Android down 14.4%. Small players getting crushed.
Apple’s quarter one (Q1) 2026 iPhone sales volume in the US was up 1.3% year-over-year (YoY), outperforming the country’s overall smartphone market.
That market declined 5.7% YoY, according to Counterpoint’s US Monthly Smartphone Channel Share Tracker. Apple’s share of volume grew by 4% YoY, as Android device sales declined 14.4% YoY.
On the impact of the delayed launch,Graham said, “The premium smartphone space in the US is highly consolidated compared to some other markets, with Apple, Google, Samsung and, to some extent, Motorola comprising the vast majority of sales here. When one brand delays a flagship launch, it opens a window of opportunity to fill that vacuum. Apple did just that.”
Apple grew its market share in each of the Big 3 US carriers. Its share grew the most at Verizon to 77% in Q1 2026.
“If Apple can avoid significant price increases and continue to outpace its peers in promotional dollars, it will be tough for Android manufacturers to keep up in the year ahead, said Klaehne.
NB: What are the dynamics of the US market? The split between Apple and the rest of the market seems to be starker than ever. It's ask if there is a K shaped market emerging…
Fundamentals are breaking; Profits evaporate; Competitors flee; Android logic questioned
Apple’s revenue climbed 22% YoY in Q1 2026, registering the fastest growth among the top five smartphone brands while also hitting a first-quarter record high. Furthermore, the brand led the global smartphone market in terms of shipments for the first time in a first quarter, capturing a 21% share.
Commenting on Apple’s performance, Research Director Jeff Fieldhack said, “Apple’s growth was driven by sustained demand for the base iPhone 17 and iPhone 17 Pro Max, with a stronger mix of these models lifting Apple’s overall ASP by 11% YoY.
Unlike its peers, Apple mostly maintained stable pricing despite rising BOM costs, reflecting its ability to absorb cost pressures and remain insulated from the memory crisis, which helped strengthen its competitive position during the quarter. Regionally, Apple saw broad-based strength, especially across the Asia-Pacific region, driven by subsidies, promotions, and trade-in offers.”
The global smartphone market’s revenue grew 8% YoY in Q1 2026, driven by strong premium demand and pricing adjustments across major OEM portfolios amid rising Bill of Materials.
The average selling price (ASP) climbed 12% YoY to reach $399, supported by contraction in entry-level segments and price hikes across regions.
Apple led the global smartphone market in terms of value, recording its highest-ever first quarter revenue. Apple was the fastest growing brand with revenue up 22% YoY supported by relatively stable pricing compared to peers, despite broad-based price increases across the industry.
Samsung held an 18% revenue share in Q1 2026, with shipments reaching 21% of the total market, supported by portfolio optimization and strong response for the Galaxy S26 series.
The global smartphone market is expected to remain under pressure through 2026, and a substantial recovery is expected only in late 2027.
NB: The average sales price is up to $399 but Apple, with the largest share and fastest growth, reached $908? There's a lot more that does not make sense.
We expect our June quarter total company revenue to grow by 14%-17% year-over-year, which comprehends our best view of constrained supply. On iPad, keep in mind, we face a difficult compare driven by the launch of the A16-powered iPad in the prior year. We expect services revenue to grow at a year-over-year rate similar to what we reported in the March quarter after removing the favorable year-over-year impact from foreign exchange tailwinds. Keep in mind, during the March quarter, FX was a 2.5 percentage point tailwind to the total company growth rate, and for services, that impact was slightly more favorable.
We expect gross margin to be between 47.5% and 48.5%. We expect operating expenses to be between $18.8 billion and $19.1 billion. We expect OINE to be around $250 million, excluding any potential impact from the mark-to-market of minority investments, and our tax rate to be around 17%. With that, Tim and I will take questions.
- Kevan Parekh, CFO
Based on the above, here are the estimates for Revenues and Earnings per Share
Sequential change in segment revenues:
My Revenues and EPS expectations in table form:
My segment revenues and growth expectations in table form:
Note that the revenue expectations are for 15.6% growth while guidance is at 14% to 17%. Chances are that they will hit the upper end of the range and I may revise these estimates to reflect that as we get more data.
Office Hours question asked by by Ian H. on May 1, 2026
Q: Memory prices could move from 15% to 40% of the BOM of a device. This seems incredible. So how can Apple deal with this?
