Apple's Q4 2025 Earnings Call: Contradictions Emerge on iPhone Demand, AI Development, and Services Growth

Date of Call: October 30, 2025

Financials Results

• Revenue: $102.5B, up 8% YOY (September quarter record)
• EPS: $1.85 per diluted share, up 13% YOY on an adjusted basis (excludes one-time Q4 2024 charge)
• Gross Margin: Company gross margin 47.2%, up 70 bps sequentially; Products GM 36.2% (up 170 bps seq); Services GM 75.3% (down 30 bps seq); includes ~$1.1B tariff-related costs

Guidance:

• December quarter revenue expected to grow 10%–12% YOY (company's best ever quarter)
• iPhone revenue expected to grow double-digits YOY (best iPhone quarter ever)
• Mac: difficult compare vs prior-year M4 launches; Services: expected to grow at a rate similar to FY2025
• Gross margin expected 47%–48% (includes ~$1.4B estimated tariff impact)
• OpEx expected $18.1B–$18.5B; OI&E ~ $150M; tax rate ~17%
• Assumes tariff rates/policies stay as of call and macro does not worsen

Business Commentary:

* Record Revenue and Growth Across Product and Services Segments: - Apple reported revenue of $102.5 billion for Q4 2025, up 8% year-over-year, marking a September quarter record. - Growth was driven by strong sales in various regions, including the U.S., Asia, and India, along with record revenue in products and services segments.

• Robust Services Performance:
• Services revenue reached $28.8 billion for the September quarter, up 15% year-over-year, setting a new record.

• The growth was broad-based across developed and emerging markets, driven by double-digit growth in advertising, App Store, and payment services.

• Strong iPhone Demand and Upgraders:

• iPhone revenue was $49 billion, up 6% year-over-year, with a September quarter record.

• The growth was supported by high customer satisfaction and strong demand for new models like the iPhone 17 Pro and iPhone Air.

• Expansion and Investment in AI and Product Innovation:

• Apple is significantly increasing its investments in AI and expanding its product roadmap, leading to record revenue in AI-powered products.
• This includes the launch of new AI-infused features and the integration of AI technologies across various product lines, enhancing customer experiences.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted record results: "$102.5 billion in revenue, up 8%" and "Services $28.8B, up 15%"; CFO: "Company gross margin was 47.2%, above the high end of our guidance"; guidance calls for December quarter revenue +10%–12% and double‑digit iPhone growth, signaling confidence.

Q&A:

• Question from Erik Woodring (Morgan Stanley): Can you share detail on why the iPhone 17 is having this level of success — aged installed base replacement or specific features this cycle?
  Response: Management: Success is product-driven — the strongest iPhone lineup ever (17 Pro, iPhone Air, iPhone 17) and global resonance are driving demand.

• Question from Erik Woodring (Morgan Stanley): How are you managing component cost inflation, particularly memory/storage given higher memory content?
  Response: Kevan: Procurement actions are offsetting inflation; slight tailwind in memory/storage now; new products have higher initial costs but team expects savings over time; gross margin remains strong.

• Question from Benjamin Reitzes (Melius Research LLC): How is iPhone trending in China for December quarter — have you turned the corner?
  Response: Tim: China retail traffic is up and iPhone 17 family well received; expect to return to growth in the December quarter.

• Question from Benjamin Reitzes (Melius Research LLC): Was Services upside driven by tax items or the Google antitrust resolution or was it organic?
  Response: Kevan: No tax or unusual antitrust-related impact; Services performance was organically driven and broad‑based.

• Question from Michael Ng (Goldman Sachs): Can you unpack drivers of the Services acceleration — cross‑sell, installed base, bundling, etc.?
  Response: Kevan: No single driver — acceleration was broad across categories and geographies rather than one specific factor.

• Question from Michael Ng (Goldman Sachs): Any shift in sell‑through between upgraders vs switchers; carrier promotions; channel inventory?
  Response: Tim: Set a September‑quarter record for upgraders; too early to parse full cycle mix; channel inventory at low end of target and several 16/17 models are supply‑constrained due to strong demand.

