Apple Inc. 10-Qquarter ended 2025-12-27
Positive
iPhone Pro demand and Services mix drove growth and lifted margins despite tariff costs; Greater China led regional gains.
Filed 2026-01-30 06:01 ET
Key figures · Q1 FY2026 · period ended 2025-12-27
- Revenue$143.8BYoY +15.7%QoQ +40.3%
- Operating income$50.9BYoY +18.7%QoQ +56.8%
- Net income$42.1BYoY +15.9%QoQ +53.3%
- Total assets$379.3BYoY +10.2%QoQ +5.6%
- Total debt$90.5B1YoY −6.5%QoQ −8.3%
How total debt adds up Term debt $76,685M + Term debt $11,827M + Commercial paper $1,997M Total debt $90,509M Lines as the filer presents them on its balance sheet.
- Shareholders' equity$88.2BYoY +32.1%QoQ +19.6%
- Tangible book value$88.2B2YoY +32.1%QoQ +19.6%
Notes (2)
- Total debt: About the summary: The summary's $88.5B is term-debt carrying amount; total debt of $90.51B also includes commercial paper.
- Tangible book value: No goodwill is reported. No intangible assets are reported.
How this filing reads
- Health+0.9Cash and marketable securities totaled $145B, with $51.6B free cash flow and $88.5B term debt.
- Momentum+0.9Revenue rose 16% and operating income 19%, while gross margin increased to 48.2%.
- Outlook0.0No forward guidance; management flags tariff and margin volatility and $43.7B due within 12 months.
Executive Summary
Apple’s Q1 FY2026 growth was led by higher-priced iPhone Pro models and expanding Services, with Greater China delivering the fastest regional sales growth. Revenue rose 16% Y/Y, while favorable product and Services mix lifted margins despite higher tariff costs and a 32% increase in R&D spending. Operating cash flow substantially exceeded net income, but a liability inflow and lower cash tax payments boosted that comparison. For investors, the quarter strengthens the earnings case; the key tests are whether iPhone demand and margins hold as tariff exposure and investment spending continue.
Key Financial Highlights
| Metric | Q1 FY2026 / 12/27/2025 | Investor interpretation |
|---|---|---|
| Revenue | $144B, +16% Y/Y | iPhone and Services drove growth across every reported region. |
| Gross profit | $69.2B, +19% Y/Y | Gross margin rose to 48.2% from 46.9% as mix outweighed tariff costs. |
| Operating income | $50.9B, +19% Y/Y | Operating margin improved despite faster R&D spending. |
| Net income | $42.1B, +16% Y/Y | Earnings grew despite a higher effective tax rate. |
| Diluted EPS | $2.84, +18% Y/Y | Repurchases helped per-share growth exceed net income growth. |
| Total assets | $379B | Provides balance-sheet scale; cash and marketable securities totaled $145B. |
| Total equity | $88.2B | Capital returns remain substantial relative to book equity. |
- Revenue mix: iPhone $85.3B, +23% Y/Y, and Services $30.0B, +14%, together accounted for ≈80% of sales. Services growth came primarily from advertising, the App Store and cloud services; Mac sales fell 7% and Wearables, Home and Accessories fell 2%.
- Cash conversion: Q1 operating cash flow $53.9B vs net income $42.1B; capital expenditures $2.37B → free cash flow $51.6B. A $12.5B inflow from other liabilities, reversing a prior-year outflow, and much lower cash tax payments materially supported the cash-flow increase.
- Capital return: Apple repurchased $25.0B of shares and paid $3.92B in dividends and equivalents. Shares outstanding fell by 70.6M, or 0.48%, net of issuance; stock-based compensation was $3.59B.
- Investment and funding: R&D reached $10.9B, +32% Y/Y, for infrastructure, headcount and engineering programs. Commercial paper outstanding fell to $2.0B from $8.0B; term debt carrying amount declined to $88.5B from $90.7B.
Business Developments
Management attributed iPhone growth partly to stronger Pro-model sales. Greater China revenue rose 38% to $25.5B, making it the fastest-growing region; every other reported region also grew. This broad geographic gain reduces reliance on any single market for the quarter’s growth, although iPhone remained the dominant product driver.
Services’ higher sales and favorable mix lifted its gross margin to 76.5% from 75.0%, reinforcing its role in profitability. Apple also introduced updated 14-inch MacBook Pro, iPad Pro and Apple Vision Pro products. Whether those launches reverse softer Mac and Wearables trends will become clearer after the holiday quarter.
Risk Assessment
- Tariffs and supply chains: New and potential U.S. tariffs, retaliation and restrictions affecting components or rare earths could raise costs or constrain supply; favorable product mix offset tariff costs this quarter but may not do so consistently.
- iPhone demand and concentration: iPhone generated $85.3B of $144B in sales, and Greater China drove the fastest regional growth; weaker premium-model demand or regional consumer spending would have an outsized effect.
- Margin and investment pressure: Apple cautioned that gross margins face volatility and downward pressure, while R&D grew 32% Y/Y; returns on that spending must keep pace with its cost.
- Purchase commitments: Manufacturing purchase obligations totaled $44.4B, including $43.7B payable within 12 months, increasing the importance of accurate demand and inventory planning.
- Currency and valuation: Foreign exchange affected regional sales differently, and hedges may only partly offset exposure; marketable securities carried $2.54B of gross unrealized losses.
This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: the company's 10-Ks on SEC.
Strategic Outlook and Investor Actionables
Apple enters the next quarter with stronger margins, substantial liquidity and a growing Services business, but the durability of Pro-model demand and tariff offsets matters more than the holiday quarter’s headline growth.
- iPhone and Greater China: Track sales growth in both; sustained gains would support the premium-demand thesis, while a sharp reversal would challenge it.
- Margins and spending: Compare gross margin with tariff effects and R&D growth to see whether mix gains continue to fund investment.
- Cash conversion and capital return: Compare operating cash flow with net income, separating liability and tax-payment effects, and check whether repurchases continue to reduce shares outstanding.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
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