This has been on people's minds now for what, three, four months? I think since January. I call it the Great Panic of 2026. The great memory panic.
First of all, you have to understand the scale that Apple operates at. The number of devices in the hundreds of millions. It's not just iPhones, obviously. All of the Apple products consume some memory. And there's a lead time. When you're dealing with scale, there's a lead time. There's usually a couple years of lead time. And every supplier who works with Apple is doing it because they love volumes.
Now, volumes are good for suppliers because they can also predict things in their own operations. They can plan, they can raise capital. Usually they need loans to do that, and they get good terms on loans if it's a long-term payback. And there's a lot of moving parts there that benefit scale.
The difference with memory pricing that we're seeing a lot of anxiety around is at the margin. That is to say, there's a base production, and then there's a variable production. That variable production comes when somebody orders, "Hey, can I have something next month?" And the smaller suppliers tend to not have that long-term planning or the volumes that can fill the pipe. And so the marginal pricing on memory has gone through the roof. It spiked, and that's what we're seeing. But that's on the variable bit.
So Apple negotiates on the base load. Now, of course, that marginal cost is going to eventually infect, if it continues long enough, base price. In fact, suppliers are going to say, well, even if it's two years out, we're going to have to ask for more, because there's so many other players that also we anticipate will be two years out. But then Apple can negotiate on another basis and say, well, if you don't do us a favor here and give us a better rate, then maybe we won't work with you when all this settles down. You know things are going to settle down. These things are always cyclical. There's never been a semiconductor boom that's not followed by a semiconductor bust. Never. And they know it.
So they're happy to make mint on this volatility right now. So much so that I heard Samsung's making more money now with memory than Nvidia's making with their processors. So memory suddenly is the new gold. A year ago, two years ago, it was about compute. Now it's memory. Who knows what's next?
But if you're in this business for the long term, and you want to play games, Apple's going to be there a lot longer. You could believe that AI is going to be going at this rate forever. We'll see if the profit model can sustain it. But I just speak from experience. There's a lot of these things that happen in the phone space with all kinds of components. There were always some shortages.
There was storage. The iPod killed a hard drive supply chain. Apple monopolized the CNC machines that made the aluminum Macs. And these things happen. By the way, that monopoly is no longer in effect. Eventually, somebody built enough of the tooling and sold them to Apple's competitors. And if they want to make an aluminum enclosure, they can do so now. But that's how it is in this game, and nobody plays it as well as Apple does.
If you read the book on China — Apple in China — there's a lot of anecdotes about this. So I can't get excited about any of these stories about supply crunches, other than there being a windfall for somebody and an anxiety, a panic for somebody else.
And again, other analysts are starting to come around to notice that maybe this all settles into Apple gaining a whole lot of share, because all the other competitors won't be able to get any memory. So Apple could also just lock up everything and say, alright, we've got the biggest checkbook in the business, we'll take a hit on margins. As if we care, as if that matters. We go from 49% to 45%. Which is where we were two years ago. And then in doing so, we're going to take out everybody but Samsung. So we get in a situation where a lot of marginal players just disappear. And Apple locks up even more.
And when you go for the jugular, you do all this, and then you launch a low-end product that's even cheaper, which is what the Neo looks like to me. I mean, Neo might be a prototype. The Neo might be John's trial balloon out there. Maybe he has a theory — I'm just speculating now — that Apple is going to go for the jugular on the iPhone in a couple of years. The iPhone's going to be $499. It'll be as good as the best iPhone today. And they're going to launch that against a landscape where everybody else is losing money at $800 a phone. And so they'll just quit.
Now, it's uncharacteristic, but it's a low-end disruption coming from Apple. It's completely possible. It's well within their ability. And if they want to, they could. There's a lot going on here with what strategic intent is from John, and I think he comes with a fresh thinking on this. Not that Tim was unwilling, but I think he knew what works, and he was not willing to stray too far from what was reliable. And John may just think that, I know we can pull this off. And we'll go for a different way. Who knows?
Takeshi Narabe On the secret of Apple's success, you have previously noted that the key to Apple's success was its ability to integrate hardware, software, and services to create products that are perfectly hired for a specific job to be done. You also highlighted how they moved beyond mere devices to lock customers into an ecosystem like iOS, iCloud and Apple stores. So this analysis is now very well known. So do you still think this is one of the biggest reasons of Apple's success?
