Apple’s iPhone revenue misses expectations, but CEO Tim Cook promises an immediate turnaround – News

Apple Inc. delivered strong fiscal fourth-quarter financial results today as it closed out its fiscal 2025 year, but its stock gained only 2% after-hours after iPhone sales fell short of Wall Street’s expectations.

The world’s most valuable device maker posted earnings before certain costs such as stock compensation of $1.85 per share on revenue of $102.47 billion, up 8% from the same period one year earlier. The results came in ahead of analyst’s expectations, with the Street guiding for earnings of just $1.77 per share on sales of $102.24 billion.

All told, Apple delivered $27.5 billion in net income during the quarter, up from $14.29 billion in the year-ago period. For fiscal 2025 as a whole, the company posted $416 billion in revenue, up 6% from the previous year.

Apple doesn’t offer formal guidance, but Apple Chief Executive Tim Cook (pictured) told CNBC in an interview that sales in the current quarter are expected to grow by between 10% and 12%, with iPhone revenue forecast to increase by double digits year-over-year. “We expect that this will make the December quarter the best ever in the history of the company,” Cook said.

The forecast suggests Apple’s fiscal first-quarter sales will come to around $137.9 billion, which is much higher than what most analysts are predicting. Wall Street is looking for Apple to deliver just $132.31 billion in sales in the current quarter.

Cook said he’s confident about the company’s guidance, citing the strong reception of its latest iPhone 17 devices that launched in September. He said sales so far have been off the charts, and believes they will accelerate during the holiday season. “We look at the results to date, the reception of the consumer on the very strong iPhone lineup,” he explained. “We’re looking at traffic in our stores, which is up significantly. We see enthusiasm around the world.”

Despite Cook’s claims, revenue from iPhone sales missed Wall Street’s targets during the quarter. The company sold $49.03 billion worth of handsets, trailing the analyst forecast of $50.19 billion, though it’s notable that the period only included the first week’s worth of iPhone 17 sales. According to Cook, the reason for this is that some of its older iPhone 16 models and also some of the new ones were hit by supply constraints. “Currently, we’re supply-constrained on several models of the iPhone 17,” he told analysts on a conference call.

The iPad business also came up short with $6.95 billion in sales, flat from a year ago and trailing the Street’s forecast of $6.98 billion. There weren’t any new iPad models released in the quarter, but it did upgrade the iPad Pro in October, equipping it with the more advanced M5 chipset.

Fortunately for the company, the services business unit fared much better, with sales rising 15%, to $28.75 billion in the quarter, above the $28.17 billion forecast. The unit, which includes App Store sales and subscriptions for services such as Apple Music and iCloud, is a critical one for Apple because it’s the only one that provides recurring revenue. Investors were therefore likely pleased by Apple Chief Financial Officer Kevin Parekh’s promise that the revenue will accelerate growth in the current quarter.

Apple’s Mac business also did well, with revenue coming to $8.73 billion, ahead of the $8.59 billion estimate, representing growth of 13% from a year earlier. Other Products, which includes sales of the Apple Watch, AirPods and Vision Pro headset, contributed $9.01 billion in sales, beating the Street’s forecast of $8.49 billion, although down slightly from a year earlier.

Zacks Investment Research analysts Ethan Feller said Apple’s forecast signals confidence that the iPhone maker will continue to grow, and is probably the main factor behind the slight uptick in its stock. “The results and guidance reinforce Apple’s predictable execution and durable profitability,” he said. “Despite pockets of weakness in iPhone and China sales, the expanding services segment and improving margins highlight the resilience of its business model.”

AI spending to remain modest

On the call with analysts, Cook reiterated the company’s plan to launch an updated Siri digital assistant next year and a revamped Apple Intelligence suite that will integrate OpenAI Group PBC’s ChatGPT. He added that the company has similar partnerships in the works, and intends to “integrate with more people over time.”

AI is important for Apple, but the company has taken a wholly different approach than other technology giants. While the likes of Microsoft Corp., Amazon.com Inc. and Google LLC are spending lavishly to build out cloud computing infrastructure for AI, Apple’s investments have been much more modest. Rather than trying to buy as many AI processors as it can get its hands on, it’s more focused on reserving cloud computing capacity from third parties.

It does operate some data centers, but they’re powered by its own chips rather than those from Nvidia Corp. or Advanced Micro Devices Inc. “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,” Parekh told analysts.

Apple’s strategy means it has been able to save a ton of money. While Amazon and Microsoft have both pledged to spend more than $100 billion on capital expenditures this year, Apple’s total capex in fiscal 2025 came to just $12.72 billion. Even that figure represents a 35% increase on what it spent in the year before, underscoring how frugal the company has been. Parekh said the company estimates capex at $14.3 billion in fiscal 2026.

The question is whether Apple’s strategy represents a risk. The company launched Apple Intelligence last year, but the tools, which help summarize notifications and generate images on-device, have had mixed reviews thus far. The general consensus is they’re not as good as rival services such as ChatGPT and Google Gemini, which is why Apple is now looking at expanding its AI partnerships. The improved Siri is expected to launch in May 2026.

Elsewhere, Apple said that sales in the Greater China region, which includes Mainland China, Taiwan and Hong Kong, declined 4% from a year earlier to $14.5 billion. That’s a worry because China is a key market for Apple, but Cook insisted that the company will return to growth there in the current quarter thanks to the arrival of the iPhone 17 family.

Cook also discussed Apple’s pricing strategy in light of U.S. President Donald Trump’s trade policies, which have seen heavy tariffs imposed on products originating from China. He explained that the company has had to bear higher costs of about $1.1 billion relating to these measures, so as to avoid putting this burden onto its customers.

According to Cook, these costs will increase to around $1.4 billion in the current quarter. “We held the pricing that we would have done without any tariffs, and we’re just absorbing the tariffs in gross margin,” he explained.

If today’s slight gain after-hours holds Friday, that means Apple’s stock is now up just over 8% in the year to date, trailing the broader S&P 500 Index, which has gained almost 16% so far this year.

Photo: Mike Deerkoski/Flickr