of the AI narrative that continues to build. Is there -- could you provide any kind of updated thoughts around the build-out of Apple's private compute cloud and how we should think about that kind of as we look forward?

Yes. We're obviously using PCC, our private cloud compute today for a number of queries for Siri, and we will continue to build it out. In fact, the manufacturing plant that makes the servers used for Apple Intelligence just started manufacturing in Houston a few weeks ago, and we've got a ramp plan there for use in our data centers and it's robust.

Yes. Aaron, I'll add maybe there are two since you asked a question about private cloud compute that we -- in '25, we did have CapEx costs associated with building out our private cloud compute environment in our first-party data centers. So you would have seen that in some of the CapEx investment in the year.

Operator, can we get the next question, please?

Our next question is from Atif Malik with Citi.

Great execution. The first question is on iPhone Air. Does the consumer reception and iPhone Air gives you a feel on perhaps the foldable corn market? Or are the 2 form factors very different?

I'm not sure that that one is a proxy for the other. The thing that I would say is that where we don't get into the model kind of demand. At the aggregate level, we are thrilled with how iPhone has been received, and that's the reason that we're expecting double-digit growth in the current quarter.

Great. And Tim, as a follow-up, good to know that the personalized Siri is making good progress and on track for next year. Will you continue to use a 3-pronged approach with your own foundation models and partner with other LLM providers and maybe potential M&A? Or is one strategy more emphasized over another?

We're obviously creating Apple Foundation models within Apple. We ship them on device and use them in the private cloud compute as well. And we've got several in development. And so we also, from a continually to surveil the market on M&A and are open to pursuing M&A if we think that it will advance our road map.

Operator, can we get our last question, please?

Our last question is from Richard Kramer with Arete Research.

Tim, we've often seen Apple be a fast follower with iPhone and new technology, whether large displays or 4G or 5G. But with all the height now around AI, are you seeing evidence that AI capabilities or features are a material purchase consideration for consumers or the record sales levels you're reporting simply reflecting other factors like the retention of your iOS space?

I think that there are many factors that influence people's purchasing considerations. And so -- and we don't have a great in-depth survey yet on the current iPhone 17 because it's very new in the cycle, and we give it some time to formulate. But I would say that Apple Intelligence is a factor. And we're very bullish on it becoming a greater factor and so that's the way that we look at it.

Okay. And then one for Kevan. In the wake of nearly every other large tech company massively increasing their CapEx in advance of AI demand and also mentioning that there's scarce capacity, do you anticipate Apple altering its sort of long-standing hybrid approach to your own and third-party data centers? And maybe can you talk a little bit about the role you see for Apple silicon with the new M5 series of chipsets?

Richard, thanks for the question. In general, I think as we've talked about before, we are expecting increases in our CapEx spending related to AI investments. For example, as I mentioned earlier, we did end up having investments this year to build out our private cloud compute environment. And we do believe this hybrid model has served us very well, and we continue to want to leverage it. And so I don't see us moving away from this hybrid model where we leverage both first-party capacity as well as leverage third-party capacity. We'll continue to want to build out private cloud compute, as Tim outlined, as we have more usage there over time. But I think in general, we want to continue to have this hybrid model.

A replay of today's call will be available for 2 weeks on Apple podcast as a webcast on apple.com/investor and via telephone. The number for the telephone replay is (866) 583-1035. Please enter confirmation code 0689794 followed by the pound sign. These replays will be available by approximately 05:00 p.m. Pacific Time today. Members of the press with additional questions can contact Josh Rosenstock at (408) 862-1142. And financial analysts can contact me, Suhasini Chandramouli with additional questions at (408) 974-3123. Thanks again for joining us.

Once again, this does conclude today's conference. We do appreciate your participation.

Good morning. Welcome to Apple Park. And Apple design has always been fundamental to who we are and what we do. For us, design goes beyond just how something looks or feels Design is also how it works. This philosophy guides to everything we do, including the products we're going to introduce today and the experiences they provide.

From the magical listing experience with AirPods to the wager Apple Watch keeps you healthy, active and connected to how iPhone helps you with so many things throughout your day.

It's also true of our new software design featuring our innovative liquid glass. It brings fluidity, vitality and flexibility to the things you do every day. It's absolutely gorgeous and delivers a more intuitive and delightful user experience. We bring so much care and consideration to every detail. From every product, service and technology we create to the welcoming nature of our retail stores, design is at the core of everything we do.

Today, we have a huge day of announcements about AirPods and Apple Watch, and we're taking the biggest leap ever for iPhone.

Let's start with AirPods. AirPods are the best and most popular headphones in the world. With an iconic design and groundbreaking sound quality, they have revolutionized the industry and raised the bar for what headphone should be. AirPods deliver a truly magical user experience from an effortless setup to their amazing sound quality to working seamlessly across your Apple products.

Last fall, AirPods Pro took this even further with the world's first end-to-end hearing health experience. It's extraordinary that the world's leading headphones can also make such a meaningful difference to those facing hearing challenges.

Today, we're building on these innovations and extending our leadership in world-class audio quality with the introduction of the next generation of AirPods Pro.

[Presentation]

With breakthrough audio performance and entirely new capabilities, I think AirPods Pro 3 are truly incredible. To tell you more, here's Kate.

[Presentation]

As a part of AirPods outstanding audio. This year, we pushed ourselves even further and created something truly special. AirPods Pro 3 deliver a breathtaking spatial listening experience. We designed a custom multiport acoustic architecture, which precisely controls the airflow that carries down into the year. This transforms the base response. It widens the down stage? Do you hear every instrument and bring vocals into stunning focus across music, shows and calls.

And it gets even better with phenomenal active noise cancellation, ultra-low noise microphone and advanced computational audio, combined with new foam infused ear tips creating greater noise isolation. This significantly improves performance, delivering twice the ANC compared to the previous generation, which were already amazing.

These are by far my favorite Airpod ever. So those with the original AirPods Pro, the difference is night and day because this AMC is 4x more effective. AirPods Pro 3 are must have upgrade with over-the-ear headphone performance in a pocket size design that removes even more background noise from your daily commute.

So no matter what headphones you've used before. With AirPods Pro, you will have the world's active noise cancellation of any in-year wireless headphones. Transparency enables you to hear your surroundings and now your own voice and people speaking to you will sound more natural than ever.

And to help connect with those near you, we're bringing the magic of AirPods to the way you communicate across languages, with live translation powered by Apple Intelligence. Now when you were together with someone who speaks a different language like exploring a market abroad, AirPods Pro will help you understand them in your preferred language. Using a new simple gesture by translation begins.

Translating Spanish, while ANC lowers the volume of the person speaking. So it's easier to focus. "hello. Welcome Today, all the red car nations are 50% off, and it doesn't just translate individual words. "

The meaning of each frame is translated for you. When you need to talk -- just speak naturally. I'd love to take some of these to my sister for her birthday. [indiscernible], please. Your iPhone displays your words in their language. And can you even read them out loud if needed.

Life translation is even more useful when both people are wearing AirPods Pro. [ Presentation ].

This incredible capability is enabled by advanced computational audio on ARPUs, combined with Apple intelligence models running on iPhone. Along with incredible personal audio, we're also improving how AirPods Pro fit in your ears. -- because people years are completely different shapes and sizes.

We analyze more than 10,000 3D ear scans along with over 100,000 hours of user research to optimize the new AirPods Pro. To fit even more people, we make each AirPod smaller and to make a bit more securely in your ear, we shake the design to match the natural geometry of the ear canal with entirely new year tip -- now in the 5 sizes, all together, these are the most stable and best bidding AirPods ever engineers to stay in their ears even during the most intense workouts.

And they're also more durable with IP 57 sweat and water resistance, a first for any airpods. So you can can feel confident during this sweaty sessions in the June or even if you find yourself running in a down for -- these updates are so important for our users who love listening to music when exercising with AirPods Pro to tell you about how we're taking the business experience even further.

[Presentation]

In addition to breakthrough performance across the board, you will also get longer battery life throughout the day. We are moving from 6 hours on a single charge to 8 hours, taking you through that transatlantic flight while listening to music with active noise cancellation. To help our hearing aid users, we are thrilled to provide 10 hours on a single charge in transparency. That's 4 more hours than the previous generation.

So that's AirPods Pro 3, delivering sensational audio performance, including the world's best ANC an exceptional fit and innovative fitness capabilities. Whether you've experienced AirPods before or this is the first time these AirPods Pro define a new benchmark for the world's most popular headphones. And even with all of these updates, they will still be available for $249. You can preorder them today, and they will be available September 19. And now back to Tim.

AirPods Pro 3 are absolutely amazing. They take the audio quality of the most popular headphones in the world to an entirely new level. Next, let's turn to Apple Watch. For millions, it's an indispensable daily companion, a fitness coach, message center, mobile wallet and a beautiful time piece.

What I really love about Apple Watch is how it alerts millions of people to potentially serious health issues and help save so many lives simply by wearing it on your wrist. It provides fall detection and crash detection, monitors your heart rate, tracks your sleep, is your lifeline and emergencies and so much more.

Let's take a look at the remarkable ways Apple Watch has touched people's lives.

[Presentation]

It's truly incredible to see how Apple Watch can help people in so many different ways. It's indispensable nature makes Apple Watch the most popular watch in the world. And each year, we make Apple Watch even more essential. To tell you what's new, here's Sam.

