The global smartphone market is facing structural pressure from rising memory prices. In particular, the spread of AI technology is sharply increasing demand for high-performance memory, tightening supply and pushing prices up quickly. As a result, some Android manufacturers have raised prices on new products, and low-margin budget models could shrink in the market. The industry also sees the trend as potentially leading to a contraction in the overall Android market size.
Against this backdrop, Apple has chosen a strategy of keeping prices for its main models unchanged. Pu’s analysis said the iPhone 18 Pro is likely to start at $1,099 and the Pro Max at $1,199, maintaining the existing price range. That would be the same as the previous model. It is interpreted as a strategy to secure price competitiveness even if Apple accepts some margin decline to defend market share.
Apple is also expected to pursue a two-track strategy that considers both price accessibility and profitability. It would keep base-model prices to lower the barrier to entry, while raising prices for higher-end models with larger storage capacity to offset profits. It has also been suggested that an ultra-premium iPhone 18 Ultra could be added, and the overall average selling price (ASP) is expected to rise.
Ultimately, Apple’s strategy aims to exploit weaknesses in the Android camp, which is under pressure to raise prices. While rivals face demand contraction from higher prices, Apple could keep prices relatively stable and expand user inflows. A recent rise in demand from Android users switching to iPhones has also been detected, raising the likelihood that Apple will strengthen its influence in the premium market through this strategy.
According to The Economic Times, citing unnamed sources, "Tata Electronics has expanded its workforce to 75,000, surpassing Taiwanese rival Foxconn's headcount in the country, making it Apple's largest contract manufacturer by headcount currently." The report added that the expansion has been driven primarily by its large-scale Hosur facility in Tamil Nadu.
Supply-chain sources said the company's workforce growth marks a sharp increase from about 15,000 in 2023, reflecting an aggressive scaling strategy supported by major capital investment, factory acquisitions, and rapid capacity buildout. The expansion includes its 500-acre Hosur campus, which has become the core hub of iPhone assembly in India.
Tata Electronics has combined acquisitions of Taiwanese contract manufacturers' Indian assets with greenfield investment to accelerate entry into Apple's supply chain. It acquired former Wistron(3231.TW) and Pegatron(4938.TW) facilities, while simultaneously expanding its Hosur plant, which began iPhone assembly operations in 2025.
In addition to assembly, the company is also moving upstream into semiconductor assembly and test (OSAT) and component localization, supported by large-scale funding injections in recent fiscal years. These investments aim to build a vertically integrated electronics manufacturing base spanning assembly, packaging, and supply chain services.
The reported figure of 75,000 employees reflects both direct and acquired operations across Tata Electronics' manufacturing footprint in southern India. One source noted that the rapid scale-up has enabled the company to meet Apple's production requirements while overtaking Foxconn(2317.TW) in local headcount, although industry participants expect rankings to fluctuate as other facilities ramp up.
NB: If we add Tata and Foxconn, we are probably in the 200,000 range this year. The comparable China model is …
…in the 2 million scale. I can imagine that India could scale to 1 million easily thus reaching about 50% of what China is producing. This may not mean a reduction in capacity in China but a net gain. This implies roughly three more doublings of expansion (200k -> 400k -> 800k -> 1000k+).
From 2023 to the present the number of doublings is also about three (15k -> 30k -> 60k -> 75k) suggesting perhaps four to five years of aggressive growth still to come in India.
This needs to be matched to the overall expansion of user base that is already in the Active device forecast.
Q: Do you think Apple will start investing heavily in AI data centers?
There's rumors and actually statements from Apple saying that they're working on a server chip. Google has a server chip. Amazon's got a server chip. These are effectively aimed at Nvidia. And if you can make something, you tend to do it. Now, of course, there's some protection — Nvidia's got other special sauce, but their margin is everybody's opportunity. They have a huge margin. And everybody's writing huge checks. As I say, hyperscalers are just handing over their entire cash flows to Nvidia. And that means their shareholders' entire wealth is being handed off to Nvidia shareholders. So there's a transfer of wealth happening right now. Presumably, because we're going to get some benefit later, but if that's happening and people are irritated by it, they're going to find a way to do what Nvidia does.
And Apple, of course, can and will do that. Now, whether that'll get deployed at the edge or in Apple's own cloud — because they probably also don't want to write checks to Nvidia, and they'll say, well, we can do it, and we won't necessarily sell them, like Google wants to. They'll probably just use them themselves. And that's something certainly they're capable of.
