Record Q3 FY2026 results
Apple's fiscal third quarter of 2026 posted record numbers, with net sales rising 16% year over year to $109,417 million. Net income climbed to $29,789 million from $23,434 million a year earlier, and diluted earnings per share reached $2.02. iPhone revenue rose 22%, Mac increased 29%, and Services grew 12%, with total gross margin expanding to 50.1%. The strong underlying demand, however, did not translate into the forward growth analysts had projected.
Soft Q4 guidance and supply constraints
On the Thursday earnings call, Apple guided to revenue growth of between 9% and 11% for the current quarter, falling short of Wall Street's roughly 12% estimate. CEO Tim Cook, who plans to step into the role of executive chairman in September, attributed the pressure to severe component shortages. He called the chip constraints "very significant" and said Apple had limited options to address them, noting that the cost cushion from stockpiled inventory was fading and that processor shortages were preventing Apple from fully meeting demand for iPhones and Macs.
New AI compute risk in SEC filing
Apple's 10-Q quarterly filing for fiscal Q3 2026 introduced a new risk-factor section flagging potential shortages of artificial intelligence and machine learning computing capacity. The filing warns that inadequate compute capacity could limit product functionality, delay the rollout of features, or force Apple to absorb significantly higher costs. The disclosure highlights Apple's reliance on third-party cloud providers, including Google, alongside its own data center infrastructure, and notes that demand for such infrastructure has produced "constrained supply, extended lead times, and increasing costs." The same document also links the AI compute concern to broader hardware sourcing pressure from turmoil in the NAND and DRAM sectors.
Services and App Store gaming slowdown
Apple's services business, the company's second-largest revenue segment, grew 12.1% to $30.74 billion in the quarter, missing analyst estimates of $31.22 billion. CFO Kevan Parekh attributed part of the shortfall to mobile gaming headwinds inside the App Store. The slowdown in services arrived even as iPhone sales were strong—a combination that concerned investors, since App Store commissions typically track iPhone demand. Some analysts suggested the disappointment could deepen if iPhone sales weaken following a price increase widely expected at the September product launch.
Leadership transition
The earnings call was described as Cook's final appearance as CEO, with operations chief John Ternus set to take the CEO role in September while Cook becomes executive chairman. Apple's cautious guidance for the September quarter therefore provides the first formal forward outlook under the transition framework, and analysts are weighing whether the leadership change will affect the company's traditional supply-chain leverage.
Market reaction
Apple shares fell nearly 10% in Friday trading, the steepest single-day decline since the March 2020 pandemic-driven selloff. If sustained, the drop would erase nearly $500 billion from Apple's market capitalization and return the title of the world's most valuable company to Nvidia, days after Apple had reclaimed it. At least four brokerages cut their price targets on the stock, while three raised them, leaving the median view at $330—about $3 below the prior closing price. The stock had still risen 22.7% year-to-date through Thursday's close.
Share this article