Today, we're making the best watch in the world even better. introducing Apple Watch Series 11. It's our thinnest and most comfortable watch, and it's even more durable. It starts with our proprietary INX glass, which is the toughest in the industry. We then apply a custom Apple design ceramic coating that bobs to the glass at an atomic level, making it significantly harder. So now it's 2x more scratch-resistant, perfect for everyday use and the challenges of an active lifestyle.

With a cellular connection, Apple Watch makes it easy to stay connected when your phone isn't with you. Series 11 now includes the latest cellular technology, 5G the new 5G modem and antenna architecture improved performance and provide even more coverage, plus it's more power efficient, losing less battery for cellular. At launch, many of our biggest carrier partners will support 5G on Apple Watch.

Series 11 comes with watchlist 26, bringing new features and intelligence as well as an elegant new design. The new watch base flow uses liquid glass new worlds to beautifully refractors of color. An exact graph, a modern interpretation of a traditional regulator clock that separates the hours, minutes and seconds for precise timekeeping.

Series 11 also comes with a comprehensive set of health features, including heart, hearing, cycle tracking, mental health and more. And we're taking that innovation in health even further, adding new features in heart health and sleep. Here's [indiscernible] more to tell you more.

Heart Health has always been integral to Apple Watch. This year, we're thrilled to share our next advancement focus on a problem of massive proportions, high blood pressure, also known as hypertension. It impacts approximately 1.3 billion adults worldwide. The American Heart Association has referred to it as a silent killer because it often occurs with no obvious symptoms.

To help, we developed a groundbreaking feature that can alert you to proximal hypertension just by wearing your Apple Watch. Using data from the optical heart sensor, the algorithm looks for chronic high blood pressure by analyzing how your blood vessels respond to meet to the heart. The algorithm works in the background, reviewing data over 30-day periods and will notify you if it identifies patterns of hypertension.

We've developed this novel approach using advanced machine learning methods and a series of studies totaling over 100,000 participants. While it won't detect all instances of hypertension, we expect to notify over 1 million people with undiagnosed hypertension in the first year alone, empowering them to make life-saving behavioral changes or start treatment. We expect clearance from the FDA and other regulators soon with availability in 150 countries and regions this month, including the U.S. and Europe, now let's talk about fleet, which is critical to daily restoration of your body and mind and is also an important factor in your longevity.

Apple Watch already helps you meet your sleep goals, gain insights and discover possible sleep apnea. Now we'll help you understand the quality of your sleep and how to make it more restorative with sleep score. The quality of your sleep is influenced by several factors, such as fleet duration, bedtime consistency, how often you wake up and the time spent in each stage.

Sleep score analyze these factors each night and provides a classification plus the score. You'll see how the score is calculated. So it's easy to understand what you can do to improve Guidance from leading experts, including the World Suite Society underpins the scoring approach. And over 5 million nights of sleep data from the Apple Heart movement study were used to develop and test the scoring algorithms.

You can see details in the feedback and you can track it over time in the Help app on iPhone. Now back to Dan.

Hypertension notifications, the new sleep score and the many other incredible health, fitness and safety features will make a huge impact on users' lives. To support all of these amazing capabilities, we also reengineered the battery. Series 11 now gets up to 24 hours of battery life. So you can wear it all day and all night, Series 11 comes in Jet Black, Silver, rose gold and a beautiful new space grade all mean from 100% recycled alumina.

There are also forges polish cases made from 100% recycled titanium in natural gold and slate. This fall brings a beautiful new pallet of colors across the entire van lineup. -- including the Nike Sports ban and Nike Sports, which now has reflective yarn woven throughout the fabric and a new [ Ormesa band ] with matching watch space that plays limbal animations that in their iconic Paris door.

There's also an elegant narrow ground ash and new colors across the collection, and that's Apple Watch Series 11 with better durability, 5G, 24-hour battery life and our most comprehensive set of innovative health features, now including hypertension notifications and sleep score.

I'll turn it over to Amanda to tell you about the next version of Apple Watch SD.

Apple Watch SP delivers the core features and benefits of Apple Watch at the most affordable price. For many people, it's the perfect way to get started. This year, we are delighted to introduce Apple wash at C3. First, it is our most powerful Apple was chip, S10, which enables even more features. -- brings an always on display to SC for the first time.

Now you can read the time and see the wash base without waking the display. -- with as he also supports gestures like double tax and risk place so you can easily control your launch with just 1 hand. -- already has important features like hardware notifications, fall detection and crash detection as I add even more like risk temperature sensing, which enables retrospective population estimates and gives you richer insights in the vital gap. These to be notified when something might be off, as we also get feedback your notifications and presort.

Finally, for those moments when you don't have your airport hand, you'll be able to play media like music or podcast directly through the speaker. Even with all these great new features, the power efficient S10 ship enables to still get all-day 18-hour battery life. And for the first time, Etsy supports fast charging making it easy to quickly top off the battery and now charges up to 2x faster than the previous model.

In just 15 minutes of charging, it can add up to 8 hours of normal use. Q3 comes in a popular Starlight and midnight made with 100% of cycled aluminum. That's Apple Watch SC3, featuring a new always-on display, 5G, temperature sensing, sleep back notifications and fleet score. And with the powerful features of WatchOS 26, this update takes [ SCT's ] whole new level. Not only do we update CN-Series this year. We are also introducing an only version of Apple Watch Ultra.

Here's Eugene to tell you all about it.

Apple Watch Ultra is the ultimate sports and adventure watch. Ultra seamlessly transition from a sports watch that helps you train for a race to a smartwatch they can pay for coffee to a health monitor to check your vitals. This year, we're taking it further with Apple Watch Ultra 3. Let's start with the display. -- where they're checking your pace on the side or death underwater, readability is crucial.

So Ultra 3 gets a new display that uses our most advanced technology with wide-angle OLEDs and LP3, -- the display is now brighter when he did enable and thinner borders allowed us to grow the screen area without changing the case size. The result is the largest display ever in an Apple watch. It can also refresh more frequently and always on load without affecting battery life, which means if you now see taking seconds in watch bases, including a new face way point that dynamically shows points of interest in relation to you.

For athletes, the worked app makes it faster to customized use and use workout boy. -- a generative voice with Apple Intelligence to deliver personally feedback to motivate you during your workout. And Ultra TC connected no matter where you are with 5G cellular for more coverage and a faster, stronger connection -- this year, we're also making a huge leap forward with satellite connectivity.

Now when you journey off the grid, if you can stay safe, even touch the love ones using satellites in available countries and regions. Just a few taps gathers critical information to give you the emergency help you need. You can also send messages and share your location with fine line to enable satellite connectivity in the device as small as Ultra. We redesigned the radio and antennas to double the signal stream. Allowing you to communicate with satellite 800 miles of over.

Emergency SOS [indiscernible] is included with Ultra. And along with messages in fine mine, you can now stay connected when you're back on try skin, sale running or wherever you go. All 3 also includes a larger battery and now gets it to 42 hours of battery life. -- also will be available in black and natural titanium, made using an innovative 3D printing process that uses 100% recycled titanium and just half the raw materials as previous generations.

There's also great new colors across our ultra pans and the trail look dances elect a yard woven along the edges. The that selection also gets a new banner for an active lifestyle and new colors for the [indiscernible].That's Apple Watch Ultra 3, now featuring the largest display and longest battery like on any Apple Watch with satellite communications, 5G hypertension notifications and watchOS 26. It's a big update to our most advanced Apple Watch.

Now back to Stan.

So that's all new lineup of Apple Watch. From the new Ultra 3 with satellite connectivity to Series 11 with new powerful health features and 24-hour battery life. -- and F3 with a massive update in performance and features, there's a watch that's right for everyone. Apple Watch S3 starts to just 249 AppWox Series 11 starts at 399 and Apple Watch Ultra 3 starts at $7.99.

You can preorder all the new models today, and they will be available starting September '19. And now back to Tim.

The new Apple Watch lineup and the incredible features they bring make the Apple Watch even more useful and essential. The capabilities introduced today will not only help users stay connected, they'll deliver even more health and fitness benefits seamlessly and automatically.

Now let's talk about iPhone. From the moment iPhone was introduced, it reinvented the phone and set a new standard for the entire industry. Since then, we've continued to push boundaries with design, innovation and experiences that have changed all of our daily lives.

Today, we're raising the bar once again with an all-new iPhone lineup that's unlike anything we've ever created. We're introducing 4 new models, each designed to serve the unique needs of our users, and it starts now. Iphone 14 is incredible [indiscernible] to tell you more.

Iphone 17 has a beautiful more durable design and comes in 5 gorgeous colors: Lavender, Mist Blue, black, white and Sage. The new design has a larger 6.3-inch display with thinner borders, so you can see more and do more. And the display of iPhone 17 features promotion, just like our Pro models with an adaptive refresh rate up to 120-hertz designed to dynamically respond to your content for a smooth and power-efficient experience.

When you're not using your iPhone, the always on display efficiently adjust down to 1 heart and the lock screen is even more useful with live activities and rig -- when outside iPhone 7 is more readable with 3,000 net peak outdoor brightness, our highest ever on iPhone.