Horace Dediu Yes, we have to recognize Services has only been a story for the last 10 years. And arguably integration of software hasn't been really all that important before 1998 when Apple brought Steve [Jobs] back and with him came NextStep, which was [an] operating system based on Unix. And that was much more robust and much more focused around software engineering than the original MacOS. Or, what I would say [constituted] version 1 of Apple, which began in 1970s until the 1990s.
Most people tend to think of Apple as one continuous story for 50 years. [But] it's at least two major stories. I would say pre-98 and post-98. And post-98, it's been so different. And it's much more, I would say, something [that can be studied] as a theory.
I think in the first decades Apple was more, let's say, a story of people. There were people who were brilliant. There were people who were celebrated [as they are] now. But the second half of Apple is much more about building a business that has longevity, [that] can last a long time. It's an unusual priority.
I think for many companies in the world, they don't think about longevity. And that is why, even Tim Cook recognizes that it's the next 50 years that are more important [than the last 50 years]. So thinking about a century is really important and I think [that] is core to the current culture of Apple. Now, of course, this means, as you said, integration, and that is one of the key things. But fundamentally, beneath all that, there's this point about culture.
Takeshi Narabe Culture?
Horace Dediu Culture in the sense of what are the priorities? What do we concentrate on and to what degree do we need to focus? They [management] repeat these things all the time. Focus, focus. What means this? It means saying no to many things, but it also means saying yes to the things where you can bring great things to bear. It's where Apple has a unique advantage. And that means saying no to a lot of things.
We know about the car business that they eventually rejected even though they worked on it for many years. I think ultimately that decision was based on a realization that they couldn't bring enough contribution. And that's not just an economic decision. Of course they could have made money. There are even phone companies in China that make cars today. But it isn't what they thought of as important.
Takeshi Narabe All right, thank you. So you also mentioned to what extent do you attribute Apple's dominance to the ability to tap into non-consumption addressing latent demands that consumers themselves hadn't yet realized.
Horace Dediu So this is also one of the keys indeed. i learned about this by listening to my professor Clayton Christensen, who observed that great companies not only compete effectively, but they also create their own markets. They create their own demand.
[It's an] Extraordinary idea. And when you look at Apple, you do see that they use a different language. They talk about customers not asking for the product. But they also fundamentally build something that compels the user to buy it. When it was something that wasn't conceivable. Steve Jobs famously said, the customer hires us to find out what they want. So this is a fundamental thing.
And there are many examples. And I think one of the struggles today, for example, is Vision Pro, a product that is very difficult to find how it's going to solve problems. But at the same time, it's an extraordinary product. I think the jury is still out on the Vision Pro, but there are many other examples where I think initially they thought things would go in one direction and they went in another direction.
But even the iPhone, I like to repeat the fact that when the iPhone was introduced, Steve Jobs said it was three things. That it was a widescreen iPod, that it was an internet communicator, and it was a phone. But I point out that these days, those three jobs of being a music player, being a telephone, and being a browser, are not among the most popular things people do with it.
So it's fascinating how they introduced it as a blank slate. [It was] software, written by third parties [that discovered the compelling uses], and it developed in its own ecosystem. That is also a very interesting lesson there.
But it is fundamentally about really being humble. I think, again, it's a cultural trait, being humble and saying, maybe we don't know fully what to do, but to concentrate on quality and concentrate on doing at least something useful for people. And then later, new things will appear.
— This is the first part of a series of excerpts from an interview with Asahi Shimbun newspaper on Apple & Innovation.
Apple’s iPhone 17 was the world’s best-selling smartphone in quarter one of 2026, capturing 6% of global unit sales, according to Counterpoint Research’s latest Global Handset Model Sales Tracker.
The iPhone 17 Series captured the top three spots, while Samsung Galaxy A Series was most represented with five models in the top 10. The top 10 smartphones contributed 25% of global unit sales, the highest quarter one concentration ever, according to Counterpoint. This was driven by sustained demand for the iPhone 17 series, alongside pressure on Android manufacturers in mass-market segments as the ongoing memory shortage pushes up component costs, adds the research group.
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.
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 --
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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.
