Apple silences its critics with strong iPhone demand and blowout services revenue

Apple reported a robust September quarter, with revenue of $102.47 billion and EPS of $1.85, both exceeding consensus estimates, driven by a record 15% growth in services revenue and strong Mac sales. Despite iPhone sales missing expectations due to supply constraints, demand remained high, contributing to an all-time high in the active installed device base. The company issued an exceptionally strong outlook for the December quarter, projecting record revenue growth of 10-12% and double-digit iPhone revenue growth, significantly surpassing Street expectations, underpinned by expanding gross margins and anticipated investments in AI, including a new AI Siri in 2026. This performance and bullish guidance led to a significant after-hours stock jump and an analyst price target increase to $300.

Analysis

Apple reported robust September quarter (fiscal Q4 2025) results, with revenue of $102.47 billion (+8% YoY) and EPS of $1.85 (+13% ex-one-time charge), both exceeding consensus. High-margin Services achieved an all-time record of $28.75 billion (+15% YoY), driving gross profit margin expansion of nearly 100 basis points YoY, despite tariff headwinds.

iPhone sales grew 6% to $49.03 billion but missed expectations due to supply constraints, not demand, with CEO Cook expecting Greater China growth. The active installed base reached an all-time high. Management projected an exceptionally strong December quarter (fiscal Q1 2026) with 10-12% YoY revenue growth, significantly above the Street's 6% forecast, and record iPhone revenue.

The outlook anticipates 47-48% gross margin, exceeding expectations despite tariff headwinds, and higher operating expenses due to AI investments, including a new AI Siri in 2026. Apple returned $24 billion to shareholders, supported by $34 billion net cash. AAPL jumped up to 5% after-hours, prompting analysts to raise the price target to $300 from $240, while maintaining a "hold" equivalent rating.

Key Decisions for Investors

• Investors should closely monitor Apple's supply chain improvements, especially for iPhone production, as resolving current constraints is crucial for realizing the strong demand and achieving the bullish December quarter guidance.
• Evaluate the long-term impact of Apple's increased AI investments, including the planned 2026 AI Siri debut, as these strategic expenditures are expected to drive future product differentiation and service monetization.
• Given the stock's significant after-hours rally and the analyst's maintained "hold" equivalent rating despite a raised price target, investors should carefully assess current valuation and potential entry points.