This makes a display on iPhone 17, our best yet -- we build iPhone to be durable because we know how much people count on it. Our industry-leading program of shield continues to be tougher than any smartphone glass or glass ceramic. Iphone 17 introduces ceramic shield too. Now it has 3 times better scratch resistance. This made possible by a new apple design coding bonded to shield at the atomic level.

This specialized programmic layer adds hardness to protect from everyday scratches. And the display quality gets better with a 7-layer antireflective coating that reduces glare and distractions, making iPhones more readable in bright lighting conditions, both indoors and outdoors, powering iPhone 7 is the latest generation of Apple silicon A19 built with the most advanced 3-nanometer technology, A19 is faster and more efficient.

It has an updated display engine and power promotion and we always on display. It has an improved neural engine tailored to power, incredible on the glide performance for Apple Intelligence. Combined with increased memory bandwidth as A19 on-device generative and large language models will run even faster. A19 has a 6 core CPU for our latest performance and efficiency core to make iPhone 17 responses while enabling great battery life.

The next-generation 5 core GPU provides a big step-up for graphics-intensive tasks. If you're upgrading from an older iPhone, you'll experience a huge boost in seed. The advancements in Apple silicon hardware and software make for incredible gaming on iPhone. Titles like Destiny rising by Netia are even better with promotions adaptive refresh rate up to 120 hertz. A19 Advanced CPU, GPU and updated NeuroEngine also power Apple intelligence.

There are many features available today on iPhones that empower you to create, communicate and be more productive. With IOS 26, we are adding even more with visual intelligence, you can search actions and ask questions about what's on your iPhone screen. Live translation helps you communicate across languages in selling, facetime and messages.

And just like all of Apple Intelligence, these features are designed to protect your privacy at every step. The efficiency of Apple Silicon contributes to all a battery life on iPhone 7. And with ProMotion, iPhone 17 sites up to 8 more hours of video playback compared to iPhone 16.

When you are out of battery, faster wire charging gets you up to 50% charge in 20 minutes. So just 10 minutes of charge gives you up to 8 hours of video playback.

It's also a big year for the iPhone cameras to show you what's new. Here's Megan.

iPhone 17 has a fantastic 48-megapixel dual fusion camera system. Our patient technology combines the capabilities of 2 cameras in 1 with a main camera and an optimal quality to telephoto each with dedicated image pipeline. The main camera delivers an impressive 48 megapixels of resolution, perfect for capturing fine details like in this vibrant shoreline photo.

And for everyday photo, the 24 megapixel difficult resolution provides us perfect balance, offering excellent image quality, rich detail and a smaller file size that's ideal for saving and sharing. -- at 2x the optical quality telephoto gets you closer to the subject, making it great for capturing quiet moments like this.

And now iPhone 17 gets a new 48-megapixel fusion ultra-wide genre. It has 4x the resolution compared to iPhone 16. So you get even more detail in a broad range of photos. -- from exceptional macros to expressive teams and unique angle. You're going to love how easy this to take amazing photos and videos.

Now let's flip over to the front camera. It's how we face self-photos, record memories, express or creativity and point of view. And the iPhone is with you to capture all these moments. Globally, iPhone users took over 5 billion selfies last year. That's more than any other smartphone. So this year, we are thrilled to introduce our phenomenal new center base front camera.

It gives you more pixels, more flexible waste or Granger shot and incredible stabilization this new front camera has our widest field of view. It's enabled by our largest front camera sensor, almost twice the size of our previous front camera. And for the first time, the center is square. Traditional centers have a 4 x 3 aspect ratio, which limits framing based on the orientation of the phone.

The center stage cameras unique shape and larger size allow for high-resolution photos and videos in any orientation. -- giving you 4 different compositions, which means you don't have to rotate your Iphones to take a landscape self anymore. Now you can tap to expand the field of view is routing from portrait to landscape, giving you more flexible ways to frame your father than video.

When friends joined the shot, the all new center stage for photo uses AI to automatically expand the field of you and can even rotate the frame for you. This makes it even easier to take a share of worthy photo. Holding iPhone vertically, you get a more secure group and you get better landscape healthy because your eyes are more centered in the shot. And photos have even more details with higher resolutions up to 18 megapixels. To add the pixels piles in the Square Center level of video to all your on-the-move selfie videos will be ultra stabilized using some of the same technology that enables action mode on the rare -- you can also be more present facetiming with friends and family because center stage for video call is optimized for handheld video to keep your face perfectly positioned in frame.

The center stage front camera unlocks next-level experiences unique to iPhone. Now back to Cyence.

IPhone 17 has impressive camera upgrades with a 48-megapixel dual fusion camera system and the center stage front camera. We can't wait to see all the ways you'll capture everyday moments and use it for more creative possibilities. -- and that completes the fantastic iPhone 17 powered by the A19 ship. It has a bigger and brighter 6.3-inch display with promotion and ceramic shale 2 iPhone 17 also comes with the latest iOS features, Apple Intelligence, great all-day battery life and starts with 256 gigabytes of storage in 17 is packed with features you will enjoy every day. And now back to Tim.

IPhone 17 is fantastic, and that's just the beginning of what we're introducing today. With the advancements made possible by Apple Silicon, we've been able to push the limits of iPhone design and innovation. And that breakthrough has led to something truly amazing, introducing the newest member of the iPhone family.

[Presentation]

iPhone air is unlike anything you've experienced before. To tell you all about it, here's John.

We are thrilled to introduce the impossibly thin iPhone Air. At 5.6 millimeters, it's the thinnest iPhone we've ever made, and it's also exceptionally light. It's unlike anything you've ever held before, and it's packed with our most advanced features. The gorgeous 6.5-inch display is our best featuring promotion up to 120 hertz, always on and 3,000 of peak brightness and protected by the new Ceramic Shield with improved anti reflection and 3x better scratch resistance than our previous ceramic shield.

We're also bringing ceramic shield to the back of Phone for the very first time. It's 4x more resistant to cracks than our previous glass. It also protects the new plateau that now houses major internal components at the top of iPhone. The inside was precision milk for more space, creating room for the rear camera, front camera, speaker and even Apple silicon. The frame of iPhone is made of titanium. This is an essential material choice for such a thin design. and enables it to exceed our stringent bench strength requirements. Altogether, these materials make iPhone Air more durable than any previous iPhone.

We're also using 80% recycled titanium, the highest ever for iPhone. There are 4 stunning colors to choose from: Space Black, Cloud white, light gold and Sky Blue. -- iPhone Air has such a unique design, and it wouldn't have been possible without Apple silicon. To tell you more, here's [indiscernible]

With Apple Silicon, our focus is to maximize performance and efficiency so we can drive innovation in our products. iPhone Air demands the most efficient high-performance chip we've ever built for iPhone. and that is A19 Pro. With the CPU, we continue to push on single-threaded performance and efficiency. Our performance cores gain improvements to front-end bandwidth and branch prediction, making A19 Pro the fastest CPU in any smartphone. And we increased the last level cache of our efficiency cores by 50%, specifically aimed at improving energy efficiency for the things you do every day.

The result is a CPU that's even faster and more efficient than A19. Our GPU also gets a big upgrade in A19 Pro. We are introducing the second generation of our dynamic caching architecture. We doubled our 16-bit floating point math rate, and we built a new unified image compression. And that's not all.

The other major update to our GPU is around AI. We have been at the forefront of AI acceleration since we first introduced the neural engine 8 years ago. We later brought machine learning accelerators to our CPUs. And while our GPU has always been great at AI compute, we are now taking a big step forward, building neural accelerators into each GPU core, delivering up to 3x the peak GPU compute of A18 Pro.

This is MacBook Pro levels of compute in an iPhone, perfect for GPU-intensive AI workloads. Another area of innovation for Apple Silicon is wireless connectivity. For years, we've been building WiFi and Bluetooth chips for Apple Watch and AirPods. And now this is coming to iPhone for the first time, introducing N1, our Apple design chip, which enables the latest wireless networking technologies, WiFi 7, Bluetooth 6 and Thread, while improving overall performance and reliability in key areas like personal hotspot and air drop.

Finally, a critical innovation that makes iPhone Air possible is our Apple Design modem. We introduced C1 last spring. And in just 6 months, we already have a new version that is faster and more efficient. The new C1X is up to 2x faster when compared to C1. It is even faster than the modem in iPhone 16 Pro and uses 30% less energy overall, making it the most power-efficient modem in an iPhone. In fact, iPhone Air is the most power-efficient iPhone we have ever made.

We started building Apple Silicon to enable us to create better products and iPhone Air is the realization of that goal. Back to John.

The camera system in iPhone Air delivers the most popular features that make iPhone the world's favored camera. -- what might appear to be a single camera is actually our new powerful 48-megapixel fusion camera system, which works like multiple advanced cameras in 1 you can shoot breathtaking 48 megapixel photos, capturing even the small trees across the valley and the deep color range on the stone wall. And the 2 exelaoto has in updated photonic engine,which now uses machine learning to capture the life-like details of our hair and the vibrant color of her jacket. This fusion camera excels in low life, thanks to its large sensor fast aperture in our Apple design sensor shift optical image stabilization.

