Apple delivers a nearly perfect quarter, with a CEO change and an AI update ahead
Apple on Thursday evening reported a strong quarter to wrap up a busy week of earnings for the megacap. Apparently, CEO Tim Cook’s decision to announce his impending departure before the release was a move to ensure that the news would not overshadow the dramatic results. Revenue in Apple’s second fiscal quarter of 2026 that ended March 31 rose 17% to $111.2 billion, ahead of the $109.7 billion expected, according to LSEG. Earnings per share jumped 22% to $2.01, ahead of estimates of $1.95, according to LSEG. AAPL 1Y mountain of Apple’s 1-year performance In fact, it was the best March quarter in the company’s history, and Apple stock jumped 4% in after-hours trading to around $282. A Friday closing at that level would be shy of their December record. Important While Cook will remain in charge for a short time, it is clear that incoming CEO Jon Ternus will inherit a very strong hand. Sales came in ahead of expectations in all product categories and the highly profitable services business, where growth accelerated respectively. Better yet, earnings growth outpaced revenue growth as the company was able to increase profit margins for both products and services to a level that exceeded the Street’s expectations. Apple, too, has achieved an all-time high installed base of active devices – more than 2.5 billion – across all product categories and geographic segments. That’s important because — while we’re still waiting to hear more about Apple’s Siri AI plan, and Cook confirmed on the call that “personal Siri” will indeed arrive this year — the chance for Apple to officially enter the artificial intelligence/agent AI race is as strong as ever. Apple has chosen Google as its AI partner. Cook also said, “We’re happy with the work we’re doing independently.” Although Services pass above the category of revenue weight, thanks to a gross margin profile that is almost twice that of the products sector, it is an installed base of functional devices that represent the gateway through which those services can be sold. Therefore, the larger the installed base, the larger the total addressable market for Apple’s high-profit activity offerings. Finally, in terms of share repurchases, Apple’s board approved another $100 billion repurchase program and approved a 4% increase in the company’s dividend payout. Notably, CFO Kevan Parekh said on the call, “We plan to continue our capital allocation philosophy of making the initial investments needed to support the business and return more cash to shareholders over time. Net cash neutral has been an important part of our capital structure. Since 2018, we have significantly leveraged our balance sheet and reduced net cash by more than $100 billion, we are no longer capitalizing on our target, and we will review cash and debts independently.” We do not foresee this being an issue as management clearly still views buybacks as an important component in creating overall shareholder value. Why we own it Apple’s leading hardware and high-end services businesses provide a deep competitive landscape and many opportunities for integration. Competitors: Samsung, Xiaomi, OPPO, Dell, and HP Inc. Most recent purchase : April 8, 2014 Launched : Dec. 2, 2013 These results, once again, show why you shouldn’t try to trade a name that is always the best in the class like Apple. He has owned it for a long time. For all the worries about taxes, energy prices, and rising memory costs, which could have a big impact on Apple’s profits, the team has done an admirable job of navigating the crossroads. To be sure, memory prices will remain a significant headwind in the future, but we are confident that management will continue to navigate the environment successfully. We think that the stock movement in the Iran war March low can now be trusted. With an AI review expected later this year, the groundwork has been laid for stocks to reach higher levels. We again multiply our price of $300 by an equal ratio of 2 . CEO Transition Speaking about why he chose now to announce his departure, Cook said this is the right time for many reasons. “First, our business has been doing very well. The first half of this year has been very strong, growing double digits year over year. Second, our roadmap is amazing. Most importantly, we have the right leader ready to step into the role. As I said, there is no one on the planet I trust more to lead Apple into the future than John Ternus.” Cook continued, “John is a brilliant engineer, a deep thinker, an amazing person, and a born leader. I know he will push us further than we think possible to bring the greatest products and services to our users. I have been very proud to call him a colleague and friend, and I will be even more proud to call him Apple’s CEO. In the coming months, this transition will ensure that John and I will work together smoothly.” Cook plans to take over as executive chairman on Sept. 1. Ternus also jumped on the bandwagon. He said, “It means a lot to me to have Tim’s trust and confidence. … As you know, one of the hallmarks of Tim’s tenure has been deep thinking, deliberateness, and discipline when it comes to making financial decisions for the company. I want to know that as something Kevin. [Parekh] and I intend to continue.” Ternus added, “When I pass to [CEO] role in September, this is a very exciting time for Apple. As Tim said, we have an incredible roadmap ahead. While you won’t make me talk about the details of that roadmap, suffice it to say that this is the most exciting time in my 25-year career at Apple building products and services. Strong demand for the iPhone, where sales grew by nearly 22% to $56.99 billion, which is higher than expected on the Street and a record quarter for the company, Cook said that the iPhone 17 system is the most popular in the company’s history. in sales of all other product categories, from Mac to iPad to wearables, Home Business and Accessories in all MacBook sales lines were better than MacBook increases. Neo is a low-cost laptop aimed at taking share from Windows-based laptops and Chromebooks, the product’s gross performance was also a bright spot, increasing 276 basis points, or 2.76 points, to 38.7%. 16% of Q2 revenues. That resulted in an estimated $600 million in service revenue including sales from Apple TV, advertising, cloud services, music and payment services, and total service revenue expanded by 93 points, or approximately 76.7 percent in Outlook 2026 company revenue past the third quarter of revenue is expected to increase by 14% to 17% compared to last year’s period, a strong forecast related to growth estimates of around 9%. at $102.93 billion service revenue is expected to grow in the June quarter at the same rate as Apple recently reported, minus the profit from foreign exchange, which accounted for a little more than 2.5 percentage points growth in the March quarter is expected to be between 47.5% and 48.5%, exceeded Fact. (Jim Cramer’s Charitable Trust is long AAPL. See here for a full list of stocks.) 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