The question I was always asking is how many are we talking about? Because if it's in the tens of millions, or even single-digit millions — for Apple, single digits. Is it worth it to develop your own designs? There's a limit to how many you can deploy. And probably you're going to have to replace them every so often, so there's a question about how much it costs to keep on the treadmill.
But it is an interesting question, and I think everybody's capable of doing what Nvidia's doing. But it's about execution, timing, delays. Look at what happened with the Qualcomm chip — how long it took Apple to finally deploy the communications chip relative to the amount of grief it had to deal with. First, of course, it moved out of Intel. It moved out of Qualcomm now, and now the question is, is it going to move out of the server supplier chain? And that's a complex decision. But again, Apple's not doing it because they want to be in that business. It's more that they want to avoid dependency.
This was one of the questions asked by the participants in Asymco's May 2026 Office Hours live Q&A sessions, open to Asymco One subscribers.
Office Hours question asked by Frederich H. on May 1, 2026.
Q: Any thoughts on the breakdown of R&D, with that big jump?
It's hard to tell. I do think they're buying — that does include some hardware. A lot of hardware. I think they're building quite a bit of capacity in order to implement their versions of AI. They're not for deployment, but they're for testing and experimenting. They're hiring people as well, obviously that's included. But I do think it used to be they bought equipment for testing — I don't know, radio frequencies, and testing the iPhones, and semiconductors, and testing a lot of things like that. But I do think probably there's a lot more spending now on the stuff that feeds AI. It's not on the level that a hyperscaler's doing, because they're building it for scale, and Apple's maybe building it for testing.
We're talking about here, look, $11 billion in R&D, that's in one quarter. So that goes out to about $40 billion a year.
Mostly, I think this is people, but there is some equipment involved. It's just maybe different ways of capitalizing it, because capital equipment is a complex story.
It seems like a big jump, but it's only $2 billion more compared to the prior period. It's recurring though. And the reason that this stays steady and keeps growing is because people are on the payroll. And so if there's more and more people, that's paid every period — the reason, by the way, you see SG&A being seasonal is because there's temporary people in the stores. That involves people who are hired for the holidays in the Apple stores. So that's where you see some less than steady. But engineering people are more steady. But if there's a spike, there might be something going on where there was some equipment involved.
An Office Hours question asked by Fred S., May 1, 2026
Q: Ever since Johny Srouji started talking about Apple Silicon and the power consumption for the performance and the unified memory, and now we've seen the Mac mini surge, I just wonder about high-end computing. The whole area of where that Mac architecture may go beyond its success as an individual consumer computing product. From all the high-end workloads that might be coming their way.
The story of Apple is one of personal computing. It's not a story of servers, it's not a story of clouds, it's not a story of centralized computing. They've tried once or twice to make a server product, and they abandoned it. They've even abandoned the high-end Pro product, and created the almost-as-fast Studio product.
Now, that does not mean they're shying away from high-power computing. They're just saying, we're going to put that high-power computing in a desktop, or in the laptop, or even in the phone. Everyone who's grown up throughout the personal computer era can remember Moore's Law, and how exponential growth has driven computation to levels that seemed impossible just a few years earlier. We've hit some slowdowns, but fundamentally, the potential exists.
And by the way, it's not even a classic computational CPU problem. We're dealing with AI. We're mostly dealing with high bandwidth, large data, and we're dealing with simple calculations on it in parallel, which means the architecture is much more around large matrix computations. This is why Nvidia came from graphics. Graphics was the same problem — a graphics accelerator is a matrix problem. And so is machine learning. So different variations of these have come in as a sort of a parallel to the CPU, the general computation problem.
The idea Apple has is that they're going to catch up with whatever is done on the server, they're going to do it on the device. You can call it Edge, you can call it personal — the old term was personal computing.
I may be naive, but I think we'll get very powerful desktop computers that can do what is essentially AI, but for the individual. The other aspect here is that Apple is a consumer company, not a B2B company — it's a B2C. They want to bring that power to as many people as possible. And they're certainly delivering hundreds of millions of computers a year. Nvidia's making tens of millions of computers a year. Apple is capable of doing orders of magnitude more.