The large sensor enables a second optical quality lens, be integrated to Xtelephoto, delivering stunning photos and 4K videos. -- with the power of computational photography, this incredible system enables the latest signature features of the iPhone camera like 24 megapixel default photos, capturing here the fine texture of redress and even nuances in the shadows. -- next-generation portraits with focus control, which works on any subject like these delicious waffle, or the latest generation of photographic styles, which features the new bright style that brightens skin tones and applies a top of vibrance across the image. And the custom 2 and 35-millimeter lenses give users more flexibility to frame their shot for a total of 4 lenses in your pocket.

On the front, we have our new and innovative center stage camera. You don't need to rotate your phone anymore to take a landscape sell. Center stage for photos perfectly frames everyone in either orientation. And we're introducing a brand-new feature that combines the front and rear camera. Dual capture video perfect to record yourself while at a concert or your reaction to the game's big place. The new stabilization from the front camera keeps you in framed while the Fusion main camera on the back gives you the flexibility to zoom into the story you want to sell.

And there is so much more to these camera systems, like action mode, audio mix, 4K Dolby Vision and all the features of camera control. There's another important innovation that helped bring iPhone air to life, and that is ease. We pioneered as years ago, and now it's an industry standard. And compared to that decades old piece of plastic, ESIM is so much easier to use, as better security and saves precious space inside iPhone.

Esim is also great for travel. Carriers have many affordable and convenient roaming plans, -- if you want to use a local plan, it's easy to set up a ease from the comfort of your home or while on the road. There's no need to change physical SIM cards, and you can have data from the moment you land at your destination. Esim coverage is available globally, thanks to extensive planning and testing with our carrier partners. Because of this, we designed iPhone Air to be eSIM-only worldwide, maximizing internal space for battery stacks.

So now let's talk about battery life. We innovated in both hardware and software to deliver great battery life for iPhone air, powered by our most advanced Apple silicon built for efficiency. The internal design has been completely rethought to maximize battery space. And IAS 26 introduces new power saving features like adaptive power mode, which learns your usage patterns and anticipate when you might run low on battery, intelligently conserving power to help you make it through the day. That despite being much thinner and lighter, iPhone air still gets amazing all-day battery life.

This is incredible, all-day battery life in our finest iPhone ever. We're also introducing a new ecosystem of accessories to complement this unique iPhone design. Thanks to the incredible thinness of iPhone Air, we were able to create a new low-profile MagSafe battery that when attach feels great in your hand and its slim enough to drop right in your pocket. -- when using them together, iPhone Air has up to 40 hours of video playback. It has an up to binge on all 40 episodes of for all mankind, making it a great accessory for long trips.

We also designed 2 custom cases for iPhone Air. The first is the translusion case with a back panel that is less than 1 millimeter sim, designed to provide great drop protection available in frost and shadow. The second is a lightweight lumber made from a reinforced polycarbonate. It perfectly frames iPhone area and is available in 4 matching peers. Both options can be beared with the new cross-body trap. It's line within flexible magnets designed to hold the straps together and allow you to easily adjust the mine so that the incredibly advanced iPhone air, our soonest iPhone ever with pro performance inside, incredible durability, amazing camera systems on both front and back in our latest Apple design chips built for efficiency to deliver fantastic all-day battery life.

All this in a new design that frankly seems impossible, and we can't wait for you to experience it. Now back to Tim.

iPhone Air is a total game changer. It's designed for customers who want pro performance in an unbelievably thin and light design. And with iPhone air in the lineup, we were able to take our 2 Pro models to an entirely new level of performance and capabilities. So our goal was simple: to build the most pro iPhone yet by a lot, we started from scratch and rebuilt it from the inside out, introducing iPhone 17 Pro.

[Presentation]

iPhone 17 Pro is by far the most advanced iPhone ever, featuring a striking new design and powerful capabilities. To tell you more, here's [indiscernible].

The iPhone 17 pro design is more than just a fresh bold new look. It also delivers a dramatic leap in performance that makes this the most powerful iPhone ever by far. And it starts with an entirely new approach to thermal management, which is critical to system performance. We meticulously manage power and surface temperature to make sure IPOs 17 Pro and iPhone 17 Promax always deliver exceptional performance while remaining comfortable to hold.

At the heart of the new thermal management system is an Apple-designed paper chamber. GI ice water is sealed inside the vapor chamber, which is laser wellness into the aluminum chassis. It's efficiently move away from the component, allowing for higher sustained performance. The vapor chamber direct team strategically for the word is sufficiently dissipated and released by the forged aluminum unibody. We used an Apple-designed aerospace-grade aluminum alloy for superior thermal connectivity, which is 20x greater than the titanium we previously used.

This proprietary alloy is also significantly lighter -- as a result, it was the perfect choice for achieving this new design while delivering outstanding thermal performance and a product that remains comfortable to hold and use and the aluminum is anodized in 3 stunning finishes, refined silver and elegant and the bold and eye-catching come.

A key element of the design is to forge plateau, which additionally dissipates and creates extra space for components, making room for a larger battery. And by integrating the antennas around the perimeter of the plateau, it helped create the highest performing antenna systems ever in an iphone. So every aspect of this design is engineered to maximize performance and unlock the full potential of the extraordinary A19 grow. It features a powerful core CPU and a high-performance 6 core GPU with a neural accelerator built into each GPU core.

It also features a larger cash than 18 grow and even more memory. When A19 Pro is paired with our best-ever thermal design, iPhone 17 Crow is able to deliver up to a whopping 40% better sustained performance than iPhone 16 Pro. -- making an ideal for intensive tasks like gaming, photo and video editing using the latest Apple intelligence features and running local large language models. It can play visually demanding games like [indiscernible] in fields with hardware-accelerated ray tracing at higher frame rates hour after hour.

This new design not only delivers exceptional performance, but also built upon iPhone's industry-leading durability. The glass in the back is even better protected by the aluminum unibody design. In fact, it's no longer glass at all, like iPhone air, we're now using ceramic shields to the back -- this provides exceptional strength.

The Ceramic Shield back is 4x more resistant to cracks than our previous backlog. -- and in a center profile, creating more room for the battery. On the front, the gorgeous display is protected by the incredible new Ceramic Shield to providing industry-leading protection with 3x better scratch resistance than the previous generation and the new 7-layer antireflective coding reduces glare and distractions making the display more readable and bright lighting conditions, both indoors and outdoors.

All these design decisions made it possible to grow the battery significantly, resulting in iPhone 17 Promax, achieving the best battery life ever and an iPhone. For our SIM-only models, we took advantage in the space formerly occupied by the physical sim to grow the battery even more. provide an additional 2 hours of video playback per charge, enabling up to honoring 39 hours of video playback.

Next, let's talk about the Procamera system, which combines incredible hardware with advanced computational photography to capture beautiful photos and videos. The iPhone 17 pro camera system gets even more powerful and versatile, to tell you about here is Patrick.

iPhone 7 Pro and iPhone 7 Pro Max feature the best camera system we've ever made with high-resolution sensors on each camera -- on the front, we have the 18 megapixel center stage camera, our innovative, new front camera system. -- the wider field of view and higher resolution are particularly useful when recording yourself speaking directly to camera, making our pro models see absolute best choice for content creators. On the rear, all 3 cameras are 48 megapixels for the very first time. And not only are the sensors 48 megapixels but all 3 are fusion cameras.

We have updated the imaging pipelines for better resolving power. That means you'll get more detailed images at every Zoom range in light low. The extended plateau on iPhone 17 Pro is also designed to house an all-new 48-megapixel fusion telephoto camera. It offers a 4x boom at 100 millimeters and a far reaching 8x at 200 millimeters, our longest optical quality to ever. iPhone 17 Pro has our next-generation [ TechRPrism ] telephoto with an improved 3D sensor shift image stabilization system.

This is necessary because it features a sensor that is 56% larger than the previous generation, which improved sharpness in bright white and provides better detail across all light levels. The new telephoto camera provides a longer reach and gives more creative choice. The ForEx that 100 millimeters is a classic lens for fortiture, providing a flattering perspective and new options for framing. It's perfect for nature photography, briefing motion and capturing stunning detail.

With the additional 8x 200-millimeter lens, we can get closer still with a beautiful depth of field. And like the 2x telephoto the 8x also utilizes the updated photonic engine which integrates machine learning into even more parts of the image pipeline. We apply deep learning models for demosaicang, which constructs the image from the raw output using the quad pixels in the imaging sensors. This preserves natural detail, reduced noise and results in significantly improved color accuracy, especially in low light.

And now the digital Zoom is up to 48 x photo. With the new 48 megapixel fusion telephoto camera system, iPhone 17 Pro has the equivalent of 8 prolinses in your pockets. We put iPhone 17 Pro in the hands of some world-class photographers.

Let's take a look at some of the fantastic images they capture.

Those photos are absolutely beautiful. Now let's talk about video. Our Pro models already lead the way in smartphone video to match our quality, format support and seamless integration in professional workflows, you'd have to look to dedicated Pro camera systems. No other smartphone comes close. We're even filling this event with iPhone 17 Pro. How cool is that? Amazing Pro features like Dolby Vision HDR, 4K 120, crores log and support for ASUS has been loved by filmmakers. We also love how iPhone allows them to be closer to their subjects, more intimate, more nimble and more flexible.

This year, we're bringing some of our most requested Pro video features, allowing iPhone to integrate even more seamlessly into the largest and smallest of production. We're adding support for pro reservoir capture. -- which is the industry-leading Apple developed video codec that records all the information captured by the camera sensor provides unparalleled flexibility in post production. It's ideal for high dynamic range video and since we introduced it, it has become the industry standard for production is requiring the highest level of control and quality.

