Apple's Q2 Earnings Surpass Expectations: Revenue Up 10%, iPhone Sales Hit Record High

Apple's Q2 results exceeded expectations with 10% YoY revenue growth to $94bn and 13% YoY iPhone revenue growth to $44.6bn. Services revenue rose 13% to $27.4bn. The company's strong iPhone demand and tariff-related pull-in of future demand contributed to the beat. We raise our fair value estimate to $210 from $200, citing a durable lift from better upgrade demand in the medium term. Shares are fairly valued.

Apple Inc. (AAPL) reported its second-quarter earnings for the fiscal year 2025, exceeding Wall Street expectations with a robust performance across various segments. The company's revenue for the quarter ended June 2025 was $94.04 billion, representing a year-over-year (YoY) increase of 10% [1]. This strong performance was driven by significant growth in key areas, including iPhone and Services revenue.

The iPhone segment, which remains Apple's core business, saw a YoY revenue increase of 13% to $44.58 billion [1]. This growth was attributed to strong demand for the iPhone 16, which has been popular among current iPhone users upgrading to the latest model [2]. Additionally, the company's Services segment, which includes the App Store, Apple Pay, Apple TV+, Apple Music, and iCloud, experienced a 13% YoY increase in revenue to $27.42 billion [1]. This growth was driven by strong performance across various services, with iCloud subscriptions and App Store revenue growing "double digits" during the quarter [2].

The company also reported a gross margin of 46.5%, which was slightly higher than the expected 45.9% [2]. This margin was achieved despite incurring $800 million in tariff costs, which was lower than the $900 million estimate provided in May [2]. The company expects mid- to high-single-digit increases in overall revenue and a gross margin between 46% and 47% for the September quarter [2].

Apple's geographic revenue also showed strong growth, with sales in Greater China rising 4% to $15.37 billion [1]. This growth was attributed to a Chinese subsidy for some devices, which helped Apple in the region [2]. The company's Mac business grew nearly 15% to $8.05 billion in revenue, driven by the release of updated MacBook Air laptops [2].

However, the company's iPad sales declined 8% to $6.58 billion, and its wearables unit, which includes Apple Watch, AirPods, and other accessories, declined 8.64% to $7.4 billion [2]. These declines were partially offset by the strong performance in other segments.

Apple's earnings per share (EPS) for the quarter was $1.57, compared to the expected $1.43, representing a 10.56% beat [1]. The company's net income for the quarter was $24.43 billion, up 12% YoY [1]. This strong performance has led analysts to raise their fair value estimate for Apple's shares to $210 from $200, citing a durable lift from better upgrade demand in the medium term [3].

Despite the strong performance, Apple's shares have returned -1.6% over the past month, compared to the Zacks S&P 500 composite's +2.7% change [1]. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term.

In conclusion, Apple's Q2 results exceeded expectations with strong revenue growth across key segments. The company's strong iPhone demand and tariff-related pull-in of future demand contributed to the beat. The company's positive outlook and strong performance in various segments suggest that Apple is well-positioned to continue its growth trajectory in the coming quarters.

References:
[1] https://www.nasdaq.com/articles/apple-aapl-reports-q3-earnings-what-key-metrics-have-say
[2] https://www.cnbc.com/2025/07/31/apple-aapl-q3-earnings-report-2025.html
[3] https://www.aol.com/apple-services-revenue-grows-13-203825163.html