Apple has reported "overwhelming" demand for the iPhone. But there is cause for concern

Apple reported "simply staggering" demand for iPhones in the holiday quarter. The company's revenue rose 16% year-on-year to set a record. The results beat analysts' expectations, but investors are concerned about the threat to profitability due to rising memory chip prices.

Apple's revenue in the first quarter of 2026, ended December 30, rose 16% year-on-year to a record $143.76 billion. Analysts, according to LSEG, expected $138.48 billion, CNBC writes. Adjusted earnings per share came in at $2.84 versus the $2.67 forecast. Gross margin in the quarter also beat Wall Street expectations: 48.2% versus 47.5%. Net income amounted to $42.1 billion.

Apple expects its rapid revenue growth to continue in the current quarter, with the company forecasting 13% to 16% growth. However, the company has warned of a threat to margins due to rising memory chip prices. After minimal impact last quarter, Apple expects "more impact" in the current quarter, CEO Tim Cook said.

Because of this, investors' reaction to the report was restrained, according to Bloomberg. Shares of Apple after the publication of the report grew on the postmarket by about 1%, but then the pace slowed to about 0.6%. The main trading session ended with growth of 0.7%.

"Demand for the iPhone has been overwhelming," Cook said on CNBC. Smartphone revenue rose 23% year-over-year to $85.27 billion. Wall Street had expected only $78.65 billion. Strong demand for models in the iPhone 17 lineup, which went on sale in September, contributed to the success, the company said. By comparison, a year earlier, iPhone sales in the holiday quarter were down slightly.

Apple posted strong results in China, including Taiwan and Hong Kong. Sales in the region grew 38% last quarter to $25.53 billion, with Cook saying growth in the region was driven by iPhone sales. "We set an all-time record for upgrades in mainland China and recorded double-digit growth among those switching from other brands," Cook said.

Apple's capital expenditures fell slightly to $2.37 billion in the final three months of last year, with research and development spending rising to $10.89 billion from $8.27 billion a year earlier. "AI will require additional investment beyond our normal product investment plan," said Apple CFO Kevan Parekh. Apple is spending far less on AI technology than companies like Meta and Microsoft, which are investing hundreds of billions of dollars in AI infrastructure, CNBC noted.

Mac sales fell 7% year-over-year to bring in $8.39 billion, just short of Wall Street's forecast. The company released an updated MacBook Pro with a new M4 chip in November.

In contrast, iPad revenue increased 6% to $8.6 billion, beating expectations. The growth in iPad sales was driven by the release of the iPad Pro with the M5 chip in October. Cook noted that half of iPad buyers in the quarter had not previously owned such a device.

Sales of wearable devices(AirPods, Apple Watch, Vision Pro), home devices and accessories fell 2% to $11.49 billion versus $12.04 billion expected by analysts. The company claims that sales declined due to problems with AirPods Pro 3, Bloomberg writes.

Revenue from Apple TV and iCloud services, as well as advertising revenue from Google license agreements, AppleCare warranties, and other Apple offerings increased 14% to a record $30.01 billion. Cook said Apple TV views increased 36% in December compared to the same month in 2024.

Cook also reported that the active base of Apple devices - iPhones, Macs and others - has reached 2.5 billion, up from 2.35 billion as of last January. This metric is closely monitored because it shows the potential audience for Apple's services and software on its platforms, explained CNBC.

This article was AI-translated and verified by a human editor