[indiscernible] raw capture is supported by final cut camera and black magic camera and APIs are available for other developers. We're also adding support for GenLock, which enables super-precise video synchronization it's particularly useful for content creators and streamers, whether using multiple cameras or on-screen graphics, Gen lock allows for accurate and professional-looking transitions without hours of manual frame-by-frame alignment.

When using an array of cameras, Jen lock enables advanced filmmaking tools and techniques by time splicing or bullet, which allows filmmakers to change the audience perspective about producing time. Gen Lock is supported via the new black magic came Pro Doc, and we have APIs available for others as well. We're thrilled to bring these advanced sale-making tools to IPO, making them more affordable and approachable. iPhone 17 Pro truly sets the new standard and the completely experience, we've also designed a range of new accessories.

We're introducing our tech woven case, with a new innovative material. This woven textile is crafted with a tactical process that uses multiple yarn colors to create a sophisticated look, while protective counting provides a resistance to scratches and span -- we also have clear cases as well as a great selection of colors and silicon. All of our cases feature a new butt design that feels even better and more precise than before.

The beautiful and functional cross-body strap that you saw with iPhone Air is designed to pair with Tech woven cases for iPhone 17 Pro and 17 ProMax, as well as silicon cases for all iPhone 17 months. So that's iPhone 17 Pro. -- by far the most powerful and versatile iPhone we've ever made. This is a huge upgrade featuring a stunning design and powered by A19 Pro for our best performance ever. It also delivers an enormous leap in battery life. All 48 megapixel using cameras on the back and Apex Zoom, along with our innovative center stage camera on the pro, plus it supports the latest features in IAS 26, Apple Intelligence and so much more.

Let's see the iPhone 17 pro in action.

[Presentation]

This is, without question, our best iPhone lineup ever. All the new models will start with 256 gigabytes of storage, giving you more room for your photos, videos, apps and memories. -- iPhone 17 starts at $7.99, keeping the same great price icon Air starts at $999. And iPhone 17 Pro starts at $10.99. The same great prices last year is 256 gigabyte iPhone 16 Pro.

And for the first time, a 2-terabyte configuration is available on iPhone 17 Pro Max. We also have amazing offers from Apple and our partners -- you can get up to $1,100 off when you trade in an iPhone 13 Pro or newer in any condition. And the iPhone lineup starts at just $5.99 with iPhone 16 preorders for all new models start this Friday, and they will be available starting September 19. And now back to Tim.

These iPhone 17 Pro models are the most advanced pro models we've ever created. And this new iPhone lineup represents the biggest sleep ever for iPhone -- the products and innovations we introduced today, along with the power of Apple Intelligence will enrich people's lives in so many ways. It reflects our deep commitment to designing industry-leading products and experiences because we've always believed that when something is designed with great care with absolute attention to every detail every material technology and interaction that the result can impact our lives in powerful and profound ways and change the world for the better. Thank you very much for joining us. Have a great day.

Good afternoon, and welcome to the Apple Q3 Fiscal Year 2025 Earnings Conference Call. My name is Suhasni Chandramouli, Director of Investor Relations. Today's call is being recorded. Speaking first today is Apple's CEO, Tim Cook, and he'll be followed by CFO, Kevan Parekh. After that, we'll open the call to questions from analysts.

Please note that 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, capital allocation and future business outlook. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast, 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 10-Q and Form 10-K and the Form 8-K 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 28, 2025, 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, we are proud to report a June quarter revenue record of $94 billion, up 10% from a year ago, which was better than we expected. EPS set a June quarter record of $1.57, up 12% year-over-year. We saw an acceleration of growth around the world in the vast majority of markets we track, including Greater China and many emerging markets. And we had June quarter revenue records in more than 2 dozen countries and regions, including the U.S., Canada, Latin America, Western Europe, the Middle East, India and South Asia.

These results were driven by double-digit growth across iPhone, Mac and services. We set a June quarter record for iPhone, which grew a strong 13% year-over-year. We saw iPhone growth in every geographic segment and double-digit growth in emerging markets, including India, the Middle East, South Asia and Brazil. Mac continued to see excellent results with revenue up 15% year-over-year. And we set another all-time revenue record in services, which grew 13% with double-digit growth in both developed and emerging markets.

Last month, we hosted WWDC, an incredible event for our developer community with millions joining us online and more than 1,000 developers here in person at Apple Park. We shared some truly exciting updates, including a stunning new design crafted from a material we call Liquid Glass, -- it's both beautiful and expressive. And for the first time ever, this design extends across all of our platforms. We can't wait for users everywhere to experience it this fall. And we were excited to share some updates across our AI work. We announced even more capabilities coming later this year, including live translation and workout Buddy.

In addition to those new features, we announced new support for a number of languages, and we opened up access to the on-device foundation models at the core of Apple Intelligence, enabling developers to build a whole new experience for our users. It's wonderful to see great momentum building for our platforms. iOS 26, MacOS 26 and iPadOS 26 are by far the most popular developer betas we've had. Taking a step back, we see AI as one of the most profound technologies of our lifetime. We are embedding it across our devices and platforms and across the company. We are also significantly growing our investments. Apple has always been about taking the most advanced technologies and making them easy to use and accessible for everyone. And that's at the heart of our AI strategy.

With Apple Intelligence, we're integrating AI features across our platforms in a way that is deeply personal, private and seamless, right where users need them. We've already released more than 20 Apple Intelligence features, including visual intelligence, cleanup and powerful writing tools. We're making good progress on a more personalized series. And as we've said before, we expect to release these features next year. Apple Silicon is at the heart of all of these experiences, enabling powerful Apple intelligence features to run directly on device. For more advanced tasks, our servers also powered by Apple Silicon deliver even greater capabilities while preserving user privacy through our private cloud compute architecture.

We believe our platforms offer the best way for users to experience the full potential of generative AI. Thanks to the exceptional performance of our systems, our users are able to run generative AI models right on their Mac, iPad and iPhone. We're excited about the work we're doing in this space, and it's incredibly rewarding to see the strong momentum building.

Now let me turn to more details about our results for the quarter, starting with iPhone. iPhone revenue was $44.6 billion, up 13% from a year ago, and we set a June quarter record for upgraders. This strong broad-based performance was driven by the incredible popularity of the iPhone 16 family, which was up strong double digits year-over-year as compared to the 15 family. We also recently marked a significant milestone. We shipped the 3 billionth iPhone since its launch in 2007. From the Pro models with the Powerhouse A18 Pro and innovative Pro camera features to the iPhone 16E with breakthrough battery life and a 2-in-1 camera system, users are finding so many reasons to love the best iPhone lineup we've ever created. And iOS 26 will take that experience even further. In addition to the beautiful new design and powerful Apple Intelligence features, it introduces a range of meaningful updates like real-time call screening and hold assist in the phone app, smarter messaging tools and new live translation features. It all adds up to a smarter, more personal iPhone experience that we can't wait for users everywhere to enjoy this fall.

In Mac, we had another strong quarter with revenue of $8 billion, up 15% year-over-year, largely driven by the strength of the M4 MacBook Air. We set a June quarter record for upgraders on Mac, and we saw great performance in emerging markets with strong double-digit growth on revenue as well as strong double-digit growth on both upgraders and customers new to Mac. MacBook Air, the world's most popular laptop, unlocks a whole new level of performance with the power of M4. MacBook Pro customers meanwhile continue to be drawn to its incredible power and the longest battery life we've ever had on a Mac. Customers are also loving the newest Mac Studio, which is the most powerful Mac we've ever made with next-level capabilities to tackle even the most demanding AI workflows.

At the same time, Mac Mini continues to win over customers by packing so much performance into an ultracompact design. And with fantastic new updates in MacOS Tahoe 26 from the phone app to live activities to our biggest ever update to Spotlight, Mac users across our entire lineup are going to find delightful new ways to stay connected and productive. For iPad, June quarter revenue was $6.6 billion. Our incredibly versatile iPad lineup brings together power and portability like never before. And users are already excited for our biggest iPad software update ever with the upcoming release of iPad OS 26. It starts with a new windowing system that's remarkably intuitive, giving users more control than ever of their iPad experience. An enhanced files app makes it easier than ever to stay organized. And that's all on top of a beautiful new software design that brings these updates to life.

Turning to Wearables, Home and Accessories. Revenue was $7.4 billion, and we saw a June quarter record for upgraders to Apple Watch. During the quarter, we marked the 10-year anniversary of Apple Watch, celebrating a decade of helping users navigate their health and fitness journeys. And with WatchOS 26, Apple Watch will be more intelligent than ever with smart updates to the workout app and Smart stack, along with a fresh new design that feels both dynamic and personal.

We're also thrilled about what's coming to Apple Vision Pro with VisionOS26, introducing spatial widgets that let users customize their digital space, more life-like personas and new enterprise APIs that empower companies to build their own spatial experiences. And this fall, new features for our latest AirPods lineup will unlock even more possibilities. from studio quality audio recording to using AirPods as a camera remote, giving users powerful new ways to capture content and stay connected. As we're innovating across our lineup, we're especially proud of the work we're doing to help our users live healthier lives. Since we first launched our hearing health features for AirPods Pro 2, I've received notes from people who are delighted to be able to connect more deeply with loved ones. Whether it's with AirPods Pro 2 or Apple Watch or iPhone, it's amazing to see the power of our health and safety features from hearing tests to fall detection alerts to irregular rhythm notifications having such a profound impact.

