Apple Beats Q3 Earnings but Stock Drops 6% on Weak Guidance
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- Apple beat fiscal Q3 estimates (EPS $2.02 vs $1.89, revenue $109.42B vs $108.65B) with iPhone sales up 22% to $54.25B and net income climbing to $29.79B, yet shares slid more than 6% in extended trading.
- Apple guided Q4 revenue growth of 9-11%, missing the 12% analyst estimate, citing supply constraints and 2.5 percentage points of foreign-exchange headwinds; CFO Kevan Parekh said iPhone revenue will be impacted by both.
- Tim Cook delivered his final earnings call as CEO before handing the role to John Ternus on Sept. 1, calling the memory crunch a "hundred-year flood" with no end in sight: "we expect to pay even higher memory costs."
- Mac revenue surged nearly 29% to $10.35B, driven by the MacBook Neo low-cost laptop launched in March; Apple already hiked Mac and iPad prices in June to offset component costs.
- Apple received tariff rebates adding 11 cents per share to EPS and 2 percentage points to gross margin, pushing margin to a record 50.06% — a boost tied to the Supreme Court striking down some of Trump's tariffs earlier this year.
- China revenue climbed 22% to $18.82B, reinforcing its position as Apple's third-biggest market; services revenue of $30.74B missed the $31.22B estimate.
Why it matters: A 6%+ after-hours drop despite a clean beat shows the market is pricing forward visibility, not past quarters — and Apple's supply-constrained guidance, with Cook warning memory costs will keep rising, raises the odds of iPhone price hikes before the September Siri/AI hardware launch investors are watching as the AI credibility test.