• Question from Amit Daryanani (Evercore ISI): Can you walk through puts and takes on gross margin for December quarter?
  Response: Kevan: Guidance 47%–48% (mid ~47.5%); new products raise cost but favorable product mix and seasonal leverage are the main offsets driving a modest sequential increase.

• Question from Amit Daryanani (Evercore ISI): What drove muted Greater China performance in September and is December uptick mainly from iPhone Air timing?
  Response: Tim: Greater China was down ~4% YOY driven by iPhone supply constraints; improvement expected as supply catches up and the 17 family gains traction.

• Question from Wamsi Mohan (BofA Securities): Will you be unconstrained by supply as you exit December or could constraints persist?
  Response: Tim: Still constrained on several iPhone 17 models today; management is not forecasting when supply/demand will fully balance.

• Question from Wamsi Mohan (BofA Securities): Given AI/search shifts, how sustainable are mid‑teens Services growth rates long term?
  Response: Tim: Advertising (combined first‑ and third‑party) set a record this quarter; no detailed split provided — implies continued strength in Services categories.

• Question from Samik Chatterjee (JPMorgan): What role are smartphone subsidies in China playing in momentum and how much uptake?
  Response: Tim: Subsidies have a favorable effect for eligible price ranges and are contributing to consumer demand, though many higher‑priced Apple products are outside subsidy caps.

• Question from Samik Chatterjee (JPMorgan): Can you break down the OpEx step‑up for December quarter and whether higher OpEx vs revenue is a persistent tradeoff?
  Response: Kevan: OpEx increase driven primarily by R&D for AI and product roadmap; although OpEx grew faster than revenue, gross margin expansion has delivered healthy operating leverage historically.

• Question from David Vogt (UBS): How should we think about the tariff impact moving from $1.1B to $1.4B and its timing relative to iPhone production/supply?
  Response: Tim: $1.4B estimate reflects current tariff rates/policies (including China rate change from 20% to 10%); tariff impact is based on known policies and not directly linear to volume.

• Question from David Vogt (UBS): Given iPhone strength, is there upside to attach rates for other products like Mac during holiday despite tough compare?
  Response: Tim/Kevan: Mac faces an unusually difficult compare from last year's major launches and DRAM upgrades; while long‑term Mac momentum is strong (Mac outgrew market last quarter), near‑term upside is constrained by comps.

• Question from Sreekrishnan Sankarnarayanan (TD Cowen): Can you quantify business left on the table due to iPhone constraints and are regional manufacturing differences contributing?
  Response: Tim: Constraints were not capacity‑driven but due to planned production being short of demand; management will not quantify units/missed sales publicly.

• Question from Sreekrishnan Sankarnarayanan (TD Cowen): Could AI/chatbot trends change mobile app ecosystem behavior and impact the App Store?
  Response: Tim: AI presents opportunities for developers; on‑device models are available and should enable richer app features and benefit the App Store over time.

• Question from Aaron Rakers (Wells Fargo): Any discernible mix change between Pro and Pro Max in iPhone 17 demand?
  Response: Tim: Too early to determine mix; company does not disclose model‑level mix and remains constrained across models.

• Question from Aaron Rakers (Wells Fargo): Update on build‑out of Apple's Private Cloud Compute (PCC)?
  Response: Tim/Kevan: PCC is in use (e.g., Siri queries); Houston server factory began shipping and there is a robust ramp; related CapEx was incurred in 2025.

• Question from Atif Malik (Citigroup): Does iPhone Air reception give insight into foldable phone demand?
  Response: Tim: Not a proxy; overall iPhone reception is strong and underpins the expectation of double‑digit iPhone growth in December.

• Question from Atif Malik (Citigroup): Strategy for personalized Siri — own foundation models vs partners vs M&A?
  Response: Tim: Building Apple foundation models (on‑device and PCC) while monitoring market and remaining open to M&A if it advances the roadmap.

• Question from Richard Kramer (Arete Research): Is AI a material purchase consideration for consumers or are other factors (retention) driving record sales?
  Response: Tim: Multiple factors influence purchases; Apple Intelligence is already a factor and management expects it to become increasingly important.