Turning to services. Revenue for the June quarter was $27.4 billion, up 13% from a year ago and an all-time record. Apple TV+ scored 81 nominations, a record for the platform across nearly every eligible category for this year's Emmy Awards. Severance leads all Immy nominees with 27 nominations and the studio follows close behind with 23 nominations, more than any other freshman comedy series ever. It's amazing to see how these and other Apple TV shows have captured the popular imagination. To date, Apple TV+ has earned more than 2,700 award nominations and 585 wins on the strength of the highest-rated original content of any streaming network. And we continue to see very positive trends in the June quarter with TV+ viewership up strong double digits year-over-year.

In June, we were also thrilled to release F1 in theaters around the world, one of the summer's most unforgettable blockbusters. During the quarter, we celebrated a big anniversary with 10 years of Apple Music. To mark the occasion, we launched an all-new studio space in Los Angeles for artists to create content and connect with fans. And later this year, we're bringing Apple Music users even more to love from an enhanced listening experience with Automix, which mixes songs like a DJ to Lyric translation and more. The App Store meanwhile continues to be the very best place to discover the latest apps from developers around the world in a safe and trusted way and App Store revenue grew double digits year-over-year, setting a June quarter record.

In retail, we continue to find opportunities in emerging markets to connect with even more customers. We recently launched the Apple Store online in Saudi Arabia, and we couldn't be more excited to open new stores in the UAE and India later this year. We were also delighted to welcome customers in Japan to a new location in the heart of Osaka. Across everything we do at Apple, we show up by leading with our values. We feel strongly that the benefits of technology should be shared by everyone. That's why we make technology for everyone. In May, to mark Global Accessibility Awareness Day, we announced updates to help users learn, connect and interact with their worlds, including Magnifier for Mac, a new brail experience and accessibility reader, a new system-wide reading mode to make it easier to understand content.

And we're proud to introduce accessibility nutrition labels, giving users an understanding of accessibility features before they download an app while helping developers educate people on features their app support. This month, we also announced a $0.5 billion commitment with MP Materials to strengthen the supply of vital recycled rare earth materials in the U.S. and support American industry. And in August, we're opening our all-new Apple Manufacturing Academy in Detroit to train and support American manufacturers. These investments are part of Apple's largest ever spend commitment, which we announced earlier this year. Over the next 4 years, Apple is investing $500 billion in the U.S., driving innovation and creating jobs in cutting-edge fields like advanced manufacturing, silicon engineering and artificial intelligence. We're proud of this work and all that we're doing to tap into American innovation and bring the best technology experiences to users across the globe. And we continue to look for further opportunities to do even more.

Finally, the situation around tariffs is evolving, so let me provide some color there. For the June quarter, we incurred approximately $800 million of tariff-related costs. For the September quarter, assuming the current global tariff rates, policies and applications do not change for the balance of the quarter and no new tariffs are added, we estimate the impact to add about $1.1 billion to our costs. This estimate should not be used to make projections for future quarters as there are many factors that could change, including tariff rates. We're really proud of our results for the June quarter, and I want to thank our teams and our customers. In everything we do, we're driven by transformative innovation, delivering the most exceptional products and services we've ever created, and we're especially excited about what's ahead.

With that, I'll turn it over to Kevan.

Thanks, Tim, and good afternoon, everyone. Our revenue of $94 billion was up 10% year-over-year and is a new June quarter record. We grew in every geographic segment and in the vast majority of the markets we track. Products revenue was $66.6 billion, up 8% year-over-year, driven by growth across iPhone and Mac. And thanks to our high levels of customer satisfaction and strong loyalty, our installed base of active devices reached another all-time high across all product categories and geographic segments.

Services revenue was $27.4 billion, up 13% year-over-year and an all-time record. We saw strength across the world with double-digit growth in the majority of our markets. Company gross margin was 46.5% at the high end of our guidance range and down 60 basis points sequentially, primarily driven by approximately $800 million in tariff-related costs Tim mentioned earlier. Products gross margin was 34.5%, down 140 basis points sequentially, driven by mix and tariff-related costs, partly offset by cost savings. Services gross margin was 75.6%, down 10 basis points sequentially.

Operating expenses landed at $15.5 billion, up 8% year-over-year. This strong business performance led to June quarter records for both net income at $23.4 billion and diluted earnings per share of $1.57, which was up 12% year-over-year. Operating cash flow was also strong at $27.9 billion.

Now I'm going to provide some more details for each of our revenue categories. iPhone revenue was $44.6 billion, up 13% year-over-year, driven by the iPhone 16 family. As Tim noted, we saw iPhone growth in every geographic segment and double-digit growth in many emerging markets. The iPhone active installed base grew to an all-time high in total and in every geographic segment, and we reached a June quarter record for upgraders. According to a recent survey from World Panel, formerly of Kantar, iPhone was a top-selling model in the U.S., Urban China, the U.K., Australia and Japan during the June quarter. And we continue to see very high levels of customer satisfaction in the U.S. at 98% as measured by 451 Research.

Mac revenue was $8 billion, up 15% year-over-year, driven by continued strength across the portfolio, including MacBook Air, Mac Mini and MacBook Pro. We grew in every geographic segment and saw double-digit growth in Europe, Greater China and the rest of Asia Pacific. The Mac installed base reached an all-time high, and we hit a June quarter record for upgraders. In the U.S., customer satisfaction was recently measured at 97%.

iPad revenue was $6.6 billion, down 8% year-over-year, which was expected given the difficult compare against the launch of the iPad Air and iPad Pro in the year ago quarter. At the same time, the iPad installed base reached another all-time high and over half of the customers who purchased an iPad during the quarter were new to the product. And based on the latest reports from 451 Research, customer satisfaction was 98% in the U.S. Wearables, Home and Accessories revenue was $7.4 billion, down 9% year-over-year. This was driven by a difficult compare on accessories due to the prior year's iPad launches that I just referred to.

The Apple Watch installed base reached a new all-time high with over half of customers purchasing an Apple Watch during the quarter being new to the product. We also set a quarterly record for upgraders on Apple Watch and the latest customer satisfaction for Watch in the U.S. was reported at 97%. Our services revenue reached an all-time high of $27.4 billion, up 13% year-over-year. The performance in the June quarter was broad-based. We saw a sequential acceleration across the majority of the categories, including cloud services, where we reached an all-time revenue record, driven by the year-over-year growth of iCloud paying accounts.

We saw strong momentum during the June quarter and the growth of our installed base of active devices gives us great opportunities for the future. Customer engagement across our services offerings also continued to grow. Both transacting and paid accounts reached new all-time highs with paid accounts growing double digits year-over-year. Paid subscriptions also grew double digits. We have well over 1 billion paid subscriptions across the services on our platform. We continue to improve the quality and breadth of our service offerings from the new Apple Games app to a continued expansion of tap to pay and wallet.

Turning to enterprise. Organizations are continuing to invest in Apple products to drive employee innovation and productivity. With companies like PayPal and Roche deploying more Mac for their workforce, we had the best June quarter ever for MAC and Enterprise. In Thailand, Sian Commercial Bank 1 of the largest high banks has deployed thousands of iPads across their branches to enhance the quality and efficiency of their banking operations from loan services to wealth management. CAE, a leader in pilot training and simulation technology is using Apple Vision Pro to enable pilots to become more familiar with aircraft procedures, leading to more productive in-person flight simulator training outcomes.

Let's turn to our cash position and capital return program. We ended the quarter with $133 billion in cash and marketable securities. We had $5.7 billion of debt maturities and issued $4.5 billion of new debt and increased commercial paper by $4 billion, resulting in $102 billion in total debt. Therefore, at the end of the quarter, net cash was $31 billion. During the quarter, we returned over $27 billion to shareholders. This included $3.9 billion in dividends and equivalents and $21 billion through open market repurchases of 104 million Apple shares.

As we move into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that Suhasini referred to. Importantly, the color we're providing assumes that the global tariff rates, policies and application remain in effect as of this call, the global macroeconomic outlook does not worsen from today and the current revenue share agreement with Google continues. We expect our September quarter total company revenue to grow mid- to high single digits year-over-year. We expect services revenue to grow at a year-over-year rate similar to what we reported in the June quarter.

We expect gross margin to be between 46% and 47%, which includes the estimated impact of the $1.1 billion tariff-related costs that Tim referred to earlier. We expect operating expenses to be between $15.6 billion and $15.8 billion. We expect OI&E to be around negative $25 million, excluding any potential impact from the mark-to-market of minority investments and our tax rate to be around 17%.

Finally, today, our Board of Directors has declared a cash dividend of $0.26 per share of common stock payable on August 14, 2025, to shareholders of record as of August 11, 2025.

With that let's open the call to questions.

Thank you, Kevan. [Operator Instructions]. Operator, may we have the first question, please?

Certainly, we'll go ahead and take our first question from Michael Ng with Goldman Sachs.