So I think they're going to affect the disruption in AI. It's not going to be that there's no profit in AI, it'll be that it'll be done with Edge more, especially as it doesn't have to be a world model — it can be a personal model. If you want to look up something globally, you can use the cloud, but if you want to deal with tasks in your world, you're going to work with Apple computers.
It may take years to get there. But in the meantime, I don't think a centralized service — these OpenAI, or Anthropic, or Microsoft, who are trying to make us a singular superintelligence — is necessary for everyone. It'll be a good reference, but it's not how you want to handle your personal information. So I think that's what the future is, and I think Apple's very much planning for it.
It sounds cliche, but when Apple started, it was IBM that dominated computing. And IBM was about centralized computing, and their thesis was everything we now call "the cloud" — but it was all in one big computer that served the entire organization, whether that organization is a government or a big company. And then we went to mini computers, then we went to desktop computers, then we went to portable computers.
Then, fast forward 25 years and we had Google. Well, now central computing is the internet. In the internet, everything needs to be indexed to be able to be found. So they created an index in the cloud. And then a lot of companies moved that computing they used to have locally into the cloud, as a shared resource from Amazon, AWS, and others, and that became cloud compute. Even now, those are the drivers for growth for Microsoft and Amazon and Google.
The AI part of that is tiny — there's revenue from AI, but there's a lot of revenue from cloud. That still is valuable. But that's not a job for consumers. You do some things in the cloud — you store things, you search, you communicate in messages and so on. But most of the data that matters to you will get also indexed locally, so you can pull up your photos, pull up these things, and it'll be a blend of the two.
So that's where Apple lives, and I don't see anything fundamentally changing about this, because computation tends to commoditize. Software tends to be replicated. Algorithms tend to be replicated. In fact, even the AIs we have today were all because people publish papers, and one company invents it, another implements it, as was the case with the transformer. As far as I understand, it was Google who actually wrote the paper on it.
An Office Hours question by J.P. answered on May 3, 2026.
Q: With the ascension of John Ternus becoming the new CEO -- will it lower the criticism from the perennial Apple haters and critics?
No, no, of course not. Of course not, come on. You should know better than this. If anything, it'll amplify.
I wrote a piece about this. Titled, "John Ternus will have left big shoes to fill." This is his epitaph. This would be when, in 2040, he'll retire, and this is the article that will get written then. And the criticisms he will have faced will be the same.
We mustn't forget that when Steve was around and was the CEO, the amount of abuse he got was worse, in my opinion, than what Tim got. The criticisms of his incompetence, of his lack of ethics, morals, and overall bad decision-making were legend. I think he was accused of criminal behavior, even.
So we tend to forgive and give peace to the deceased. But while they're alive they will be skewered. I think John will be as criticized as any [Apple] CEO. And you can use your imagination for the reasons and all the failures and all the bad, all the things he'll miss, all the things he'll do wrong, all the incompetence. That he doesn't know how to run anything. It's time for a change. Inevitable.
Asymco Bulletin is a digest of all the work we have published for the week ending May 3, 2026.
Editor's Note: Starting next week, we will be sending Asymco Bulletin to Asymco One subscribers only. You will still receive Updates when new posts are published per your notification settings.
In Asymco One's May 1, 2026 Office Hours session, review of Apple's Q2 2026 earnings, segment growth: iPhone at 22%, Services at 16%, iPad at 8%, Mac at 5.7%, and wearables at 5%. Steady, foundational growth of Services, Gross margins reached nearly 50%, R&D spending surged, a shift in Apple's capital return strategy showing perhaps the hand of John Ternus. Guidance suggests 16% revenue growth, 22% EPS growth. Analyst sentiment turned positive post-earnings, with most price targets rising above $310. Apple's evolving identity as an engineering-centric company was the focus of many questions. →
Revenue and EPS consensus, year-ago results and my expectations Yahoo Finance Yahoo Finance’s revenue estimate for Apple in Q2 stems from 31 analysts. As of April 25, the average estimate is $109.69 billion, with a low of $107.08 billion and a high of $115.37 billion. For the earnings per share estimate, 32 analysts put it at an average of $1.95. The low is $1.56 and the high is $2.16. TipRanks TipRanks also does its own analyst polling on Apple’s quarter. In its forecast as of April 19, its consensus is for a revenue of $109.45 billion, with a high of →
TD Cowen: 15% revenue growth, 10% growth guidance → Apple is projected to gain market share in both smartphones and PCs, driven by strong iPhone 17 demand and the new MacBook Neo, with anticipated revenue growth of over 15% in Q3 and positive sentiment ahead of earnings.
