Apple beats expectations as iPhone strength meets AI supply and cost worries

Apple reported stronger-than-expected results for its January-March quarter on Thursday, with continued iPhone demand driving revenue and earnings. Investors, however, also focused on the company’s artificial intelligence direction and on a leadership transition that Apple announced earlier this month, in which CEO Tim Cook will step down and be replaced later this year by John Ternus.

In the quarter ended in March, Apple earned $29.58 billion, or $2.01 per share, according to the company’s results. That compared with the prior-year period, which showed earnings and per-share results about 22% lower than the latest figure. Apple also reported that revenue rose about 17% to $111.18 billion from $95.36 billion a year earlier.

Apple said iPhone sales remained the biggest contributor to the quarter’s results, bringing in $56.99 billion. Apple’s iPhone momentum and the broader revenue increase helped it beat analyst forecasts, which FactSet Research said had called for earnings of $1.95 per share on revenue of $109.46 billion.

Cook said in a statement that the quarter marked the company’s best March quarter ever, adding that Apple saw “double-digit growth across every geographic segment.” The company also pointed to the performance as part of its continued iPhone sales trend going into the new quarter.

Apple’s quarterly update came after it said in its previous quarter ended in December that it reached record-high iPhone sales, even as it had not fully delivered on a long-promised revamp of Siri assistance with AI. In Thursday’s update, Cook said Apple would bring “a more personalized Siri” to users this year, though he did not specify timing.

On the call with analysts, Cook said high demand has caused supply constraints, including constraints tied to the advanced technology used to form what he described as a device’s “brain.” He said those constraints will affect several Mac models in the current quarter running through June, and he linked that forecast to stronger-than-expected customer response for the MacBook Neo.

Cook also told analysts that the company has seen higher memory costs and expects “significantly higher” memory costs moving forward. He said that beyond the current quarter, Apple “believe[s] memory costs will drive an increasing impact on our business, and we’ll continue to evaluate this.”

Jake Behan, head of capital markets at Direxion, said in a statement that Apple’s warning about higher costs signals how real the “AI-driven supply crunch” has become for the broader industry. He said Apple’s results showed that even the company’s strongest operators can’t fully escape the memory squeeze.

Beyond hardware and costs, Cook also used the results to describe Apple’s AI strategy. He said Apple’s systems deliver “intelligence that is fast, personal and private,” characterizing it as “not AI as a standalone feature,” but as an “essential, intuitive part of the experience across our devices.” Apple also teased new software and developer tools alongside its stated AI advancements.

Cook, who has led Apple for 15 years after inheriting the CEO role from the late Steve Jobs, said the company’s leadership change will take effect with Ternus starting as CEO on Sept. 1. Cook said he will remain involved with Apple as executive chairman, and he introduced Ternus during the post-results call.

Ternus said it is the “most exciting time” in his “25 year career at Apple” building products and services, and he said he is “more optimistic about what’s to come.”