I just have 1 on upgrade rates and 1 First, on the upgrade rates, is it encouraging to see the records on iPhone MAC and watch I was wondering if you're seeing strength in the upgrade rates? Or is the records more a function of the growing installed base? What is your research showing that made upgrades particularly compelling this year? For example, is it product features, tariff pull forward, perhaps Apple Intelligence? And then I'll give my follow-up on CapEx.

Yes, let's do CapEx first. Mike just on -- go ahead. Just on the CapEx it's up notably year-to-date. Could you just comment on your capital spending plans this year and next and provide some qualitative color in terms of what's driving that growth? Is it AI-related or supply chain diversification, for instance? .

Yes, Mike, it's a combination of factors. I would say, a pretty significant driver as Tim talked about, is the fact we are increasing our investment significantly in AI. So that is certainly a component of it. As you know, we've been investing in private cloud compute, which is also in our first-party data centers. The other piece, as you know, is we do have a hybrid strategy where in cases we do use third parties to make capital investments, and we also invest in our own. So you are going to see an increase in CapEx. We also, from time to time, have other investments in facilities in tooling, but I would say a significant portion of the driver of growth that you're seeing now is really driven by some of our AI-related investments. .

On the upgrades, Michael, if you look at iPhone, the 16 family grew double digit as opposed to the 15 family from the year ago quarter. And so we did set an upgrade record. I think it directly is because of the strength of the product. MAC also set records on upgrade -- and I think we continue to see a move to Apple silicon and the performance of Apple Silicon is playing a very key role. And so it was an incredible quarter. In terms of -- if you're wondering about pull forward, we would estimate the pull forward of demand into April, specifically to be about 1 point of the 10 points in terms of people buying because of discussions about tariffs. .

Our next question is from Erik Woodring with Morgan Stanley.

I have to do as well. Maybe starting with you, shortly after March quarter earnings, there were some reports about searches on Safari declining in April for the first time, I think, in over 2 decades. -- on by year 13% services growth this quarter. It doesn't seem to indicate that April trends necessarily played out through the remainder of the June quarter. And so I'm really just looking for a little bit more color on really how the rest of the quarter played out. And if you believe Apple products as kind of search access points are losing their strategic value as AI platforms become more valuable, popular or increasing in strategic value? And then I have a follow-up.

I think they continue to be very valuable. I think that consumers' behaviors are evolving, and we're monitoring it very closely.

Okay. I appreciate that color. And then maybe second to that, I'd love if you could maybe elaborate a bit on what you're seeing in China. I think in an interview earlier this afternoon, you alluded to some of the promotions being tailwinds. But just bigger picture, if we take a step back in China, -- how would you characterize demand interest in the iPhone 16 and some of your other products? Is that shifting or maybe were some of the trends in the June quarter, maybe a bit more onetime and unique in nature?

Yes. We did grow in Greater China by 4% during the quarter versus the previous quarter, it was driven by an acceleration by iPhone, although we also had substantial growth on the MAC year-over-year. From a -- as you know, the government has placed certain subsidies that affects some of our products, not all of them, but there are some of them. And I think that had some effect. It was the first full quarter of the subsidy playing out. that cut in during a portion of the previous quarter.

The other things I would say are that the installed base hit a record high in Greater China -- and we set an all-time record for the iPhone installed base. The iPhone upgraders in Mainland China set a record for the June quarter. And according to Boral Panel, which was formerly known as Kantar, iPhone had the top 3 models in Urban China, which is extraordinary. Also, if you look at the other products, Mac, iPad and watch, the majority of customers that are buying in China Mainland were new to the product.

So lots of good things there. And the other thing I would point out, which is an interesting point, The MacBook Air was the top-selling laptop model in all of China, and the Mac Mini was the top-selling desktop model in all of China. So overall, a positive -- very positive quarter.

Our next question is from Ben Reitzes with Melius Research.

I really appreciate it. I wanted to ask about CRE, Tim, and just overall AI investment. There's a perception that CRE is going to help drive other new products potentially that maybe where voice is quite needed. And just wondering how's your confidence towards launching that next year? Is there anything that's been done internally to increase that confidence? Is it tied to the investment I just think folks would love to know a little bit more about your confidence in how that's going? And then I have a follow-up.

Yes. Thanks for the question. We're making good progress on a more personalized Siri, and we do expect to release the features next year, as we had said earlier, -- our focus from an AI point of view is on putting AI features across the platform that are deeply personal, private and seamlessly integrated. And of course, we've done that with more than Apple Intelligence features so far from visual intelligence to cleanup to writing tools and all the rest. We are significantly growing our investment we did during the June quarter, we will again in the September quarter.

I'm not putting specific numbers behind that at this point, but you can probably tell them the guidance that things are moving up. We are also reallocating a fair number of people to focus on AI features within the company. that are -- we have a great team, and we're putting all of our energy behind it. In terms of other products, I don't want to really comment on specific other products. But we have an exciting road map ahead and I could not be more excited about it.

That's great, Tim. Just with regard to my second question, it's about the overall revenue guide. And I appreciate that you guide the best you can see it. But I just wanted to challenge it from a different way is, why would it decelerate if services is staying the same at 13%. What -- is there a conservatism there? I would think even currency is just as favorable, if not more favorable. So why would it decelerate to the higher single digits from where you were in the quarter? Or is it just being conservative? And if there's something decelerating or comp, do you mind just pointing that out?

Yes, Ben, this is Kevan. Thanks for the question. I think when you look at the growth from Q3, we just reported to the mid- to high single-digit guide. I think you have to kind of keep in mind 2 components. The first is the effect of the tariff-related pull ahead and demand that Tim referenced earlier, which we estimated to be about 1 point of the 10 points that we ended up doing in Q3. And then the other factor that I think give to take into consideration is the fact that in September quarter a year ago, we had the full quarter impact of the iPad launches, which also leads to a difficult compare this year. So those 2 components are things you have to take into consideration as you think about the move from Q3 to Q4, I would say foreign exchange is a very minor tailwind going from Q3 to Q4, so not really a major factor.

Our next question is from Wamsi Mohan with Bank of America. .

Tim, I know you said similar growth in services, and that's predicated with Google payments continuing. Is there any way for us to dimensionalize sort of -- or maybe just conceptually talk about maybe options if the counter were to happen, if the payments were not allowed in some way, what are some of the things that Apple could do given that it is a significant chunk of profitability? And I have a follow-up.

Yes, Wamsi, I don't really want to speculate on the court ruling and how they would rule and what we would do as a consequence of it.

Okay. Okay. I guess we'll wait for that ruling to come out. I guess, separately, Tim, at a high level, when you look at some of what is perceived fears of new form factors and ways to interact with devices. There was some worry that given some of the developments in AI that there could be a world where dependence on screen-based devices significantly diminishes. And I'm kind of curious to get your thoughts on if do you think that would happen and rate and pace in which? And how do you think Apple is preparing in that case?

When you think about all the things an iPhone can do from connecting people to bringing app and game experiences to life to taking photos and videos to helping users explore the world and conduct their financial lives and pay for things and so much more. It's difficult to see a world where iPhone is not living in it. And that doesn't mean that we are not thinking about other things as well. But I think that the devices are likely to be complementary devices, not substitution.

Our next question is from Amit Daryanani with Evercore. .

I guess just to start with Tim, the tariff assumption of $1.1 billion in the September quarter, kind of -- I understand the uptick you folks are talking about. But can you just talk about assuming tariffs remain at these levels or even they evolve under Section 232, -- how do you eventually think about offsetting this headwind to your P&L? And when do you decide to execute on the levers to offset this headwind versus just flowing into your bottom line?

Right now, we're just estimating the cost of it, and it's up quarter-over-quarter, because our volume is up quarter-over-quarter. And there was some build ahead in the previous quarter. And so that's the primary reason that it's up. In terms of what we do to mitigate, we obviously try to optimize our supply chain and ultimately, we're -- we will do more in the United States. We've committed $500 billion investment in the U.S. over the next 4 years. And we're already building chips in Arizona. And in fact, we're building semiconductors across 12 states and 24 factories, and have a lot of other things in the work. She probably saw the investment in MP Materials last week. And so we continue to explore these things and look for more that we can do, which I think ultimately is the objective.

Got it. Super helpful. And then your services growth, I think, was extremely impressive at 13%, especially even on the [indiscernible] ad. Can you just touch on, did you see any impact that was notable from the Epic case and the steering dynamics that came after that? And maybe just touch on what does that appeal process looks like to me as you go forward? .

Yes, this is Kevan. Let me take that one. In general, I think just reminding, I think you just said, we had a very strong services quarter -- we had an all-time record $27.4 billion, up 13%. The 1 thing I would also say is our services performance was broad-based. So we also saw strength in developed and emerging markets, both parts of the world had double-digit growth. We also saw a sequential acceleration across the majority of our categories, including cloud services, where I mentioned in the prepared remarks that we had an all-time revenue record.

As it relates to the EPIC decision, we -- keep in mind, we only just introduced the change required by the court in the June quarter. And as you know, we don't provide the level of detail. But in general, I would say it was a very, very -- in the U.S., we had a double-digit growth on the U.S. App Store. -- and we had an all-time record. And so we'll continue to monitor the effects on our business, but we continue to innovate and ensure that the App Store delivers the best experience for users and remains a great business opportunity for developers.

Our next question is from David Vogt with UBS.