Morgan Stanley forecasts fiscal second-quarter EPS of $1.74→ Despite memory pricing pressures, Apple's strong iPhone sales, potential AI and foldable iPhone announcements, solid free cash flow, and favorable market conditions position it for better-than-expected earnings and a possible stock rise to $300 by September.
Is Apple borrowing Samsung’s Market Expansion Strategy?→ Bernstein SocGen maintains optimism on Apple's strategic pricing and ecosystem strength, forecasting EPS growth and potential market share gains, while Samsung faces smartphone profit challenges but thrives in memory.
Separately, it’s been reported that Samsung might see its first operation loss from its phone division, resulting in Apple capturing 100% (or more) of global smartphone profits. Simultaneously, Samsung is seeing huge profit gains from memory, even overtaking Nvidia’s profitability. This is remarkable…
Apple share of the smartphone SoC market grew from 15% to 19% in Q1 → In Q1 2026, global smartphone SoC shipments fell 8%, but Apple thrived in the premium market by leveraging its efficient supply chain and passing costs to consumers, boosting its market share from 15% to 19%.
Google to sell TPU chips as Gemini shows returns → Why pour cash into Nvidia when you can craft your own cutting-edge chips like Google, and then turn that innovation into a lucrative side hustle by selling them to tech giants like Meta and Anthropic?
The Vision Products Group Expanding → Gurman's 2025 dissolution claim clashes with 2026's active Vision Products Group hiring spree. The Vision Products Group posted 14 new senior roles last week.
A transcript of the May 1, 2026 Asymco One Office Hours, recorded one day after Apple's Fiscal Q2 2026 earnings call. Horace Dediu presents his analysis of the quarter and takes questions from Asymco One subscribers. Hosted by Horace Dediu and Farshad Nayeri.
Horace Dediu: So I'll do a short presentation, and then we're going to open it up for questions. We are speaking approximately one day after Fiscal Second Quarter 2026 earnings call. Let's dig into it and see if we can understand it even better.
First, I think that there was a comfortable beat from already a highly elevated expectation.
So we had a range of estimates— I collected those from Yahoo and TipRanks, each one had about 30 [analysts], probably a lot of overlap between them. So we had a range of about 105 to 115 in terms of revenues in billion, and then we had EPS in a range of about 1.6 to about 2.15.
And not only did it beat the consensus, but also you can see what happened a year earlier, which is the circle at the bottom of the graph. So the beat was from already a pretty high growth rate expected from the year before.
So we have a measure of how each of us, myself included, performed relative to the actual results.
I was about 1.8% under revenues delivered, and 1.6% on EPS. And then you can see red is Yahoo and blue is TipRanks.
So speaking for myself, I was perhaps a little bit too conservative on my revenues, and I was a little bit more accurate, relatively speaking, on EPS. Roughly speaking, again, I think these are not big errors, 1% to 2%. Worst case, 3% on the consensus basis.
Now, on the segments, these are the actual growth that we ended up with, iPhone almost 22%, 16% on services, 8% on the iPad, which is impressive. 5.7 on the Mac, we'll talk about that a little bit, and 5% on wearables and growth.
Segment level, again, the worst case, you're looking at an 8% overestimation on the Mac. The Mac— I think a lot of people, once they saw the Neo come out, once they heard about the Mac mini stockouts, when they heard about the Claude bots, you know, everybody buying up all these Macs, there was an expectation of a big boom in the Mac, but those all happened fairly late in the quarter. My expectation was a little bit over, but not as much. I was off about 3% on that estimate. So although we saw 5.7% growth, some people expected double digits. Also, the pros had the same fault there.
Overall, though, I think these are pretty impressive. I didn't break out the geographic segments. China grew extremely well. Rest of the world, that grew very well. Management also pointed out that they're doing very well in developing markets. So overall, regionally, there were some extraordinary performances. But as we see here, just the iPhone was incredible, 22%. Very similar to performance in the previous holiday quarter, where, again, unprecedented growth, or at least in the near history of the product.
And we'll get into some reasoning why that is. People talk about super cycles, people talk about the assumption that we have these giant surges once in a while. Well, here's how to look at it.
