Apple beats profit expectations as services miss sends shares lower

Apple shares fell 4% in after-hours trading after its services business came up short, even as the company posted stronger-than-expected profit and sales for the quarter ended June 27. Apple reported revenue of about $94.0 billion, up 16.4% from a year earlier, and earnings of $23.4 billion, or $1.57 a share, beating the $1.43 consensus.

The split result sharpened a familiar question for Apple investors: how long can iPhone demand carry the company while services, its highest-margin recurring business, loses a little momentum? Apple’s services revenue reached $27.42 billion, below the $27.68 billion estimate that investors were watching closely. That shortfall mattered because services, which includes the App Store, iCloud, Apple Music, payments and subscriptions, has been central to Apple’s case for sustained margin expansion.

The quarter still showed clear strength in Apple’s core hardware business. Demand for iPhones and MacBooks helped drive the beat, even as the broader consumer electronics market faced higher prices and cost pressure from memory and components. The result also reinforced Apple’s premium position at a time when many investors had braced for a more cautious report, given competition from other high-end device makers and lingering questions about consumer spending.

Apple’s latest numbers arrived as the company had recently regained the title of the world’s most valuable company, a reminder that its scale and pricing power remain formidable. But the market reaction showed how quickly that strength can be overshadowed when one of the company’s key growth engines slows. Shares moved lower despite the headline beat because Wall Street has increasingly treated services as the bridge between hardware cycles and longer-term profit growth.

The pressure did not end with the earnings release. Apple warned that supply constraints would hurt growth and said it expected fiscal fourth-quarter revenue to rise 9% to 11% in the period ending in September, below analysts’ expectations for more than 12% growth. That guidance suggested the September quarter could be shaped as much by execution limits as by demand, a combination that complicates Apple’s effort to keep margins elevated while still pushing premium products.

The earnings call also carried a leadership backdrop. Apple’s July results were described as potentially Tim Cook’s final one as chief executive before John Ternus takes over on Sept. 1, 2026. That transition, paired with the company’s uneven performance across hardware and services, leaves Apple facing a clear test: iPhone sales are still doing the heavy lifting, but investors want evidence that the next stage of growth will come from more than the handset that built the company.