And I have 2 questions as well. Maybe Tim, just on the supply chain strategy. I know last quarter, you talked about focusing production or assembly to India. And I just want to get an update on how you're thinking about the strategy holistically, given sort of the tariff rates, I think, in India potentially are higher than I think anyone had expected. So I know you mentioned U.S. investments would love to kind of get your thoughts on how you're thinking about China versus the rest of Southeast Asia and India going forward?

And then I'll give you my second question also. So Kevan, I'm just trying to understand a little bit more about the demand drivers of iPhone in the quarter because obviously, the 16 has been in the market for some time. I know there was some promotional activity. But seasonally, you generally don't see this kind of strength in the June quarter. Maybe you can help us understand outside of maybe the promotional activity, what else were some of the drivers that led to what was -- looks like a pretty significant above seasonal strength in the June quarter?

Yes. In terms of the tariff situation in country of origin and so forth. One thing I would say, just to remind everyone is Keep in mind that the vast majority of our products are covered under the Section 232 investigation. And so the -- today -- or I should say, last quarter, the bulk of the tariffs that we paid were the EEPA tariffs that hit early in the year related to China. And so that's just a reminder of where things are and what we assumed as we calculated the projection of $1.1 billion that's in our outlook color.

In terms of the country of origin, it's the same as I referenced last quarter. There hasn't been a change to that, which is the vast majority of the iPhones sold in the U.S. or the majority, I should say, have a country of origin of India and the vast majority of the products, other products, the MAC and the iPad and the watch have a country of origin of Vietnam that are sold in the United States. Still, the products for other international countries, the vast majority of them are coming from China. And so that hopefully gives you a flavor of the of where things are. But I would stress again that we do a lot in this country in the United States. And we've committed $500 billion, and we're always looking to do more. And you could kind of see that in the most recent announcements, whether it's MP Materials or our manufacturing academy that we're standing up in Detroit in a couple of weeks or so.

And so we're going to be doing -- we're doing more in this country, and that's on top of having roughly 19 billion chips coming out of the U.S. now, and we will do more. and of course, glass from iPhone in the face ID module. And so there's loads of different things that are done in the United States.

And then, David, Yes. So as in I mentioned the iPhone activity -- you asked that there's any kind of unique characteristics this quarter. I would just say, as Tim outlined, we really believe that the strong upgrade performance, which was a June quarter record was really driven by the strength of the product lineup. The iPhone 16 family has done incredibly well compared to the iPhone 15 family. And we also, as you recall, recently introduced the 16E as well, which also continued to impact the success of the overall iPhone 6 lineup.

Our next question is from Krish Sankar with TD Cowen. .

The first 1 for Kevan, just on the previous question, do you think there was any pull-in of poles in the June quarter that led to some of the upside -- and how to think about channel inventory in June quarter? And how it looks in September relative to seasonal trends? And then I had a longer-term follow-up for Tim.

Let me see if I can answer the channel inventory question or what I think is the channel inventory question. If you look at iPhone channel inventory from the beginning of the quarter to the end of the quarter, we reduced it, and it ended toward the low end of our targeted range. And so that's the answer on the inventory piece of it. .

And then I think you also asked about the pull-ahead impact. I think we referenced that earlier. Just to be clear on what we believe we saw in the June quarter, we did see some obvious signs of Bullhead really in the April time frame around the tariff-related discussions that were out in the marketplace. And so we felt that, that was from what we saw about a 1 point impact of the 10 points at a total company level of growth. And so that was the limited impact that we believe we saw for the quarter.

Got it. Very helpful. And then I just had a long-term follow-up for Tim. Tim, I was curious about your thoughts on AI for edge devices. There's like some people who think that LLM could be a commodity in the future. Do you think -- do you see a scenario where the LLM become a third part of your iOS or is the SLM the way to go and how to think about evolution of edge devices in a futuristic AI world and is smartphone going to be the choice of device. Just curious your thoughts on it, broadly speaking.

The way that we look at AI is that it's 1 of the most profound technologies of our lifetime. And I think it will affect all devices in a significant way what pieces of the chain are commoditized and not commoditized, I wouldn't want to really talk about today. because that gives away some things on our strategy. But I think it's a good question. .

Our next question is from Samik Chatterjee with JPMorgan.

Tim, maybe if I can start with your remarks about the pull ahead being about a 1 percentage point benefit here. Anything to share in terms of how -- what's underlying that estimate in terms of what you're seeing for -- is it a pull ahead largely on iPhones? Or is it across the board? And is it primarily in the U.S. or again, sort of across multiple regions? Any color there would be helpful in terms of how you're sort of getting to that assumption there? And I have a follow-up. .

It was principally on iPhone and MAC. And it was pretty -- it was obvious evidence of it. It was an unusual buying pattern there and that largely occurred in April towards the beginning of the quarter. And it was really -- we believe it was largely the United States. .

Okay. Okay. Got it. And maybe on the tariff front, when you gave the estimate of $900 million last quarter, which came in at $800 million, you did highlight it was there were some unique factors in the quarter. When I take the $1.1 billion that you're now sort of expecting for the September quarter and as we start to think about December, would -- is there anything unique in the December quarter in terms of sourcing from regions, et cetera, that would uniquely impact December, just given sort of that you had highlighted that quarter-to-quarter, so there would be unique things. Just curious if December looks very different from September because of any unique factors.

I would be careful about projecting based on the numbers from Q2 and Q3 because, one, we're uncertain of what the rates will be. And so the rates may change. Two, in -- particularly in last quarter, we had some build ahead inventory that we were -- that we had within the company and within our supplier -- within our supply chain. And so those 2 are a little unique. Also, as you know, from following us for so long, Q1 is generally a higher volume quarter. And the tariffs are currently are pretty linear with volume. .

Our next question is from Aaron Rakers from Wells Fargo.

I've got 2 as well, and I'll just ask them together. I guess the first 1 is just more housekeeping. Kevan, when we think about currency impact, how much of a benefit was currency this quarter -- and I guess across the business and in particular, maybe on the services segment. And on a year-on-year basis, how much currency benefit should we be thinking about embedded in the guidance into the September quarter?

And then the second quick question is CapEx is clearly moving higher. I know you guys don't guide specifically to that number. But just kind of qualitatively, should we as you lean in more on AI, should we really start to see that CapEx, which is running close to about $4 billion annualized today, really start to move appreciably higher? Any color on that would be helpful. .

Great, Aaron. Thanks for the question. Let me answer the first 1 first around foreign exchange. For Q3, we really had no impact from a foreign exchange standpoint on the year-on-year results. And so -- when we look at both the revenue growth as well as the gross margin, there was virtually no impact from foreign exchange. As we look at going from Q3 to June quarter to the September quarter, again, very, very, as I mentioned earlier, a very small tailwind going from Q3 to Q4 from a foreign exchange standpoint on both revenue as well as gross margin.

And then on the second question, sure, on the CapEx side, I think we talked about the fact that we are, and Tim mentioned the fact that we are increasing our investment significantly I you are going to continue to see our CapEx grow. It's not going to be exponential growth, but it is going to grow substantially. And a lot of that's a function of the investments we're making in AI. As we mentioned, we also have other items that fall under that category, facilities and some of our retail store investments. But I would say a lot of the growth is really being driven by AI. I would remind you that we do have a hybrid model though, where we also leverage third-party infrastructure in addition to investing in our own first-party infrastructure.

Our next question is from Atif Malik with Citi. .

Tim, at WWDC earlier in the quarter, you showed impressive updates on Vision Pro with the use of Viget special scenes, persona and new ways to create content appears like Meta and [ Jaume ] are seeing strong momentum on their AI glasses. So is the focus still around enterprises on Vision Pro? Or are you thinking of broadening the use cases and maybe tying it to more of your devices? Any thoughts on Vision Pro as they did not get enough airtime in the prepared remarks.

Yes. Thanks for bringing it up. I was thrilled with the release from the team on Vision OS 26. It includes many things in it like special widgets to enable users to customize their digital space. The personas took a huge increase with they're much more lifelike -- and of course, there's new enterprise APIs for companies as well. And we're seeing, as Kevan talked about in his opening remarks, we're seeing those things resonate out with CAE and other customers. And so we continue to be very focused on it. And I don't want to get into the road map on it, but this is an area that we really believe in. .

Great. And Kevan, historically, you guys have not done much big M&A. Do you feel like you need to accelerate your AI road map or just keep the organic focus? .

Let me take that 1 as well. We've acquired around 7 companies this year. And that's companies from all walks of life, not all AI oriented. And so we're doing one, think of it as 1 every several weeks. We're very open to M&A that accelerates our road map. We are not stuck on a certain size company, although the ones that we have acquired thus far this year are small in nature. But we basically ask ourselves whether a company can help us accelerate a road map if they do, then we're interested, but we don't have anything to share specifically today. .

All right. Thank you, Atif. A replay of today's call will be available for 2 weeks on Apple podcast as a webcast on apple.com/investor and via telephone. The number for the telephone replay is (866) 583-1035. Please enter confirmation code 628-7473 followed by the pound sign. These replays will be available by approximately 5 p.m. Pacific Time today. Members of the press with additional questions can contact Josh Rosenstock at (408) 862-1142. And financial analysts can contact me, Suhasini Chandramouli with additional questions at (408) 974-3123. Thanks again for joining us today.

Once again, this does conclude today's conference. We do appreciate your participation.