There are two graphs here. The bottom graph shows in green the net sales, but trailing 12 months, so it's smoothed out, so we don't see the spikes on the holidays. That's the green line. Above that, we have the EPS line. Now you'll see how they tracked very similarly for a while, and then they began to diverge. That occurred around COVID. It also occurred during the surge in services, especially subscriptions and services. But still, there's a similar pulse, if you will, a cyclicality to it.
I mean, part of that has to do with the introduction of a new form factor. This has been true all the way back since 2012. When a new iPhone comes, especially a new, distinctive-looking iPhone, people will go out, especially in China, buy it for showing off that they have the latest, which there's nothing wrong with that. But then the second year usually is not the same, the phone is not new, it's the same form factor. That has to do a lot with tooling. That's a long, old story, that the tooling is depreciated on a two-year schedule, so you're going to produce roughly the same look a couple of years in a row, and then by the next cycle, you'll see people upgrading or replacing their older phones. So you're going to have this— I guess what they used to call a super cycle.
And you see it also in the upper graph, where I try to separate out of sales just the phones. Now this is an estimate because we have no unit sales for the phones since 2018, so some of that is an estimate. But you'll see again, once you smooth out the cyclicality, you'll see these surges once in a while. Now, again, this is a valid observation, but I don't think it's the main driver. The oscillation isn't huge, it might be significant, but it's a blend of many things.
The bottom graph is particularly interesting. The gray areas are when the stock price fell. And the red line represents the derivative of EPS. And you'll see how, when that is about to dip, there's usually a stock price sale going on. I wouldn't say it's predictive, but it's an interesting pattern to go through.
So what's happening now? You'll see from the iPhone, there's a new surge happening. Now, when Tim has been asked this question, he says that, well, the iPhone 17's really nice, people really love it, and that's a good answer, but the fact is, it's a distinctive-looking product. Some say it's the orange color, but it's certainly attractive. So we're seeing this pattern, a nice surge.
We'll get into the guidance in a minute, and that actually demonstrates that we're in some kind of an acceleration. But here's the thing, underneath all that, services is just absolutely steady growth, compound growth, and as a result, it just lifts the whole story.
Here, services is at the bottom. Normally, in a graph like this, you want to put the oldest products at the bottom and the newer ones at the top, but I wanted to highlight the fact that services is foundational, in the sense of showing how it holds up everything else.
Most people put it the other way, they say the iPhone holds everything up, but services is looking more and more to be the thing that keeps people in the ecosystem. There's a lot of value there. There's a lot of things people depend on there, and I think it's one of the reasons people don't switch. So it's another one of these stories that people aren't appreciating enough. It's been years and years of pounding the table on services, but here you see it, just how important it is. It's the tide that lifts all the boats, and the boats being all the products.
So let's now talk a little bit about margins. Unbelievable, unbelievable margins. We just hit almost 50% on gross margins. Gross margin here is the blue line. And that's composed of two subcategories. We have services in red at the top, and we have products with the purple triangles.
And although products margins are exceptional— they're right around 40%— those services, again, are pulling the whole average up, and you can see that bend in the curve in the blue line, where we were very steady around 40%, but as services took more and more; it just pulled the whole curve up.
And we also see here operating and net margins, which also are going up, naturally. There is a little bit more operating expense. We'll get into that, which maybe decreases the slope of the bottom line. But this gross margin is absolutely incredible. We just haven't seen anything like this since 2010-11. We saw that surge back then, and then it sort of leveled out, and everybody was happy with 40%, and now we're flirting with 50. I just cannot believe it.
Just one more thing. I remember being an analyst decades ago, when I was looking at different companies in hardware and software, in phones and computers and so on, and everybody was really impressed by Microsoft, because Microsoft, had an 80% gross margin, because there was very little cost of sales. That's exceptional. An 80% margin business is a money printing machine. And everybody was impressed and jealous of Microsoft that they could pull that off. Of course, Microsoft, a software company, is going to have extraordinary margins, right?
And so for a phonemaker like Nokia, there was something to be jealous of. And here we are with Apple services, a significant component on the business, approaching also almost 80% right now. And it's still rising. I just can't get over how impressive this is.
R&D Acceleration
A little bit about the difference between gross and net— you have to take out the operational expenses, and this is what we have here. It's interesting what's happened. Obviously, you see R&D overtaking on the absolute basis. So R&D overtook SG&A already in 2021. And now it's just [going] almost vertical.