• Question from Richard Kramer (Arete Research): Will Apple change its hybrid data‑center approach and what's the role for Apple silicon (M5) in AI/CAPEX plans?
  Response: Kevan: Expect increased CapEx for AI but will retain a hybrid model leveraging both first‑party and third‑party capacity while building out PCC; no shift away from hybrid approach.

Contradiction Point 1

iPhone Demand and Supply Constraints

It highlights differing perspectives on the demand for iPhones and the supply constraints faced by Apple, which directly impacts sales and revenue projections.

How are U.S. carrier dynamics impacting iPhone sell-through? - Michael Ng (Goldman Sachs)

2025Q4: We ended the quarter towards the low end of the targeted range due to supply constraints on several models. There is strong demand, and we are constrained on current iPhone models. - Timothy Cook(CEO)

How did Services growth reflect Safari search trends in April? Also, what is the demand and trend in China for Apple products? - Ben Reitzes (Melius Research)

2025Q3: We're not shipping as many iPhones as we would have liked to because of the geopolitical issues. - Timothy Cook(CEO)

Contradiction Point 2

AI and Siri Development

It involves differing statements about the development timeline and progress of Apple's AI capabilities, particularly in relation to Siri, which is crucial for future product strategy.

Has there been a change in the mix between iPhone 17 Pro and Pro Max models? - Aaron Rakers (Wells Fargo)

2025Q4: We are confident in launching Siri next year with strong progress. - Timothy Cook(CEO)

How confident are you in Siri's 2024 launch, and how will the Epic case affect Apple’s Services? - Ben Reitzes (Melius Research)

2025Q3: We are making significant progress. And yes, we feel very good about where we are from a scheduling point of view. - Timothy Cook(CEO)

Contradiction Point 3

Services Growth and Margin Expectations

It involves the company's perspective on the growth and margin expectations for the Services segment, which is a critical revenue driver and reflects the health of Apple's ecosystem.

What drives the growth in Services revenue, especially from advertising? - Michael Ng (Goldman Sachs)

2025Q4: The strength in Services is broad-based, both geographically and across categories. - Kevan Parekh(CFO)

How should investors assess potential impacts of regulatory changes on Apple's Services? - Wamsi Mohan (Bank of America)

2025Q1: Services achieved an all-time record, up 14%. Strong momentum across all geographic segments. - Kevan Parekh(CFO)

Contradiction Point 4

Tariff Impact and Supply Chain Optimization

It highlights the differing perspectives on the impact of tariffs and the responsiveness of the supply chain, which are critical for financial forecasting and operational strategy.

How are U.S. carrier dynamics affecting iPhone sell-through? - Michael Ng (Goldman Sachs)

2025Q4: We ended the quarter towards the low end of the targeted range due to supply constraints on several models. There is strong demand, and we are constrained on current iPhone models. - Timothy Cook(CEO)

What is the mix of India-sourced iPhones for the U.S. market by year-end? Are you targeting 100% India sourcing for U.S.-bound iPhones? - Erik Woodring (Morgan Stanley)

2025Q2: The assumption for the June quarter includes the current tariff rates and policies. It's challenging to predict beyond June due to ongoing investigations and potential future actions. - Timothy Cook(CEO)

Contradiction Point 5

Consumer Behavior and Tariff Impact

It involves the interpretation of consumer behavior in response to tariffs, which can affect sales forecasting and strategic planning.

How much revenue was lost due to supply chain constraints? - Sreekrishnan Sankarnarayanan (TD Cowen)

2025Q4: We could have sold more iPhones than we were able to manufacture. Current demand is strong, with significant back orders. - Timothy Cook(CEO)

What is the projected mix of India-sourced iPhones for the U.S. market by year-end? Is the goal to source 100% of U.S.-bound iPhones from India? - Erik Woodring (Morgan Stanley)

2025Q2: There was no obvious evidence of significant pull-forward in demand due to tariffs in the March quarter. - Timothy Cook(CEO)