By reading a little bit the guidance, I think it's going to taper a bit into the next quarter. But what we see is a significant R&D increase, also as a percent of sales, which you're seeing below in the graph below, but in a stacked fashion. In that sense, the two of them together are now approaching— haven't yet reached— a percentage of sales that was in evidence around 2007 and 8, when the iPhone was just emerging. But you'll see back then, R&D was tiny, SG&A was huge as a percent of sales. So much so that R&D—this is during Steve Jobs era, R&D was like 2% of sales. And now it's approaching 8%, which is extraordinary. Because that's an engineering company that's doing breakthrough work.
And that's something that Apple's not recognized for doing. There's a negative side of spending a lot on R&D. The positive, though, is that Apple is doing a lot of fundamental research now. This isn't fixing products, this isn't updating OS. This is engineering that is really driving what might be considered breakthrough. And that's something— and I've said this to the media when interviewed about Ternus and the succession— I said, the new CEO will need to be— this is before he was announced— I said [the CEO] would need to be someone who is acceptable to engineering, because Apple is an engineering company today. Fundamentally, culturally, operationally, it's an engineering company, and it is being now led by an engineer.
Steve Jobs was not an engineer. And none of the other CEOs were engineers. Tim Cook was an operations manager. He was excellent in a fundamental part of the business. And that is acceptable to engineers, culturally speaking. But the thing is that John is an engineer's engineer. He understands the culture of engineering and will understand how to motivate and retain talent, as well as to allocate capital effectively, not wasting it on pipe dreams. Engineers have a tendency to try to chase dreams, by the way, so you got to be harsh sometimes to shut things down. So, keep an eye on the R&D— it's a great story.
However overdoing it can be a problem. There are downsides to an engineering-led company where, again, it turns into kind of an engineering welfare state. Engineers tend to get projects and do a lot of navel-gazing, which needs to be managed carefully.
Now, let's just touch on ACTIVE. Active is the number of users, the fundamental measure of the value of the company. It's not counting iPhones. It's counting users, and these are the comments from management, just so we capture them. They come every quarter. Sometimes some products are mentioned, sometimes they're not.
So here's what we have exactly on the topic. Record upgraders and customers new to the Mac. They mentioned that Mac lifespans have been long, which is good and bad. They talk about the iPad, half the customers being— over half— new to the product. Same with the Apple Watch, this has been going on for a while.
So this is going to be important when we measure installed base, because if we see every quarter an estimate for the number of watches, or Macs, or iPads, you just take half of that and allocate it to the installed base, and the other half is growth of the installed base. So there's an interesting way to measure that, and I've been applying it. We're going to keep an eye on this.
And finally, there was a mention with respect to India during an answer to the question. The citation is that the iPhone, Mac, iPad, watch, all of these have a majority of customers that are new to the product in India. As you would expect, part of the developing market story. But this drum is still getting beaten. And that's a positive. Always want to look forward to that every quarter.
So let's jump in now to what I thought was the most unexpected comment during the call. I've pasted in here exact, verbatim the comments from the CFO. I need to point out a few things here, and I've highlighted these things in bold.
One is the dividend. The dividend number is 3.8. Last quarter was 3.9, so that's not a surprise. However, open market purchases were only $11 billion. Now, that is represented in the graph by the buyback, and that is this mustard color. And you'll notice it is extremely low. The previous quarter, we were over 25 on buyback, so we're less than half that. This is an anomaly. You'll see that it does not match the rest of the graph at all.
The blue area is dividends. The reddish area is net share repurchases, or settlements. And there's a pattern to both. Dividends has been growing in a predictable fashion, very steady. Buybacks have been somewhat steady, but up and down a little bit. During the last few periods, we've seen something unprecedented.
Now, you'll see that the 11 from last quarter was offset by a much higher number the previous quarter, but on balance, we're still down. And there's also these comments that say that they are abandoning the net cash neutral position. And I'm wondering if it's already started, because this $11 billion caught me by surprise.
I've highlighted that "our repurchase activity at any time can be affected by a number of factors that we take into account." So this was essentially explaining why sometimes there's a difference in the amount of purchases, right? And then in the middle of that commentary, he says, "as you're aware, we recently announced a CEO transition." Why does that comment fit in the middle of a paragraph, talking about the general theme?
I read this as it suggests that already the CEO choice is deciding how much to allocate to capital returns. And it appears— and again, I could be wrong— but it appears that John is probably against the idea of huge returns to shareholders in capital form. So keep an eye on this. This was, I found, very, very strange and out of character in a way. Very out of character of a Tim Cook presentation. I'm not judging it, I'm just pointing out that it isn't normal.
So here's the bottom line. This is the graph representing what's happening with the entire cash position and return of capital. The debt has decreased slightly, and it has been decreasing. And that's a good thing. As interest rates go up, you don't want to hold debt. A lot of that is fixed rate, but they're not taking on more. It seems like they're paying it down.
Net cash, which is the blue dotted line, has now been increasing two quarters in a row. Now, it's increased in the past, but never for long. It's had only one tick, during the holiday period. Here, where we're seeing two ticks— holiday and the quarter after.
Now, if you'll notice here, I'm going to try to zoom in. Those red lines represent what I would say were the trajectories to get to net cash zero. So that blue line, since they announced it, they kept missing the target. You would see that, another year goes by, and there's a notch up. Overall, the trend is down, but they haven't kept that path down all the way to zero. And that is now completely abandoned.
Again, we'll have to figure out why. The buyback, as I mentioned, halved— at least more than halved— to 11. Net cash zero abandoned, $100 billion net cash reduction. You'll see that this blue dot line has gone down by about half. It was down even further than that until it came back a bit. So that is going from about $160 billion net cash to the current $62 billion, which is why we get to 100 reduction. And $1 trillion overall return, which is, again, something they mentioned. In fact, they're at $1.085 trillion. And still $100 billion will be allocated further. Whether they actually spend it is another matter, but that's been approved.
So now— is this good news or bad news? I don't think it matters. I think at the end of the day, the value of the company doesn't change because of this. The value might be captured in the share price, or it might be captured as a percentage of the company that has been increasing.
In fact, let me just pop into the next slide. What does this mean? Are we never going to reach what I call the halving? Well, we were at the maximum 26.5 billion shares. And now we've reduced that to about 14.6. Half would be 13.2. So we're still going down. But there's 1.4 billion shares to go before it's half of what the max was. Now, this is an arbitrary figure. I just thought it was an interesting target to have. And as you can see, it's getting asymptotic as the price goes up. It should be harder and harder to get there. But we have $100 billion allocated. $260 billion at the current share price would need to be spent to get to half. But probably we're not going to get there. I really don't— if I were a betting man, I would say we're probably going to see this taper.
Let's look a little bit at guidance. This is based on what management already communicated. So if you put in the numbers they gave us, you will get revenue growth of 16%, coming at about— well, they guided 14 to 17, so I'm estimating 16 conservatively right now. That gets you to $108.7 billion. If you put in the other numbers— the margin, the OI&E and the tax— and do something about this share reduction. (We're still going to probably see a share reduction.) We're going to look at EPS 1.92. Which is another 22% growth. This is what we had last quarter as well.
I'm putting gross margin at the top of the guidance. [Last quarter] they went over. They guided high, and even so they went over, so I'm going to assume they're going to still hit towards the upper end of the range. I'm exactly at the upper end of that range.
If those things are true, the iPhone almost necessarily has to grow about 19%. Now, here, I'm dialing the Mac way up to 18% growth, because I do think they're going to get a lot more Mac Neos into customers' hands. Now, that's a lower price point, but it will drive sales. So yeah, I could be a little bit high on this. If I am, then iPhone needs to go a little bit higher because I still think they're going to get the revenue there.
They did warn that iPad is facing a tough comp, so I'm putting iPad down 3%. Wearables and home, 4%. It was 5% last time, so maybe consistency there. And Services, just the same as before, 16%, could come in a little bit less. But if it does, again, it's going to be put into something else like the iPhone.
So overall revenue growth, I think 16% is very much being telegraphed. And as I always say, they already have April on their books. They're communicating exactly at the end of April. They're not going to lie to us and withhold data from April. They know about a third [of the quarter] already, so that's why this guidance is so useful.
And, as you saw with my error analysis, nowadays, people's estimates are very close. There's a lot of consistency. We're not off more than a couple percentage from each other. That's just because they're so accurate on their guidance.
And speaking of analysts, one more graph. This is just some of the latest price targets. I'm just trying to bring everything together that came out today. This is all very brand new. A lot of targets moved up. Not that it's all that important, but people are getting more and more excited. Almost all the targets from anybody who has a positive— effectively a buy rating— is now above $310 as a target. There's two who are negative, that are at 270 and below. This is Barclays and Rosenblatt. And then there's a few which have no ratings. So they're typically neutral.
But overall, all these numbers are higher than they used to be. Now, again, I don't use that very much, but it's worth keeping an eye on things just to get a sense of how the sentiment is out there. And it looks like the stock is responding positively today. Not by much— 3% or so, last I checked. But that's the story today.
So given that, this is my first take on the quarter. Love to take questions.
-- End of Presentation --
Editor's Note: This presentation is made available to non-subscribers for a limited time. Subscribe to Asymco Oneforfull access to this and other content.
Below are Horace's live commentary during the release of Apple FQ2 2026 Earnings, lightly edited. For an in-depth look, and a discussion of what turned out to be a record-breaking quarter, join uss at Asymco Office Hours: Apple Live Q&A.
Transcript: Friday 30 April 2026, 4:30pm-6pm EST | asymco@mastodon
Apple will release earnings at 4:30PM ET and conference call begins half hour later and lasts for one hour. I will try to make some comments as I process the news. This might be the 75th Apple conference call I listen to.
My estimates: EPS $1.98 Rev. $109.2b iPhone Rev 55.716684 Mac Rev 8.640 iPad Rev 6.9552 Wearables & Home Rev 7.522 Services Rev 30.3753
iPhone revenue came in at $56.99 billion. My estimate was $55.71b.
Here is a graph of the expectations vs. actual Revenue results.
iPhone revenues grew 22%. Extraordinary. The growth barely slowed from 23% the previous quarter.
Mac revenue growth was 6%. Slightly less than I expected.
Revenues were up 17%, earnings per share were up 22%. Best March quarter ever.
The board of directors has declared a cash dividend of $0.27 per share of the, an increase of 4 percent. Repurchase program authorized for up to $100 billion for the next 12 months. No surprises here.
Greater China growth was 28%.
Apple shares are down 0.6% after-hours. Normal drop when company beats on the top and bottom. The big drop comes when the CFO talks guidance.
John Ternus will join the call for a few remarks.
Gross margin came in at a record high of 49.3%. This is three months after the great memory panic of 2026 was declared.
Shares fall 0.81% after John Ternus remarks.
Apple reports double digit growth in every emerging market.
Mention of Mac Neo leads to more drops in the share price as the pain of share growth sinks in. Now down 1% after hours.
iPhones went to the moon, stock not mooning.
“Our strong business performance during the March quarter generated over $28 billion in operating cash flow and drove new March quarter records for both operating cash flow and EPS,” The fact that Apple did not turn over this cash flow t...
5% in Wearables and Home. Modest growth is shameful growth. Compounding shompounding.
Apple has 6 stores in India. So much more to do there.
Supply constraints mean that the growth could have been higher —CFO.
Active iPhone install base grew to all-time high. (No surprise). Customer satisfaction was 99% for iPhone 17 in the US.
Customer satisfaction for Mac was 97%. Half of customers buying an iPad are new to the product. Most of these new customers are in emerging markets. Customer sat for iPad at 98%.
Tap to pay (Apple Pay) now in 50 markets.
Net cash was $62 billion. No longer placing net cash neutral as a target!!!! OMG OMG.
June Q guidance: 14% to 17% growth. Shares recovered to +1.35%.
Margin guidance: 47.5% to 48.5%. Despite the great memory panic of 2026 being in full effect.
Shocked, shocked, shocked that CFO remarks did not crash the stock.
Tim says they did see higher memory costs. For the June quarter they expect significant higher memory costs and more beyond that. Still, margins are brilliant.
Mark Gurman claims Apple dissolved the Vision Products Group in 2025, but that contradicts the fact that this group is still active and hiring new employees as of April 27 2026. Mark Gurman is pretty much the main source of all reports regarding the vision pro apart from supply source analysi...
NB: The Vision Products Group posted 14 new senior roles last week.
The Vision Products Group is hiring for multiple senior-level software engineering positions across cutting-edge areas — Al, augmented and virtual reality, and more! These roles offer the chance to work on innovative products that will impact billions of users.
Maybe it's time to introduce the Anti-Gurman index: Buy each dip induced by a Gurman leak dump.
